Chapter 13 Bankruptcy in the United States
Chapter 13 bankruptcy is a federal reorganization proceeding that lets you keep your assets while repaying some or all debts through a court-approved 3-to-5-year plan. It is designed for individuals with regular income who exceed Chapter 7 means test limits or want to protect non-exempt property from liquidation.
Last updated: April 2026
Overview
Chapter 13 bankruptcy, sometimes called the "wage earner's plan," is a reorganization proceeding under Title 11 USC that allows individuals with regular income to develop a plan to repay all or a portion of their debts over 3 to 5 years. Unlike Chapter 7, no assets are liquidated. Instead, you make monthly payments to a Chapter 13 trustee, who distributes funds to creditors according to the court-approved plan.
Chapter 13 is particularly valuable for homeowners facing foreclosure, as it allows you to catch up on missed mortgage payments over the life of the plan while keeping your home. It also protects co-signers on consumer debts from collection activity through a special co-debtor stay under 11 USC 1301. According to the Administrative Office of the US Courts, Chapter 13 accounts for roughly 30% of consumer bankruptcy filings.
Eligibility requires regular income and debt below certain thresholds. As of 2026, your secured debts must be less than approximately $2,750,000 and your unsecured debts must be less than approximately $2,750,000 (these limits were unified and adjusted under the Bankruptcy Threshold Adjustment and Technical Corrections Act). You must also complete the same pre-filing credit counseling required for Chapter 7.
At the end of your repayment plan, any remaining qualifying unsecured debt is discharged. The Chapter 13 discharge is broader than Chapter 7 in some respects, as it can discharge certain debts that Chapter 7 cannot, including some willful and malicious property damage claims and debts from marital property settlements. However, the 2005 BAPCPA narrowed the "super discharge" considerably.
Eligibility Requirements
You may qualify if:
- +You have regular income sufficient to fund a repayment plan (employment, self-employment, Social Security, pension, or other stable income)
- +Your total secured debts do not exceed the current statutory limit (approximately $2,750,000 as of 2026)
- +Your total unsecured debts do not exceed the current statutory limit (approximately $2,750,000 as of 2026)
- +You completed a credit counseling course from a US Trustee-approved agency within 180 days before filing
- +You have filed all required federal and state tax returns for the 4 years preceding your filing
- +You have not had a bankruptcy case dismissed for bad faith within the past 180 days
- +You are an individual (Chapter 13 is not available to corporations, partnerships, or LLCs)
- +You are willing to commit your disposable income to the repayment plan for 3 to 5 years
- +You can demonstrate that your plan is proposed in good faith
- +You are current on domestic support obligations (child support and alimony) at the time of plan confirmation
This may not be right if:
- -You lack regular income to fund a feasible repayment plan
- -Your debts exceed the statutory limits for Chapter 13 eligibility
- -You have not filed required tax returns for the 4 years before filing
- -You had a prior bankruptcy case dismissed for cause within 180 days
- -You are a business entity rather than an individual
- -You received a Chapter 13 discharge within the past 2 years or a Chapter 7 discharge within the past 4 years
How the Process Works
Complete pre-filing credit counseling
Just like Chapter 7, you must complete a credit counseling course from a US Trustee-approved provider within 180 days before filing. The agency will issue a certificate that must accompany your petition. This course reviews your financial situation and explores alternatives to bankruptcy.
Prepare and file your petition with a proposed repayment plan
Working with your attorney, you prepare the bankruptcy petition, schedules, and a proposed Chapter 13 repayment plan. The plan specifies how much you will pay each month, how long the plan will last (3 or 5 years), and how creditors will be treated. Priority debts (taxes, child support) must be paid in full. The filing fee is $313 as of 2026.
Begin making plan payments within 30 days
Under 11 USC 1326, you must begin making payments to the Chapter 13 trustee within 30 days of filing, even before the plan is confirmed by the court. These payments are typically made through automatic payroll deduction. If your plan is later modified or not confirmed, the trustee returns funds to creditors or to you as appropriate.
Attend the 341 Meeting of Creditors
Approximately 20 to 50 days after filing, you attend a Meeting of Creditors where the Chapter 13 trustee reviews your petition and plan. The trustee and any attending creditors may ask questions about your income, expenses, assets, and the feasibility of your proposed plan. This meeting is typically 10 to 20 minutes.
Attend the confirmation hearing
The court holds a confirmation hearing, usually 20 to 45 days after the 341 meeting, to determine whether your proposed plan meets the legal requirements under 11 USC 1325. The trustee and creditors may object. The plan must pass the best interests test (creditors receive at least as much as they would in Chapter 7), the disposable income test, and the good faith test. The judge may require modifications before confirming the plan.
Make monthly payments for the duration of the plan
Once confirmed, you make monthly payments to the trustee for 3 years (if your income is below the state median) or 5 years (if above the state median). The trustee distributes payments to creditors according to the confirmed plan. You must maintain all post-petition obligations (mortgage, car payments, insurance) and remain current on any domestic support obligations.
Complete the debtor education course and receive your discharge
After completing all plan payments, you must file a certification of completion of the debtor education course and certify that all domestic support obligations are current. The court then issues a discharge order, eliminating remaining qualifying unsecured debts. Your case is closed. If circumstances change during the plan (job loss, medical emergency), you may request a plan modification, hardship discharge, or conversion to Chapter 7.
Costs and Fees
Chapter 13 costs are generally higher than Chapter 7 due to the longer duration and complexity. Attorney fees are typically paid through the repayment plan rather than upfront. Trustee fees are built into your monthly payment.
| Item | Estimated Amount |
|---|---|
| Court filing fee | $313 |
| Attorney fees (varies by district) | $2,500 - $6,000 |
| Pre-filing credit counseling course | $25 - $50 |
| Post-filing debtor education course | $25 - $50 |
| Chapter 13 trustee fee (percentage of plan payments) | Approximately 7-10% of total plan payments |
| Total monthly plan payment (varies widely by income and debts) | $200 - $2,500+ per month |
Timeline
Chapter 13 is a longer process than Chapter 7 because it involves a multi-year repayment plan. The plan duration is determined by your income relative to the state median.
Below-median-income filer (3-year plan)
36 months of payments, plus filing and confirmation time
Above-median-income filer (5-year plan)
60 months of payments, plus filing and confirmation time
Filing to confirmation hearing
2 to 4 months
Filing to discharge (below median income)
Approximately 38 to 42 months total
Filing to discharge (above median income)
Approximately 62 to 66 months total
Hardship discharge (if unable to complete plan)
Available any time during the plan if criteria met
Credit Impact
Credit Rating
Significant
Duration on Report
Up to 7 years
A Chapter 13 bankruptcy remains on your credit reports for up to 7 years from the filing date under the Fair Credit Reporting Act (15 USC 1681c), which is 3 years less than Chapter 7. The initial credit score impact is typically 130 to 200 points, though this varies. Because you are repaying a portion of your debts, some lenders view Chapter 13 more favorably than Chapter 7. Credit rebuilding can begin during the repayment plan with court permission, and many filers achieve mid-600s credit scores within 1 to 2 years of discharge.
Pros and Cons
Advantages
- +Keep all your assets, including non-exempt property that would be liquidated in Chapter 7
- +Stop foreclosure and catch up on missed mortgage payments over the life of the plan
- +Protect co-signers on consumer debts through the co-debtor stay (11 USC 1301)
- +Remains on credit reports for 7 years instead of 10 years for Chapter 7
- +Can strip off wholly unsecured junior liens on your primary residence in some circuits
- +Broader discharge than Chapter 7 for certain types of debts
- +Available to higher-income filers who do not pass the Chapter 7 means test
- +Can cure arrearages on car loans and other secured debts
Disadvantages
- -Requires 3 to 5 years of commitment to a court-supervised repayment plan
- -All disposable income must go toward the plan, leaving limited financial flexibility
- -Failure to make payments can result in case dismissal or conversion to Chapter 7
- -Attorney fees are higher than Chapter 7, though they can be paid through the plan
- -Must obtain court permission for new debt (car loan, etc.) during the plan
- -Completion rates are lower than expected; roughly 33-40% of Chapter 13 cases are dismissed before plan completion
- -Must remain current on all post-petition obligations throughout the plan period
Frequently Asked Questions
Can Chapter 13 save my home from foreclosure?
Yes. Chapter 13 is one of the most powerful tools for stopping foreclosure. The automatic stay halts foreclosure proceedings immediately upon filing. Your repayment plan can include a schedule to cure your mortgage arrearages (missed payments, late fees, and penalties) over the 3-to-5-year plan period, while you continue making regular monthly mortgage payments going forward. As long as you complete the plan and remain current, your lender cannot foreclose.
What is the difference between Chapter 7 and Chapter 13?
Chapter 7 is a liquidation proceeding that eliminates most unsecured debts in 3 to 6 months but may require surrendering non-exempt assets. Chapter 13 is a reorganization proceeding where you keep all assets but repay some or all debts over 3 to 5 years. Chapter 7 has income limits (means test), while Chapter 13 has debt limits. Chapter 7 stays on credit reports for 10 years; Chapter 13 for 7 years. The right choice depends on your income, assets, and financial goals.
What happens if I cannot complete my Chapter 13 plan?
If you cannot complete your plan due to changed circumstances (job loss, illness, disability), you have several options. You may request a plan modification to lower payments. You may convert to Chapter 7 if you qualify. You may request a hardship discharge under 11 USC 1328(b) if your failure to complete the plan is due to circumstances beyond your control. Or you may voluntarily dismiss the case, though this removes the automatic stay protections.
How much of my debt will I repay in Chapter 13?
The amount varies significantly. Priority debts (taxes, child support) must be paid in full. Secured debts may be paid at the value of the collateral through a process called cramdown (except for your primary mortgage and recent car purchases). Unsecured creditors receive your disposable income after priority and secured claims. Unsecured creditors may receive anywhere from 0% to 100% of their claims depending on your income and expenses. The plan must provide at least as much as creditors would receive in a Chapter 7 liquidation.
Can I buy a car during a Chapter 13 plan?
You must obtain permission from the court (or the trustee, depending on your district's procedures) before taking on any new debt during your Chapter 13 plan, including a car loan. The court will evaluate whether the purchase is necessary and whether you can afford it without jeopardizing your plan payments. Emergency vehicle replacement for work purposes is generally approved. Luxury purchases are typically denied.
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