Long-Term Impacts of Filing Bankruptcy

right away upon filing, through the automatic stay. You're behind on your home mortgage and want to keep your homeYour income 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 strategy rather of losing the assetYou have debts that make it through Chapter 7 (particular taxes, some domestic support defaults) that you require structured time to payYou've filed Chapter 7 too just recently to submit again (see timing guidelines 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 average family earnings figures by household size, upgraded every April and November using Census Bureau information. If your typical regular monthly income over the prior six months, annualized, falls at or below Colorado's mean for your household size, you pass the ways test automatically and may submit Chapter 7.

Lots of above-median filers still receive Chapter 7 after these deductions. or you might still have options depending upon the type of debt you carry (the ways test only uses to filers whose debts are mainly consumer debts). Due to the fact that the average income figures and internal revenue service expenditure requirements alter twice a year, the exact numbers that applied when a pal or relative submitted may not use to your case today.

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

New Legal Steps for 2026 Bankruptcy

This is typically the deciding factor for Colorado filers. Colorado's exemption statutes secure a set amount of equity in your house, automobile, tools of trade, pension, and personal effects. If your equity in a property goes beyond the exemption, the trustee can offer it and pay you the exempt portion however for the large majority of filers with average equity levels, whatever is protected and nothing is offered.

This is frequently why higher-equity property owners or service owners select 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 continuous trustee cost)Often paid up front or quickly after filingFrequently paid through the plan over timeStays ten years from filingStays 7 years from filingUnsecured financial obligation without any major assets at riskSaving a home, curing financial obligations, above-median income Chapter 13 Chapter 7 You typically need to wait 8 years for another Chapter 7 discharge, however may certify for Chapter 13 sooner (timing guidelines are technical and case-specific) Chapter 13, to cure the default and keep the cars and truck Typically Chapter 13, though eligibility depends upon the "routine income" requirement Chapter 13's co-debtor stay uses security Chapter 7 does notI invested years administering cases as the Trustee -seeing direct which choices held up and which ones backfired.

Submitting the wrong chapter, or filing properly however with a preventable error, can mean losing property you might have kept or paying years longer than necessary. Every financial circumstance is different, and the "best" chapter depends upon numbers and realities unique to your family. 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 scenarios alter, based on particular constraints and court approval. Not always. If you're current 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 upon your home income compared to Colorado's present mean figures for your household size, plus enabled expense deductions if you're above typical. These figures alter two times a year, so an accurate response requires checking the chart in impact on your filing date. Yes. Filing either Chapter 7 or Chapter 13 triggers the automatic stay, which immediately stops most wage garnishments, collection calls, and claims.

Chapter 13 offers court-enforced protection that personal debt settlement doesn't supply, but it's a longer dedication. This short article is for basic informative purposes just and does not make up legal suggestions. Insolvency law is fact-specific, and outcomes depend upon your specific scenarios. Contact our office to discuss your circumstance directly.