Navigating Between 13 and Chapter 13 for 2026

immediately upon filing, through the automated stay. You're behind on your home loan and want to keep your homeYour earnings is above the Colorado typical and you don't pass the Chapter 7 implies testYou have non-exempt equity you want to secure by paying its worth into a plan instead of losing the assetYou have debts that survive Chapter 7 (particular taxes, some domestic support defaults) that you need structured time to payYou have actually filed Chapter 7 too just recently to file again (see timing rules listed below)The ways test under 11 U.S.C.

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

Many above-median filers still get approved for Chapter 7 after these reductions. or you might still have alternatives depending on the kind of financial obligation you carry (the methods test just applies to filers whose debts are mostly consumer financial obligations). Since the typical income figures and internal revenue service expenditure standards change two times a year, the precise numbers that applied when a good friend or relative filed may not use to your case today.

Chapter 13 isn't available to everyone no matter earnings there are statutory debt ceilings under 11 U.S.C. 109(e). As of the most current inflation adjustment (reliable April 1, 2025, through March 31, 2028), the limitations are different for secured and unsecured financial obligation, 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 threshold worth viewing if you're near the existing ceiling, especially if a large home loan is what's pushing you over.

Protecting Income From 2026 Bankruptcy Garnishment

This is normally the deciding aspect for Colorado filers. Colorado's exemption statutes secure a set quantity of equity in your house, lorry, tools of trade, retirement accounts, and personal effects. If your equity in a property goes beyond the exemption, the trustee can sell it and pay you the exempt portion but for the big bulk of filers with typical equity levels, whatever is protected and absolutely nothing is sold.

This is frequently why higher-equity homeowners or entrepreneur select Chapter 13 even when they might technically pass the Chapter 7 means test. 34 months to discharge35 years to dischargeNoYes, per court-approved planLower, one-timeLower, one-time (plus ongoing trustee fee)Typically paid up front or shortly after filingFrequently paid through the plan over timeStays 10 years from filingStays 7 years from filingUnsecured financial obligation without any significant possessions at riskSaving a home, curing financial obligations, above-median earnings Chapter 13 Chapter 7 You typically should wait 8 years for another Chapter 7 discharge, but might qualify for Chapter 13 faster (timing rules are technical and case-specific) Chapter 13, to cure the default and keep the vehicle Often Chapter 13, though eligibility depends on the "regular earnings" requirement Chapter 13's co-debtor stay provides protection Chapter 7 does notI spent years administering cases as the Trustee -seeing firsthand which decisions held up and which ones backfired.

Submitting the wrong chapter, or filing correctly but with a preventable mistake, can suggest losing home you might have kept or paying years longer than required. Every financial scenario is various, and the "ideal" chapter depends upon numbers and facts special to your home. If you're weighing Chapter 7 vs.

Yes, in many cases you can convert your case from Chapter 13 to Chapter 7 if your scenarios alter, subject to specific limitations and court approval. Not always. If you're present on your mortgage and your home equity is within Colorado's exemption limitations, you can usually keep your home in Chapter 7.

It depends on your family earnings compared to Colorado's current average figures for your home size, plus allowed cost deductions if you're above typical. Filing either Chapter 7 or Chapter 13 activates the automated stay, which immediately stops most wage garnishments, collection calls, and lawsuits.

Chapter 13 deals court-enforced defense that personal financial obligation settlement doesn't supply, but it's a longer commitment. This post is for general informational functions just and does not constitute legal suggestions. Bankruptcy law is fact-specific, and outcomes depend on your individual circumstances. Contact our office to discuss your situation straight.