Choosing Chapter 7 for Your 2026 Needs

right away upon filing, through the automated stay. You're behind on your home loan and desire to keep your homeYour income is above the Colorado median and you don't pass the Chapter 7 implies testYou have non-exempt equity you want to safeguard by paying its worth into a strategy instead of losing the assetYou have debts that survive Chapter 7 (specific taxes, some domestic support arrears) that you require structured time to payYou have actually filed Chapter 7 too recently to submit once again (see timing guidelines listed below)The methods test under 11 U.S.C.

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Here's how it operates in plain terms: The U.S. Trustee Program publishes average family income figures by family size, updated every April and November utilizing Census Bureau data. If your average monthly income over the prior 6 months, annualized, falls at or listed below Colorado's median for your home size, you pass the means test automatically and may submit Chapter 7.

Lots of above-median filers still get approved for Chapter 7 after these reductions. or you might still have options depending upon the type of debt you carry (the methods test only uses to filers whose financial obligations are mainly consumer financial obligations). Because the mean earnings figures and internal revenue service expense standards alter twice a year, the specific numbers that used when a buddy or relative filed might not apply to your case today.

Chapter 13 isn't offered to everybody despite income there are statutory debt ceilings under 11 U.S.C. 109(e). Since the most recent inflation modification (effective April 1, 2025, through March 31, 2028), the limitations are separate for protected and unsecured debt, in the low seven figures combined. There is active, bipartisan legislation pending in Congress that would raise and streamline these limits into a single combined threshold worth watching if you're near the existing ceiling, particularly if a large home loan is what's pushing you over.

Long-Term Impacts of 2026 Bankruptcy

This is generally the deciding element for Colorado filers. Colorado's exemption statutes secure a set amount of equity in your house, lorry, tools of trade, pension, and personal effects. If your equity in an asset goes beyond the exemption, the trustee can offer it and pay you the exempt part but for the big bulk of filers with average equity levels, everything is secured and absolutely nothing is sold.

This is typically why higher-equity house owners or entrepreneur pick Chapter 13 even when they may technically pass the Chapter 7 suggests test. 34 months to discharge35 years to dischargeNoYes, per court-approved planLower, one-timeLower, one-time (plus continuous trustee charge)Often paid up front or soon after filingFrequently paid through the strategy over timeStays 10 years from filingStays 7 years from filingUnsecured financial obligation without any major assets at riskSaving a home, treating arrears, above-median earnings Chapter 13 Chapter 7 You typically should wait 8 years for another Chapter 7 discharge, however might certify for Chapter 13 sooner (timing guidelines are technical and case-specific) Chapter 13, to cure the default and keep the vehicle Typically Chapter 13, though eligibility depends on the "routine earnings" requirement Chapter 13's co-debtor stay provides security Chapter 7 does notI invested years administering cases as the Trustee -seeing direct which choices held up and which ones backfired.

Filing the incorrect chapter, or filing properly but with a preventable mistake, can suggest losing home you might have kept or paying years longer than required. If you're weighing Chapter 7 vs.

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Financial Support for 2026 Chapter 13 Filers

Yes, in most cases you can convert your case from Chapter 13 to Chapter 7 if your circumstances changeSituations alter to certain restrictions specific court approval.

It depends upon your home income compared to Colorado's existing typical figures for your home size, plus enabled expense deductions if you're above typical. These figures alter two times a year, so a precise answer requires inspecting the chart in impact on your filing date. Yes. Filing either Chapter 7 or Chapter 13 triggers the automated stay, which immediately stops most wage garnishments, collection calls, and lawsuits.

Chapter 13 offers court-enforced protection that private debt settlement doesn't supply, however it's a longer commitment. This post is for general informative purposes only and does not constitute legal guidance. Insolvency law is fact-specific, and results depend on your individual scenarios. Contact our office to discuss your situation directly.