How to Stop Garnishment Through 2026 Bankruptcy

instantly upon filing, through the automatic stay. You're behind on your mortgage and wish to keep your homeYour earnings is above the Colorado mean and you don't pass the Chapter 7 suggests testYou have non-exempt equity you wish to safeguard by paying its value into a plan instead of losing the assetYou have debts that make it through Chapter 7 (specific taxes, some domestic assistance financial obligations) that you require structured time to payYou have actually filed Chapter 7 too 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 works in plain terms: The U.S. Trustee Program releases typical family income figures by home size, updated every April and November utilizing Census Bureau information. If your average regular monthly earnings over the prior 6 months, annualized, falls at or listed below Colorado's mean for your household size, you pass the ways test immediately and may submit Chapter 7.

Many above-median filers still receive Chapter 7 after these reductions. or you might still have options depending upon the type of financial obligation you carry (the ways test just applies to filers whose financial obligations are mainly consumer financial obligations). Due to the fact that the typical earnings figures and internal revenue service expense standards change two times a year, the precise numbers that applied when a pal or relative submitted might not apply to your case today.

Chapter 13 isn't readily available to everybody despite earnings there are statutory debt ceilings under 11 U.S.C. 109(e). Since the most recent inflation change (efficient April 1, 2025, through March 31, 2028), the limitations are different for secured and unsecured financial obligation, in the low 7 figures integrated. There is active, bipartisan legislation pending in Congress that would raise and streamline these limitations into a single combined limit worth watching if you're near the current ceiling, especially if a large home mortgage is what's pressing you over.

Navigating Between 13 and 7 for 2026

This is generally the deciding aspect for Colorado filers. Colorado's exemption statutes secure a set quantity of equity in your house, vehicle, tools of trade, retirement accounts, and personal effects. If your equity in a property surpasses the exemption, the trustee can sell it and pay you the exempt portion but for the large bulk of filers with average equity levels, whatever is protected and nothing is offered.

This is often why higher-equity house owners or company owner choose Chapter 13 even when they may 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 charge)Often paid up front or shortly after filingFrequently paid through the strategy over timeStays ten years from filingStays 7 years from filingUnsecured debt with no significant assets at riskSaving a home, curing financial obligations, above-median income Chapter 13 Chapter 7 You normally should 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 cure the default and keep the car Frequently Chapter 13, though eligibility depends on the "regular income" requirement Chapter 13's co-debtor stay uses defense Chapter 7 does notI invested years administering cases as the Trustee -seeing firsthand which decisions held up and which ones backfired.

Submitting the incorrect chapter, or filing properly but with an avoidable error, can mean losing property you might have kept or paying years longer than needed. If you're weighing Chapter 7 vs.

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A Guide to 2026 Bankruptcy Support

Yes, in most cases you can convert your case from Chapter 13 to Chapter 7 if your circumstances change, subject to certain restrictions specific court approval.

It depends on your home income compared to Colorado's present typical figures for your home size, plus allowed expense reductions if you're above average. Filing either Chapter 7 or Chapter 13 triggers the automated stay, which instantly stops most wage garnishments, collection calls, and suits.

Chapter 13 offers court-enforced security that private financial obligation settlement does not offer, but it's a longer commitment. This post is for general informative functions just and does not constitute legal advice. Insolvency law is fact-specific, and outcomes depend upon your private circumstances. Contact our workplace to discuss your situation straight.