Should You Use Chapter 13 in 2026?

immediately upon filing, through the automatic stay. You lag on your mortgage and desire to keep your homeYour earnings is above the Colorado average and you do not pass the Chapter 7 implies testYou have non-exempt equity you desire to secure by paying its value into a strategy rather of losing the assetYou have financial obligations that survive Chapter 7 (specific taxes, some domestic support arrears) that you require structured time to payYou've submitted Chapter 7 too recently to file again (see timing rules listed below)The means 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 household earnings figures by household size, upgraded every April and November using Census Bureau data. If your average regular monthly income over the prior 6 months, annualized, falls at or below Colorado's median for your household size, you pass the methods test instantly and might submit Chapter 7.

Lots of above-median filers still qualify for Chapter 7 after these deductions. or you may still have choices depending on the type of financial obligation you bring (the means test just uses to filers whose debts are mainly customer debts). Because the average earnings figures and internal revenue service expense requirements alter twice a year, the precise numbers that used when a friend or relative filed might not use to your case today.

Chapter 13 isn't offered to everybody despite earnings there are statutory debt ceilings under 11 U.S.C. 109(e). Since the most current inflation adjustment (effective April 1, 2025, through March 31, 2028), the limitations are different for secured and unsecured debt, in the low seven figures integrated. There is active, bipartisan legislation pending in Congress that would raise and streamline these limitations into a single combined threshold worth seeing if you're near the current ceiling, particularly if a big home loan is what's pressing you over.

Navigating Between Chapter 7 and 7 for 2026

This is usually the choosing aspect for Colorado filers. Colorado's exemption statutes secure a set quantity of equity in your home, lorry, tools of trade, retirement accounts, and personal effects. If your equity in an asset surpasses the exemption, the trustee can offer it and pay you the exempt portion however for the large majority of filers with average equity levels, whatever is safeguarded and nothing is offered.

This is often why higher-equity house owners or company owner pick Chapter 13 even when they may technically pass the Chapter 7 implies test. 34 months to discharge35 years to dischargeNoYes, per court-approved planLower, one-timeLower, one-time (plus continuous trustee fee)Often paid up front or soon after filingFrequently paid through the plan over timeStays ten years from filingStays 7 years from filingUnsecured debt with no significant properties at riskSaving a home, curing arrears, above-median earnings Chapter 13 Chapter 7 You generally must wait 8 years for another Chapter 7 discharge, however may get approved for Chapter 13 quicker (timing guidelines are technical and case-specific) Chapter 13, to treat the default and keep the car Frequently Chapter 13, though eligibility depends on the "routine income" requirement Chapter 13's co-debtor stay uses defense 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 properly but with an avoidable error, can imply losing residential or commercial property you could have kept or paying years longer than required. Every financial scenario is various, and the "right" chapter depends on numbers and truths unique to your household. If you're weighing Chapter 7 vs.

Yes, most of the times you can transform your case from Chapter 13 to Chapter 7 if your circumstances change, based on specific restrictions and court approval. Not necessarily. If you're existing on your home mortgage and your home equity is within Colorado's exemption limitations, you can generally keep your home in Chapter 7.

It depends upon your household income compared to Colorado's current typical figures for your household size, plus permitted expenditure deductions if you're above typical. These figures change twice a year, so an accurate answer requires checking the chart in result on your filing date. Yes. Filing either Chapter 7 or Chapter 13 activates the automatic stay, which instantly stops most wage garnishments, collection calls, and suits.

Chapter 13 deals court-enforced defense that private financial obligation settlement does not offer, but it's a longer commitment. This article is for general informational purposes only and does not make up legal guidance. Personal bankruptcy law is fact-specific, and outcomes depend on your specific situations. Contact our workplace to discuss your situation straight.