Key Impacts of 2026 Bankruptcy

instantly upon filing, through the automatic stay. You lag on your home loan and want to keep your homeYour income is above the Colorado median and you do not pass the Chapter 7 means testYou have non-exempt equity you desire to secure by paying its worth into a strategy instead of losing the assetYou have financial obligations that survive Chapter 7 (particular taxes, some domestic assistance financial obligations) that you need structured time to payYou have actually submitted Chapter 7 too recently to file again (see timing rules listed below)The ways test under 11 U.S.C.

apfsc.org

Here's how it works in plain terms: The U.S. Trustee Program releases average household income figures by home size, upgraded every April and November using Census Bureau information. If your typical regular monthly income over the previous six months, annualized, falls at or listed below Colorado's typical for your family size, you pass the means test instantly and might file Chapter 7.

Lots of above-median filers still qualify for Chapter 7 after these deductions. or you might still have alternatives depending on the kind of financial obligation you carry (the ways test only applies to filers whose financial obligations are mostly customer financial obligations). Since the median income figures and internal revenue service expense standards alter twice a year, the precise numbers that used when a good friend or relative submitted might not use to your case today.

Chapter 13 isn't readily available to everybody regardless of income there are statutory debt ceilings under 11 U.S.C. 109(e). As of the most recent inflation change (effective April 1, 2025, through March 31, 2028), the limitations are different for secured and unsecured debt, in the low 7 figures combined. There is active, bipartisan legislation pending in Congress that would raise and simplify these limits into a single combined threshold worth watching if you're near the existing ceiling, especially if a large home mortgage is what's pressing you over.

Navigating Between Chapter 7 and 7 for 2026

This is normally the deciding element for Colorado filers. Colorado's exemption statutes protect a set quantity of equity in your house, car, tools of trade, pension, and personal effects. If your equity in an asset exceeds the exemption, the trustee can offer it and pay you the exempt part but for the big majority of filers with typical equity levels, whatever is secured and absolutely nothing is offered.

This is often why higher-equity house owners or entrepreneur choose Chapter 13 even when they may technically pass the Chapter 7 means 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 plan over timeStays ten years from filingStays 7 years from filingUnsecured debt without any major possessions at riskSaving a home, curing defaults, above-median income Chapter 13 Chapter 7 You typically must wait 8 years for another Chapter 7 discharge, but may qualify for Chapter 13 faster (timing guidelines are technical and case-specific) Chapter 13, to treat the default and keep the automobile Often Chapter 13, though eligibility depends upon the "routine income" requirement Chapter 13's co-debtor stay uses security Chapter 7 does notI invested years administering cases as the Trustee -seeing direct which decisions held up and which ones backfired.

Submitting the incorrect chapter, or filing correctly however with an avoidable error, can mean losing home you might have kept or paying years longer than necessary. If you're weighing Chapter 7 vs.

apfsc.org

Estimating Bankruptcy Fees for 2026

Yes, in most cases you can convert your case from Chapter 13 to Chapter 7 if your circumstances change, alter to certain restrictions particular limitations approval.

It depends on your family income compared to Colorado's existing typical figures for your family size, plus allowed expenditure deductions if you're above mean. Filing either Chapter 7 or Chapter 13 activates the automated stay, which immediately stops most wage garnishments, collection calls, and suits.

Chapter 13 deals court-enforced defense that private debt settlement does not supply, however it's a longer commitment. Insolvency law is fact-specific, and outcomes depend on your private situations.