Deciding Between 13 and Chapter 13 for 2026

immediately upon filing, through the automated stay. You're behind on your home mortgage and want to keep your homeYour income is above the Colorado typical and you don't pass the Chapter 7 indicates testYou have non-exempt equity you wish to safeguard by paying its worth into a strategy rather of losing the assetYou have debts that survive Chapter 7 (certain taxes, some domestic assistance financial obligations) that you require structured time to payYou've filed Chapter 7 too just 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 works in plain terms: The U.S. Trustee Program publishes median family earnings figures by household size, updated every April and November using Census Bureau data. If your typical month-to-month income over the previous 6 months, annualized, falls at or listed below Colorado's average for your home size, you pass the means test automatically and might file Chapter 7.

Many above-median filers still get approved for Chapter 7 after these deductions. or you may still have alternatives depending on the type of financial obligation you carry (the ways test only uses to filers whose debts are mainly consumer debts). Since the mean earnings figures and IRS expenditure requirements alter twice a year, the precise numbers that used when a good friend or relative filed may not use to your case today.

Chapter 13 isn't readily available to everyone regardless of earnings there are statutory debt ceilings under 11 U.S.C. 109(e). Since the most current inflation modification (efficient April 1, 2025, through March 31, 2028), the limits are separate for secured and unsecured debt, in the low seven figures combined. There is active, bipartisan legislation pending in Congress that would raise and simplify these limitations into a single combined limit worth enjoying if you're near the existing ceiling, especially if a big mortgage is what's pushing you over.

Choosing Chapter 13 for Your 2026 Needs

This is usually the deciding aspect for Colorado filers. Colorado's exemption statutes protect a set quantity of equity in your home, car, tools of trade, pension, and personal effects. If your equity in a possession surpasses the exemption, the trustee can sell it and pay you the exempt part however for the big bulk of filers with typical equity levels, whatever is safeguarded and absolutely nothing is offered.

This is frequently why higher-equity homeowners or service owners select Chapter 13 even when they might technically pass the Chapter 7 indicates test. 34 months to discharge35 years to dischargeNoYes, per court-approved planLower, one-timeLower, one-time (plus continuous trustee charge)Typically paid up front or soon after filingFrequently paid through the plan over timeStays ten years from filingStays 7 years from filingUnsecured financial obligation with no major assets at riskSaving a home, treating financial obligations, above-median income Chapter 13 Chapter 7 You usually must wait 8 years for another Chapter 7 discharge, however might get approved for Chapter 13 quicker (timing rules are technical and case-specific) Chapter 13, to cure the default and keep the car Typically Chapter 13, though eligibility depends upon the "regular income" requirement Chapter 13's co-debtor stay offers security Chapter 7 does notI invested years administering cases as the Trustee -seeing direct which choices held up and which ones backfired.

Filing the wrong chapter, or filing correctly but with an avoidable error, can imply losing property you could have kept or paying years longer than required. Every monetary circumstance is various, and the "ideal" chapter depends upon numbers and realities special to your family. 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 situations alter, based on specific limitations and court approval. Not necessarily. If you're present on your home mortgage and your home equity is within Colorado's exemption limits, you can normally keep your home in Chapter 7.

It depends upon your family income compared to Colorado's existing average figures for your family size, plus allowed cost deductions if you're above average. These figures change twice a year, so a precise response needs examining the chart in result on your filing date. Yes. Filing either Chapter 7 or Chapter 13 sets off the automatic stay, which right away stops most wage garnishments, collection calls, and claims.

Chapter 13 offers court-enforced security that personal financial obligation settlement does not provide, but it's a longer commitment. Insolvency law is fact-specific, and outcomes depend on your individual situations.