Comparing Chapter 7 Vs Chapter 13 in 2026

instantly upon filing, through the automatic stay. You're behind on your home mortgage and wish to keep your homeYour income is above the Colorado mean and you do not pass the Chapter 7 suggests testYou have non-exempt equity you wish to safeguard by paying its value into a strategy instead of losing the assetYou have debts that survive Chapter 7 (certain taxes, some domestic assistance defaults) that you need structured time to payYou have actually filed Chapter 7 too just recently to submit again (see timing rules listed below)The methods 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 household earnings figures by household size, updated every April and November utilizing Census Bureau data. If your average month-to-month income over the previous six months, annualized, falls at or below Colorado's mean for your family size, you pass the methods test immediately and may file Chapter 7.

Lots of above-median filers still qualify for Chapter 7 after these reductions. or you might still have options depending upon the kind of financial obligation you carry (the methods test just applies to filers whose financial obligations are primarily consumer financial obligations). Due to the fact that the average earnings figures and internal revenue service cost standards change two times a year, the exact numbers that applied when a friend or relative submitted might not apply to your case today.

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

Important Filing Steps for 2026 Bankruptcy

This is generally the choosing element for Colorado filers. Colorado's exemption statutes safeguard a set quantity of equity in your house, 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 large bulk of filers with average equity levels, everything is secured and absolutely nothing is offered.

This is typically why higher-equity homeowners or entrepreneur 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 cost)Often paid up front or shortly after filingFrequently paid through the strategy over timeStays 10 years from filingStays 7 years from filingUnsecured financial obligation without any significant assets at riskSaving a home, curing defaults, above-median income Chapter 13 Chapter 7 You normally should wait 8 years for another Chapter 7 discharge, however might get approved for Chapter 13 sooner (timing rules are technical and case-specific) Chapter 13, to treat the default and keep the vehicle Often Chapter 13, though eligibility depends on the "regular earnings" requirement Chapter 13's co-debtor stay provides defense Chapter 7 does notI invested years administering cases as the Trustee -seeing firsthand which choices held up and which ones backfired.

Filing the incorrect chapter, or filing correctly however with an avoidable mistake, can mean losing residential or commercial property you could have kept or paying years longer than essential. Every monetary scenario is various, and the "right" chapter depends on numbers and truths unique to your household. If you're weighing Chapter 7 vs.

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

It depends on your household earnings compared to Colorado's existing typical figures for your household size, plus permitted expenditure deductions if you're above mean. These figures change two times a year, so a precise response requires checking the chart in effect on your filing date. Yes. Filing either Chapter 7 or Chapter 13 triggers the automated stay, which immediately stops most wage garnishments, collection calls, and lawsuits.

Chapter 13 deals court-enforced security that private debt settlement does not supply, but it's a longer commitment. Personal bankruptcy law is fact-specific, and results depend on your specific situations.