A Chapter 13 repayment plan is a court-approved schedule that lets you pay off your debts over three to five years while keeping your house, car, and other property. A federal bankruptcy judge sets the monthly amount based on what you can actually afford after necessary living expenses, and a trustee collects your payments and distributes them to creditors in an order fixed by law. When you finish the plan, most remaining unsecured balances are wiped out.
Who Can File
Chapter 13 is for individuals with regular income. That income does not have to come from a traditional job: wages, self-employment earnings, Social Security, pensions, and consistent contributions from other household members all count.1United States Courts. Chapter 13 – Bankruptcy Basics What matters is whether the income is steady enough to sustain payments for years.
There are hard debt limits. As of April 2025, your noncontingent, liquidated unsecured debts must be under $526,700, and your secured debts must be under $1,580,125.2Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor Above those numbers, Chapter 13 is not available. You also must have filed all required federal tax returns for the four years before your bankruptcy filing.3Internal Revenue Service. Chapter 13 Bankruptcy – Voluntary Reorganization of Debt for Individuals Before filing, you have to complete credit counseling from an approved agency within 180 days of your petition date; an older certificate will get your case dismissed.
What Filing Does Right Away
The moment you file, an automatic stay stops nearly all collection against you. Creditors cannot start or continue lawsuits, garnish wages, foreclose, repossess, or even call to demand payment.4Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay The stay covers every debt that existed before you filed, including tax debts and judgments.
It’s not permanent. It lasts as long as the case is active and your plan is in good standing. A creditor can ask the court to lift it by showing cause, such as collateral value dropping while payments are inadequate. For most filers the stay buys the critical breathing room to get the plan approved without losing property in the meantime.
How Debts Get Paid Through the Plan
Federal law sorts your debts into three tiers, and the plan will not be confirmed unless it follows that order.
Priority Debts
Priority debts sit at the top and must be paid in full unless the specific creditor agrees otherwise.5Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan The most common are domestic support obligations (child support, alimony) and certain recent tax debts. If your plan doesn’t account for these in full, the court will reject it.
Secured Debts
Secured debts are tied to specific property: your mortgage to your house, your auto loan to your car. To keep the collateral, you keep making the regular payments. If you’re behind on the mortgage, the plan can cure the arrears by spreading them across the three-to-five-year term while you resume regular monthly payments going forward.1United States Courts. Chapter 13 – Bankruptcy Basics This is one of the main reasons people choose Chapter 13 over Chapter 7. It can stop a foreclosure and give you years to catch up.
General Unsecured Debts
Credit cards, medical bills, and personal loans without collateral come last. These creditors receive whatever remains after priority and secured obligations are addressed. In many cases that’s a fraction of what’s owed, sometimes a few cents on the dollar, depending on your disposable income.
Student loans get their own treatment. They’re technically unsecured but almost never dischargeable. Some courts allow you to separately classify student loan payments in your plan so you can keep making payments under a federal income-driven repayment program during the bankruptcy, rather than lumping the servicer in with other unsecured creditors that receive far less.
How Your Monthly Payment Is Calculated
Your payment is built on “disposable income.” The court starts with your current monthly income, which is the average of what you earned during the six calendar months before filing. That includes wages, business income, rental income, and regular household contributions. Social Security is not included.1United States Courts. Chapter 13 – Bankruptcy Basics
From that figure, the law subtracts amounts reasonably necessary for living expenses: housing, utilities, food, transportation, healthcare, childcare. If your income is above your state’s median for a household your size, the expenses have to follow standardized IRS allowances rather than your actual spending, which usually produces a higher payment.6Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan What’s left after these deductions is your monthly payment.
Your income also sets how long the plan lasts. Below the state median, you can propose a three-year plan, though the court may approve longer. Above the median, the plan generally must run five years. Five years is the ceiling in every case.1United States Courts. Chapter 13 – Bankruptcy Basics
Every payment passes through a bankruptcy trustee who takes a percentage as compensation for administering the plan. Federal law caps that fee at 10 percent of plan payments, though the actual rate varies by district.7Office of the Law Revision Counsel. 28 USC 586 – Duties; Supervision by Attorney General The fee is built into your payment, not added on top.
Filing and Getting the Plan Approved
The paperwork is the most time-consuming part. You’ll need pay stubs covering at least 60 days before filing, federal tax returns for the prior four years,8Internal Revenue Service. Understanding Federal Tax Obligations During Chapter 13 Bankruptcy recent bank and investment account statements, a complete creditor list with balances, and valuations for real estate and vehicles. The plan itself is drafted on Official Form 113, the required format in all Chapter 13 cases.9United States Courts. Chapter 13 Plan Any inconsistency between your records and the form will attract objections, so accuracy matters more here than anywhere else.
You have 14 days after filing the bankruptcy petition to submit the plan if it wasn’t filed alongside it.1United States Courts. Chapter 13 – Bankruptcy Basics Between 21 and 50 days after filing, the trustee holds a meeting of creditors (the 341 meeting), where you appear under oath and answer questions about your finances and the plan’s terms. Creditors may attend, though many don’t. The trustee’s job at this stage is to verify that your reported numbers match reality.
After the meeting, the court schedules a confirmation hearing. Creditors can file formal objections. If the judge confirms the plan, it becomes legally binding on you and every creditor, and you start sending monthly payments to the trustee for distribution.1United States Courts. Chapter 13 – Bankruptcy Basics
What It Costs
The court filing fee for Chapter 13 is $313, which the court can let you pay in installments. Attorney fees typically run $2,500 to $6,000 depending on complexity and location. A real advantage of Chapter 13 is that attorney fees can usually be paid through the plan itself, so less is due upfront. The trustee’s percentage, capped at 10 percent, comes out of your monthly plan payments.7Office of the Law Revision Counsel. 28 USC 586 – Duties; Supervision by Attorney General
Changing the Plan If Life Changes
Three to five years is a long time. You, the trustee, or an unsecured creditor can ask the court to modify a confirmed plan at any time before payments are completed.10Office of the Law Revision Counsel. 11 USC 1329 – Modification of Plan After Confirmation Modifications can raise or lower payments, change the timeline, or adjust what a particular creditor gets. A job loss or medical emergency is the classic trigger. The law also specifically allows a reduction to buy health insurance for yourself or a dependent who would otherwise be uninsured. Even with a modification, the plan can’t extend beyond five years from when the first payment was originally due.
What Happens If You Fall Behind
Missing payments is the fastest way to lose your Chapter 13 protections. A missed payment counts as a material default, and the trustee, a creditor, or the U.S. Trustee’s office can ask the court to either dismiss your case or convert it to Chapter 7 liquidation, whichever better serves creditors.11Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal
Dismissal ends the case and the automatic stay. Creditors can resume collection immediately, and any arrears you cured through the plan may come due again. Conversion to Chapter 7 means a trustee can liquidate your non-exempt assets, which is exactly what Chapter 13 was designed to avoid. Failing to file tax returns during the plan is another ground for dismissal or conversion. If you see trouble coming, request a modification before you miss payments. Courts are far more receptive to a proactive adjustment than to explaining missed payments after the fact.
What You Get at the End
Once you complete all plan payments, the court discharges most remaining debts, meaning creditors can never collect on them again. The discharge covers the unpaid balances of unsecured debts that received only partial payment.12Office of the Law Revision Counsel. 11 USC 1328 – Discharge Several categories survive:
- Student loans, unless you filed and won a separate adversary proceeding proving undue hardship.
- Domestic support obligations like child support and alimony.
- Criminal restitution and fines.
- Civil damages from willfully injuring someone.
If circumstances genuinely beyond your control keep you from finishing, the court can grant a hardship discharge, but only if unsecured creditors have already received at least as much as they would have in a Chapter 7 liquidation and a modification isn’t workable. A hardship discharge covers fewer debts than a completion discharge, so it’s a last resort.
One tax point matters here. Outside bankruptcy, forgiven debt generally counts as taxable income; a $10,000 cancellation is $10,000 of income to the IRS. Bankruptcy is the major exception. Any debt discharged in a Title 11 case is excluded from your gross income.13Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness You may still receive a Form 1099-C from a creditor, but you report the exclusion on IRS Form 982 rather than paying tax on the amount.
A Note on Non-Bankruptcy Repayment Plans
Not every repayment plan is a Chapter 13 plan. Debt management plans arranged through nonprofit credit counseling agencies are private agreements where the agency negotiates reduced interest rates or waived fees, and you send one monthly payment to the agency to distribute. These are not the same product. A voluntary plan isn’t binding on creditors who don’t participate, any creditor can withdraw and resume collection, there’s no automatic stay, and no portion of the debt is discharged at the end. You pay the full principal, just on better terms. If what you’re weighing is a court-supervised plan that can stop foreclosure and wipe out unsecured balances, that’s Chapter 13.