Chapter 13 bankruptcy is a court-supervised debt reorganization for individuals with regular income. Instead of selling off property to pay creditors, you keep what you own and repay some or all of what you owe through a single monthly payment to a court-appointed trustee, over three to five years. At the end of the plan, most remaining balances covered by it are wiped out. To qualify in 2026, your noncontingent, liquidated unsecured debts must be under $526,700 and your secured debts under $1,580,125.1Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases
The tradeoff at the center of it: you get years of protection from foreclosure, garnishment, and collection calls, and you get to keep property that a Chapter 7 trustee might otherwise sell. In exchange, you commit your disposable income to the plan for as long as the law requires.
Who Can File
Chapter 13 is only for individuals. Sole proprietors and people running unincorporated businesses qualify, and spouses can file jointly, but corporations and partnerships cannot use it. You need “regular income” sufficient to fund a repayment plan. That income doesn’t have to be a paycheck; Social Security, pensions, freelance earnings, and consistent support from a family member can count.
The debt caps are strict. A temporary law had combined them into a single $2,750,000 limit, but that provision expired in June 2024, and the two-part test is back: unsecured debts under $526,700, secured debts under $1,580,125. “Noncontingent” means the debt doesn’t hinge on some future event, and “liquidated” means the amount is fixed or easily calculable. If you’re over the caps, Chapter 11 is the alternative, and it’s substantially more complex and expensive.
A few other doors close the option off. You can’t file if a prior bankruptcy was dismissed within the last 180 days because you ignored court orders or failed to appear.2Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor You can’t file Chapter 13 within two years of a prior Chapter 13 discharge, or within four years of a Chapter 7 discharge. And you must have filed federal tax returns for the four tax years before your filing date; missing returns can get the case dismissed.3Internal Revenue Service. Declaring Bankruptcy
How Chapter 13 Compares to Chapter 7
Chapter 7 is a liquidation. A trustee sells your non-exempt property and distributes the proceeds; the case wraps in a few months, but you can lose a car, a second home, or other assets that exemptions don’t cover. Chapter 13 lets you keep everything as long as you keep making plan payments, and it gives you years to catch up on a mortgage or car loan you’re behind on.
Eligibility runs in opposite directions. Chapter 7 uses a means test to screen out filers who earn enough to repay. Chapter 13 requires enough regular income to fund a plan. High earners pushed out of Chapter 7 often land in Chapter 13 by default.
What You Do Before Filing
Bankruptcy paperwork is extensive. Federal law requires a full picture of your finances: schedules of every asset, every debt, monthly income and expenses, plus a statement of financial affairs covering recent property transfers, lawsuits, and account closures.4Office of the Law Revision Counsel. 11 USC 521 – Debtors Duties Miss the 45-day deadline for filing all required documents after your petition, and the case is dismissed automatically.
You also have to complete a credit counseling session with a nonprofit agency approved by the U.S. Trustee’s office. The session must fall within the 180 days before you file, and the certificate goes in with your petition.5United States Bankruptcy Court District of Columbia. Notice to All Debtors About Prepetition Credit Counseling Requirement If the certificate is older than 180 days on the filing date, it doesn’t count. Most agencies offer the course online or by phone, and it runs about an hour.
Chapter 13 filers also complete Form 122C-1, which calculates current monthly income and sets the plan’s commitment period, and Form 122C-2, which calculates disposable income by subtracting standardized IRS-based living expenses from earnings.6U.S. Courts. Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period The disposable income number drives what unsecured creditors get each month.
What It Costs
The court’s filing fee is $313, split into a $235 statutory fee and a $78 administrative fee.7U.S. Courts. Bankruptcy Court Miscellaneous Fee Schedule Chapter 13 filers can’t get the fee waived the way Chapter 7 filers sometimes can, but you can apply to pay in up to four installments within 120 days of filing, extendable to 180 days for good cause.
Attorney fees are the bigger number. Most bankruptcy courts publish a “no-look” fee, an amount presumptively reasonable that attorneys can charge without itemizing. These run roughly $2,500 to $6,000 depending on the district. The helpful part of Chapter 13 is that attorney fees can be folded into the plan, so you don’t need the full amount upfront. All fees have to be disclosed to the court, and the judge can cut them if they’re unreasonable.
How the Repayment Plan Works
The plan is the heart of the case. It sets your monthly payment, tells the trustee which creditors get paid and how much, and defines how long the whole thing lasts. Several legal tests have to be satisfied before a judge will confirm it.8Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan
How Long the Plan Lasts
Length depends on how your household income compares to your state’s median. Below median, the baseline commitment is three years. At or above median, it’s no less than five.9Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan Either way, you can finish sooner if the plan pays every unsecured creditor in full. No plan can run longer than five years.
Priority and Secured Debts
Some debts jump to the front. Priority claims, including past-due child support, alimony, and most tax debts, must be paid in full through the plan.10Office of the Law Revision Counsel. 11 USC 507 – Priorities For a mortgage you’re behind on, the plan spreads the arrears across its full length while you keep making regular monthly payments to the lender directly. Car loans get their own treatment depending on when you bought the vehicle.
Car Loan Cramdowns
If you bought your car at least 910 days before filing (roughly two and a half years), the plan can reduce the loan balance to the vehicle’s current replacement value. Owe $18,000 on a car now worth $11,000, and the plan treats it as an $11,000 secured claim. The $7,000 gap becomes unsecured debt, often paid at pennies on the dollar. Cars bought inside the 910-day window don’t qualify.
Stripping Junior Liens
If your home is worth less than what you owe on the first mortgage, any junior lien (a second mortgage or home equity line) counts as fully unsecured and can be stripped off entirely. If the home is worth $300,000, the first mortgage is $350,000, and a second mortgage is $80,000, that $80,000 gets reclassified as unsecured debt. When you complete the plan, the junior lien comes off the property. Chapter 7 doesn’t offer this.
What Unsecured Creditors Get
Credit cards, medical bills, and other unsecured debts often collect a fraction of what’s owed, sometimes nothing. The rule is that unsecured creditors must receive at least what they would have gotten if your assets had been liquidated under Chapter 7. If you have no non-exempt assets, that floor can be zero. Above-median filers must also commit all projected disposable income to the plan for the full commitment period.
What Happens the Moment You File
The instant your petition is filed, a trustee is assigned and the automatic stay takes effect.
The Automatic Stay
The automatic stay is an injunction that stops most creditor actions at once. Lawsuits, wage garnishments, bank levies, foreclosure sales, and collection calls all halt. For many filers this is the most immediate reason to file. The stay stays in force for the length of the case unless a creditor persuades the judge to lift it.
It doesn’t stop everything. Criminal proceedings continue, and collection of domestic support obligations from non-estate property is not paused.11Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay If a prior case of yours was dismissed within the past year, the stay lasts only 30 days unless you get an extension. With two or more prior dismissals in the past year, the stay doesn’t take effect at all without a good-faith motion.
Protection for Co-Signers
Chapter 13 also stays collection against people who co-signed a consumer debt with you, something Chapter 7 doesn’t do.12Office of the Law Revision Counsel. 11 USC 1301 – Stay of Action Against Codebtor The protection ends if the case is dismissed, converted to Chapter 7, or if the plan doesn’t propose to pay that particular debt.
The 341 Meeting and Confirmation
Within a few weeks of filing, the trustee holds a meeting of creditors. You answer questions under oath about your finances, assets, and the plan.13Office of the Law Revision Counsel. 11 USC 341 – Meetings of Creditors and Equity Security Holders Creditors rarely appear for routine cases; it’s mostly the trustee checking that the paperwork and the plan hold up.
A separate confirmation hearing follows, where the judge decides whether to approve the plan. The trustee or creditors can object if the plan doesn’t pay priority debts in full, doesn’t beat the Chapter 7 liquidation floor for unsecured creditors, or doesn’t commit enough disposable income. You must start making plan payments within 30 days of filing, before confirmation.14Office of the Law Revision Counsel. 11 USC 1326 – Payments The trustee holds those early payments and distributes them once the plan is confirmed.
When the Plan Stops Working
Three to five years is a long time. Job losses, medical emergencies, and other disruptions can make the original payment impossible, and the law provides several routes out.
Modifying the Plan
You, the trustee, or a creditor can ask the court to modify a confirmed plan. Modifications can raise or lower payments, stretch or shorten the timeline, or shift how specific creditors are paid.15Office of the Law Revision Counsel. 11 USC 1329 – Modification of Plan After Confirmation You can also reduce plan payments by amounts spent on new health insurance for yourself or a dependent who didn’t previously have coverage. The modified plan has to pass the same legal tests as the original.
Dismissing or Converting
You have an absolute right to dismiss a Chapter 13 case at any time, and an absolute right to convert to Chapter 7. Those rights can’t be waived, even in writing.16Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal Creditors and the trustee can also ask the judge to dismiss or convert for cause, such as missed payments, unreasonable delays, or missing tax returns. Dismissal ends the stay and lets creditors resume collection. Conversion to Chapter 7 puts a liquidation trustee in charge and puts non-exempt assets at risk.
Hardship Discharge
In narrow cases, the court can grant a discharge even without full completion of the plan. Three conditions all have to hold: the failure to finish was caused by circumstances genuinely beyond your control, unsecured creditors have already received at least what they would have gotten in Chapter 7, and modification isn’t a realistic option.17Office of the Law Revision Counsel. 11 USC 1328 – Discharge A hardship discharge covers fewer debts than a standard one; anything non-dischargeable in Chapter 7 survives here too.
The Discharge and What Survives It
Once you make every payment the confirmed plan required, the court issues a discharge order eliminating your personal liability on most of the covered debts.17Office of the Law Revision Counsel. 11 USC 1328 – Discharge Before the discharge is entered, you also have to complete a debtor education course in personal financial management from an approved provider. That’s separate from the pre-filing counseling and can’t be skipped.18U.S. Courts. Credit Counseling and Debtor Education Courses
Not every debt disappears. Child support, alimony, most student loans, criminal restitution, and certain tax debts survive. So do debts from fraud, willful injury, and DUI-related obligations. Creditors holding discharged debts are permanently barred from collecting on those balances.
Forgiven debt is usually taxable income outside bankruptcy. Not here. Federal tax law specifically excludes debt discharged in a bankruptcy case from gross income, so there’s no surprise tax bill for the gap between what you owed and what unsecured creditors actually received.19Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness
Life During and After the Case
While the case is active, you generally can’t take on new debt without permission from the trustee or judge. That covers car loans, mortgage refinancing, student loans, co-signing, even rent-to-own contracts. The only exception is a genuine emergency involving life, health, or property. Unauthorized new debt can get the case dismissed, and the court can void the transaction.
A Chapter 13 filing shows on your credit report for up to seven years from the filing date, versus ten years for Chapter 7. The hit to your score is heaviest in the first year or two and fades over time, especially if you make plan payments on time and rebuild credit responsibly after discharge. The filing on your report doesn’t prevent new credit after discharge, but expect higher interest rates and narrower options in the early years.