Choosing Chapter 7 Vs Chapter 7 in 2026

immediately upon filing, through the automated stay. You're behind on your home loan and desire to keep your homeYour earnings is above the Colorado average and you don't pass the Chapter 7 implies testYou have non-exempt equity you desire to protect by paying its value into a plan rather of losing the assetYou have debts that endure Chapter 7 (particular taxes, some domestic support financial obligations) that you require structured time to payYou have actually filed Chapter 7 too recently to submit once again (see timing guidelines listed below)The methods test under 11 U.S.C.

apfsc.org

Here's how it works in plain terms: The U.S. Trustee Program publishes average household income figures by household size, upgraded every April and November utilizing Census Bureau information. If your average month-to-month income over the prior 6 months, annualized, falls at or below Colorado's median for your family size, you pass the ways test instantly and might file Chapter 7.

Many above-median filers still receive Chapter 7 after these reductions. 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 mainly consumer debts). Due to the fact that the mean income figures and IRS expenditure requirements change twice a year, the specific numbers that applied when a friend or relative filed may not apply to your case today.

Chapter 13 isn't available to everybody no matter income there are statutory financial obligation ceilings under 11 U.S.C. 109(e). Since the most recent inflation adjustment (reliable April 1, 2025, through March 31, 2028), the limits are different for protected 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 limit worth enjoying if you're near the existing ceiling, particularly if a large home mortgage is what's pushing you over.

Deciding Between 13 and 7 for 2026

This is generally the choosing factor for Colorado filers. Colorado's exemption statutes protect a set amount of equity in your home, car, tools of trade, pension, and personal effects. If your equity in a property goes beyond the exemption, the trustee can sell it and pay you the exempt part however for the large majority of filers with average equity levels, everything is secured and absolutely nothing is sold.

This is often why higher-equity house owners or company owner choose Chapter 13 even when they might technically pass the Chapter 7 suggests test. 34 months to discharge35 years to dischargeNoYes, per court-approved planLower, one-timeLower, one-time (plus ongoing trustee charge)Often paid up front or soon after filingFrequently paid through the strategy over timeStays 10 years from filingStays 7 years from filingUnsecured debt without any significant possessions at riskSaving a home, curing financial obligations, above-median income Chapter 13 Chapter 7 You generally should wait 8 years for another Chapter 7 discharge, however might get approved for Chapter 13 earlier (timing rules are technical and case-specific) Chapter 13, to cure the default and keep the automobile Frequently Chapter 13, though eligibility depends on the "routine earnings" requirement Chapter 13's co-debtor stay provides security Chapter 7 does notI invested years administering cases as the Trustee -seeing direct which choices held up and which ones backfired.

Submitting the incorrect chapter, or filing correctly but with a preventable mistake, can mean losing property you might have kept or paying years longer than needed. Every monetary circumstance is various, and the "best" chapter depends on numbers and facts distinct to your family. If you're weighing Chapter 7 vs.

Yes, in many cases you can transform your case from Chapter 13 to Chapter 7 if your situations change, based on specific restrictions and court approval. Not always. If you're existing on your home mortgage and your home equity is within Colorado's exemption limitations, you can normally keep your home in Chapter 7.

It depends on your family income compared to Colorado's existing average figures for your family size, plus permitted expense reductions if you're above typical. These figures alter two times a year, so an accurate answer requires examining the chart in impact on your filing date. Yes. Filing either Chapter 7 or Chapter 13 activates the automated stay, which immediately stops most wage garnishments, collection calls, and claims.

Chapter 13 deals court-enforced defense that private debt settlement doesn't offer, however it's a longer commitment. This article is for general educational purposes only and does not constitute legal advice. Bankruptcy law is fact-specific, and outcomes depend upon your specific circumstances. Contact our workplace to discuss your scenario straight.