Serious Financial Results of 2026 Bankruptcy

instantly upon filing, through the automated stay. You're behind on your home loan and wish to keep your homeYour income is above the Colorado median and you don't pass the Chapter 7 means testYou have non-exempt equity you wish to protect by paying its value into a plan instead of losing the assetYou have financial obligations that endure Chapter 7 (specific taxes, some domestic assistance financial obligations) that you need structured time to payYou've filed Chapter 7 too recently to file again (see timing rules below)The means test under 11 U.S.C.

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

Many above-median filers still receive Chapter 7 after these deductions. or you might still have choices depending on the kind of debt you carry (the methods test only applies to filers whose financial obligations are mostly consumer financial obligations). Since the typical income figures and IRS expenditure standards alter twice a year, the specific numbers that used when a buddy or relative submitted may not use to your case today.

Chapter 13 isn't offered to everyone regardless of earnings there are statutory debt ceilings under 11 U.S.C. 109(e). Since the most recent inflation adjustment (efficient April 1, 2025, through March 31, 2028), the limitations are different for protected and unsecured debt, in the low 7 figures combined. There is active, bipartisan legislation pending in Congress that would raise and streamline these limitations into a single combined threshold worth viewing if you're near the present ceiling, especially if a large mortgage is what's pushing you over.

Legal Support for 2026 Chapter 13 Filers

This is typically the deciding factor for Colorado filers. Colorado's exemption statutes secure a set quantity of equity in your home, car, tools of trade, retirement accounts, and individual property. If your equity in a property exceeds the exemption, the trustee can sell it and pay you the exempt portion but for the big majority of filers with typical equity levels, whatever is secured and nothing is sold.

This is typically why higher-equity house owners or company owner choose Chapter 13 even when they may technically pass the Chapter 7 indicates test. 34 months to discharge35 years to dischargeNoYes, per court-approved planLower, one-timeLower, one-time (plus ongoing trustee cost)Frequently paid up front or quickly after filingFrequently paid through the plan over timeStays 10 years from filingStays 7 years from filingUnsecured financial obligation without any major possessions at riskSaving a home, treating defaults, above-median earnings Chapter 13 Chapter 7 You typically need to wait 8 years for another Chapter 7 discharge, however may get approved for Chapter 13 quicker (timing rules are technical and case-specific) Chapter 13, to treat the default and keep the vehicle Frequently Chapter 13, though eligibility depends upon the "regular earnings" requirement Chapter 13's co-debtor stay offers security Chapter 7 does notI spent years administering cases as the Trustee -seeing direct which decisions held up and which ones backfired.

Filing the incorrect chapter, or filing correctly but with an avoidable error, can imply losing residential or commercial property you could have kept or paying years longer than essential. If you're weighing Chapter 7 vs.

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How to Stop Wage Garnishment Through 2026 Bankruptcy

Yes, in most cases many can convert your case from Chapter 13 to Chapter 7 if your circumstances changeSituations alter to certain restrictions and constraints approval.

It depends on your family earnings compared to Colorado's existing average figures for your household size, plus allowed expenditure reductions if you're above average. Filing either Chapter 7 or Chapter 13 sets off the automatic stay, which instantly stops most wage garnishments, collection calls, and claims.

Chapter 13 offers court-enforced security that personal debt settlement doesn't provide, but it's a longer dedication. This short article is for basic informational purposes only and does not constitute legal guidance. Personal bankruptcy law is fact-specific, and outcomes depend on your private situations. Contact our office to discuss your scenario directly.