Chapter 13 bankruptcy
The reorganization chapter. You keep all your property and pay creditors a portion of what you owe over 3 to 5 years through a court-supervised plan. When it saves your home, how the plan works, and how the math differs from Chapter 7.
What Chapter 13 is for
Chapter 13 is called "reorganization" because it lets you restructure your debts and pay them off over 3 to 5 years while keeping all your property. It's the right choice when Chapter 7 isn't the best fit: you own assets you want to keep that exemptions don't cover, you're behind on secured debts (mortgage or car loan) that Chapter 7 can't fix, you have recent tax debts or other non-dischargeable debts that a repayment plan can restructure, or your income is too high for the Chapter 7 means test.
The plan itself is the core of Chapter 13. You propose a monthly payment amount that pays priority debts in full, catches you up on secured debts, and pays your "disposable income" to unsecured creditors. The court confirms the plan if it meets statutory requirements, and you pay the trustee each month while the trustee distributes the money to creditors.
Who qualifies for Chapter 13
- Regular income
You need reliable income to fund a plan. Sources: employment wages, self-employment earnings, Social Security or disability payments, pension distributions, alimony or child support. The income has to be stable enough to commit to monthly plan payments for 3 to 5 years.
- Debt ceilings
Total unsecured debts under $1,395,875. Total secured debts under $4,187,525. These are the 2025 limits and adjust every 3 years. Most individuals qualify; the ceilings exclude only high-net-worth filers who'd typically use Chapter 11 instead.
- Credit counseling
Complete a pre-filing credit counseling course within 180 days before filing. Costs $10 to $50. Certificate must be filed with the petition. A second debtor education course is required before discharge.
- No recent bankruptcy discharge
You can't receive a Chapter 13 discharge if you received a Chapter 7 discharge within the past 4 years or a Chapter 13 discharge within the past 2 years. You can still file Chapter 13 to use the automatic stay and repay debts, but won't get a discharge at the end.
How the repayment plan works
Priority debts — paid in full
Recent income taxes (less than 3 years old), child support arrears, alimony arrears, criminal restitution. These must be paid 100% over the plan's life. This is often why people file Chapter 13 — to pay down non-dischargeable priority debts over time instead of facing immediate collection.
Secured debts — cure and maintain
Mortgage arrears get "cured" (paid off) over the plan while you continue regular monthly payments outside the plan. Car loans can be restructured down to the vehicle's current value ("cramdown") if you've had the loan more than 910 days. The plan stops foreclosure and vehicle repossession.
Unsecured debts — disposable income
Credit cards, medical bills, personal loans get paid the "disposable income" amount: your net income minus reasonable living expenses. For below-median households, this is often 0-25% of the total unsecured debt. For above-median households, it's whatever the means test calculation produces.
The "best interests" floor
Unsecured creditors must receive at least what they would have gotten in a Chapter 7 liquidation. If you have $50K in non-exempt equity, unsecured creditors get at least $50K through the plan. This prevents Chapter 13 from being a worse deal for creditors than the Chapter 7 alternative.
The Chapter 13 timeline
| Stage | Timing | What happens |
|---|---|---|
| Pre-filing credit counseling | Within 180 days before filing | Required counseling course. $10-$50. |
| File petition + plan | Day 0 | Petition, schedules, and proposed plan filed with court. Automatic stay stops foreclosures, garnishments, and most collections immediately. |
| First plan payment due | Day 30 | Start making monthly plan payments to the trustee even before confirmation. Missing payments can get the case dismissed. |
| 341 meeting of creditors | Day 21 to 50 | Meet with the trustee to review your finances and plan under oath. Creditors can attend and object to specific plan provisions. |
| Confirmation hearing | Day 45 to 90 | Judge reviews the plan. If no one objects, and the plan meets statutory requirements, the court confirms it. Confirmation makes the plan binding on everyone. |
| Plan payment period | Months 1 to 60 | Make monthly payments to the trustee. Trustee distributes to creditors per priority order. Adjust plan if circumstances change materially. |
| Debtor education course | Before discharge | Required financial management course. $10-$40. |
| Discharge order | Month 36-60 | After completing all plan payments and the education course, remaining qualifying unsecured debts are discharged. Case closes. |
When Chapter 13 is the right choice
- Behind on mortgage, want to keep the house
The single most common reason people file Chapter 13. The automatic stay stops foreclosure on day 1, and the plan lets you catch up on arrears over 3 to 5 years. Chapter 7 doesn't stop foreclosure if you're behind.
- Need to restructure a car loan
If your car loan is over 910 days old, Chapter 13 allows "cramdown": the loan is reduced to the car's current fair market value, with any excess balance treated as unsecured. Saves money on underwater car loans.
- Above the Chapter 7 means test
High-income filers who can't qualify for Chapter 7 liquidation use Chapter 13 to pay creditors from future income. The plan amount often ends up less than paying all debts outside bankruptcy.
- Recent tax debts
Income tax debts less than 3 years old aren't dischargeable in Chapter 7. Chapter 13 lets you pay them off as priority debts through the plan — often a better outcome than an IRS installment agreement.
- Valuable non-exempt assets
A vacation home, rental property, valuable collection, or business interest that exceeds state exemptions. Chapter 13 lets you keep these by paying unsecured creditors their equivalent value over the plan period.
- Previous Chapter 7 discharge within 8 years
You can't get another Chapter 7 discharge within 8 years. Chapter 13 is available, though you won't get a discharge until the 4-year waiting period from the Chapter 7 discharge passes.
Common Chapter 13 pitfalls
- Missing plan payments. The trustee files motion to dismiss after a few missed payments. Dismissal leaves you worse off: creditors can restart collections, foreclosure can resume, and you've lost the payments you already made.
- Income change without plan modification. A pay cut, job loss, or medical emergency can make the plan unaffordable. File a motion to modify the plan instead of silently missing payments. Trustees are generally willing to work with debtors who proactively seek modifications.
- Underestimating the 5-year commitment. Chapter 13 locks you into a 3 to 5 year payment schedule. Mid-plan life changes (divorce, relocation, new business opportunities) often complicate the plan. Make sure you're committed before filing.
- Hiding post-filing income or assets. Chapter 13 requires you to report material income increases to the trustee. Hiding a bonus, inheritance, or lottery win is bankruptcy fraud. The trustee has broad discovery rights throughout the plan period.
- New debt without court approval. Taking on new debt over $1,000 without trustee/court approval during the plan period is a violation. Get pre-approval for necessary new debt (like replacing a totaled car).
Frequently Asked Questions
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What is Chapter 13 bankruptcy?
Chapter 13 is the "reorganization" form of consumer bankruptcy. Instead of liquidating assets (like Chapter 7), you propose a 3 to 5 year repayment plan based on your income and expenses. You keep all your property. The plan pays some portion of your debts — the amount depends on your disposable income, your assets, and the type of debt. At the end of the plan period, any remaining qualifying debts are discharged. Total time: 3 to 5 years from filing to discharge.
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Who qualifies for Chapter 13?
Three requirements: (1) you must have regular income (employment, self-employment, Social Security, or pension) sufficient to fund a plan, (2) your unsecured debts must be under $1,395,875 and secured debts under $4,187,525 (2025 limits, adjusted every 3 years), and (3) you must have completed a credit counseling course within 180 days before filing. Unlike Chapter 7, there's no means test for Chapter 13 because the plan itself demonstrates repayment capacity.
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How does the Chapter 13 repayment plan work?
Your plan pays three categories of debt: (1) priority debts (recent taxes, child support, alimony) get 100% paid over the plan's life, (2) secured debts (mortgage arrears, car loans) get what's needed to catch up or retain the property, and (3) unsecured debts (credit cards, medical bills) get the "disposable income" amount, which may be as little as 0%. You pay a trustee each month; the trustee distributes the money to creditors per the plan's priority order.
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How long does Chapter 13 last?
3 years if your household income is below the state median for your family size, 5 years if above the state median. The 3-year floor protects lower-income debtors from longer plans. The 5-year ceiling is absolute — no Chapter 13 plan exceeds 60 months. Most plans run the full 5 years because longer plans pay less per month and spread the total cost more manageably.
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How much does Chapter 13 bankruptcy cost?
Court filing fee is $313. Attorney fees are significantly higher than Chapter 7 — typically $3,000 to $4,500 — because the case stays open 3 to 5 years and requires ongoing representation. Most attorney fees are paid through the Chapter 13 plan itself (not upfront), which makes Chapter 13 more accessible than Chapter 7 for filers who can't produce $1,500+ at the outset. See the full bankruptcy cost breakdown.
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When is Chapter 13 better than Chapter 7?
Chapter 13 wins in five common situations: (1) you're behind on mortgage payments and want to stop foreclosure while catching up on arrears, (2) you're behind on a car loan and want to restructure the payments, (3) you have non-exempt assets you want to protect (valuable art, a second home, equity in a business), (4) you have recent tax debts that aren't dischargeable in Chapter 7 but can be paid through a Chapter 13 plan, or (5) your income is too high for the Chapter 7 means test. See Chapter 7 for the liquidation alternative.
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Can I keep my house in Chapter 13?
Almost always, yes. Chapter 13 is specifically designed to save homes from foreclosure. If you're behind on your mortgage, the plan lets you catch up ("cure the arrears") over 3 to 5 years while making your regular monthly payments on time. The bank cannot foreclose during the plan period. At the end of the plan, you're caught up and your mortgage continues as normal. This is the biggest single reason people file Chapter 13 instead of Chapter 7.
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How long does Chapter 13 stay on my credit report?
7 years from the filing date. This is shorter than Chapter 7's 10 years. The shorter reporting period plus the fact that Chapter 13 shows you actively repaid creditors (vs Chapter 7's liquidation) can make it marginally better for future credit applications, though both chapters are serious derogatory marks during the reporting period.
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What happens if I can't complete my Chapter 13 plan?
Three options if your plan becomes unaffordable: (1) modify the plan (lower payments, longer term within the 5-year ceiling) if a material change in circumstances justifies it, (2) convert to Chapter 7 (possible anytime), or (3) request a "hardship discharge" if you've paid unsecured creditors as much as they would have received in Chapter 7 and you can't modify further. Cases that simply stop being paid get dismissed, leaving you worse off than before you filed.