Chapter 13 bankruptcy is a court-supervised repayment plan for individuals with steady income. Instead of selling your property to pay creditors, you keep what you own and repay some or all of what you owe over three to five years through a plan approved by a bankruptcy judge. A court-appointed trustee collects your monthly payment and distributes it to creditors. When you finish the plan, most remaining balances it covered are discharged. To qualify in 2026, your unsecured debts must be under $526,700 and your secured debts under $1,580,125.
Chapter 13 Versus Chapter 7
The two consumer bankruptcies solve different problems. Chapter 7 is a liquidation: a trustee sells your non-exempt property, pays creditors from the proceeds, and the case closes in a few months. You can lose a second car, a vacation home, or anything else that falls outside your state’s exemptions.
Chapter 13 keeps your property intact as long as you make the plan payments. It is the right tool when you are behind on a mortgage or car loan and need time to catch up without losing the collateral. It is also where you end up if your income is too high for Chapter 7 under the means test.
Timing matters. You cannot file Chapter 13 if you received a Chapter 13 discharge in the past two years, or a Chapter 7 discharge in the past four.
Who Can File
Chapter 13 is for individuals only. Sole proprietors and people running unincorporated businesses can file, and spouses can file jointly, but corporations and partnerships cannot. You need “regular income,” though it does not have to be a paycheck. Social Security, a pension, consistent freelance earnings, or reliable support from a family member can all count.
Debt Limits
Your noncontingent, liquidated unsecured debts must be less than $526,700, and your noncontingent, liquidated secured debts must be less than $1,580,125.1Federal Register. Adjustment of Certain Dollar Amounts Applicable to Bankruptcy Cases “Noncontingent” means the debt doesn’t depend on a future event, and “liquidated” means the amount is fixed or easy to calculate. If your debts top either ceiling, Chapter 13 is off the table and Chapter 11 is the alternative.
Prior Filings and Tax Returns
You cannot file if a prior bankruptcy was dismissed in the last 180 days because you ignored court orders or missed required proceedings.2Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor You must also have filed federal tax returns for the four tax years before your filing date.3Internal Revenue Service. Declaring Bankruptcy Missing returns can get your case dismissed.
What You Do Before Filing
You must complete a credit counseling session with a nonprofit agency approved by the U.S. Trustee’s office within 180 days before you file.4United States Bankruptcy Court District of Columbia. Notice to All Debtors About Prepetition Credit Counseling Requirement Most agencies offer it online or by phone, and it takes about an hour. The certificate goes in with your petition.
You then prepare the petition itself, which under federal law requires a full picture of your financial life: schedules of every asset, every debt, your monthly income, and your monthly expenses, plus a statement of financial affairs covering recent transfers, lawsuits, and account closures.5Office of the Law Revision Counsel. 11 USC 521 – Debtors Dutiesa> If you don’t file every required document within 45 days of your petition, the case is dismissed automatically.
Chapter 13 filers also complete Form 122C-1, which calculates current monthly income and sets how long your plan must last.6U.S. Courts. Chapter 13 Statement of Your Current Monthly Income and Calculation of Commitment Period Form 122C-2 calculates disposable income by subtracting standardized living expenses, drawn from IRS National and Local Standards, from your earnings. That disposable-income figure drives how much you pay unsecured creditors each month.
What It Costs
The court charges a $313 filing fee, split into a $235 statutory fee and a $78 administrative fee.7U.S. Courts. Bankruptcy Court Miscellaneous Fee Schedule Chapter 13 filers cannot get the fee waived but can pay in up to four installments, all due within 120 days of filing (extendable to 180 for good cause).
Attorney fees are the larger expense. Most districts set a “no-look” fee, a presumptively reasonable amount roughly between $2,500 and $6,000 for a standard case. The useful part: in Chapter 13, attorney fees can be built into your plan, so you do not need to pay them in full at the start. Your lawyer must disclose fees to the court, and the judge can cut them if they are unreasonable.
How the Repayment Plan Works
The plan sets your monthly payment, lists which creditors get paid and how much, and runs for a defined period. The judge will only confirm a plan that passes several legal tests.8Office of the Law Revision Counsel. 11 USC 1322 – Contents of Plan
How Long It Lasts
Plan length depends on your household income compared to your state’s median. Below the median, the baseline is three years. At or above the median, it is at least five years.9Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan You can finish early only by paying every unsecured creditor in full. Five years is the hard cap.
Which Debts Get Paid First
Priority claims come first and must be paid in full through the plan. That includes past-due child support, alimony, and most tax debts.10Office of the Law Revision Counsel. 11 USC 507 – Priorities
Secured debts like mortgages and car loans get their own treatment. If you are behind on your mortgage, the plan can spread the arrears over its full length while you keep making regular monthly payments to the lender. Vehicle loans follow their own rules depending on when you bought the car.
Vehicle Loan Cramdowns
One of Chapter 13’s most useful tools is the car-loan “cramdown.” If you bought your vehicle at least 910 days (about two and a half years) before filing, the plan can reduce the secured portion of your loan to the car’s current replacement value. Owe $18,000 on a car now worth $11,000, and the plan treats $11,000 as secured. The remaining $7,000 becomes unsecured debt and may be paid at pennies on the dollar. Cars bought inside the 910-day window do not qualify.
Stripping Junior Liens From an Underwater Home
If your home is worth less than you owe on the first mortgage, any junior lien (a second mortgage or home equity line) is treated as entirely unsecured. Chapter 13 lets you “strip” those junior liens, reclassify them as unsecured debt in the plan, and have them removed from the property once you complete the plan. If your home is worth $300,000, you owe $350,000 on the first, and there is an $80,000 second mortgage, that $80,000 lien can be stripped. Chapter 7 does not offer this.
What Unsecured Creditors Receive
Credit card balances, medical bills, and similar unsecured debts often get a fraction of what is owed, sometimes nothing. The law sets a floor: unsecured creditors must receive at least what they would have gotten in a Chapter 7 liquidation. If you have no non-exempt assets, that floor can be zero. Filers above the state median income must also commit all projected disposable income to the plan for the full commitment period.
What Happens the Moment You File
Filing triggers two things at once: a trustee is assigned to your case, and the automatic stay goes into effect.
The Automatic Stay
The automatic stay is a federal injunction that stops most creditor actions instantly. 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 place through the case unless a creditor convinces the judge to lift it.
It is not absolute. Criminal proceedings continue. Collection of domestic support from non-estate property continues. Tax audits and deficiency notices continue.11Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay If a prior case of yours was dismissed in the past year, the stay expires after 30 days unless the judge extends it. If two or more of your cases were dismissed in the past year, the stay does not take effect at all unless you file a motion and prove good faith.
Co-Signer Protection
Chapter 13 includes something Chapter 7 does not: a co-debtor stay. Creditors generally cannot pursue someone who co-signed a consumer debt with you while your Chapter 13 case is active.12Office of the Law Revision Counsel. 11 USC 1301 – Stay of Action Against Codebtor That protection ends if the case is dismissed, converted to Chapter 7, or if the plan does not propose to pay that debt.
Meeting of Creditors 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 plan.13Office of the Law Revision Counsel. 11 USC 341 – Meetings of Creditors and Equity Security Holders Despite the name, creditors rarely attend routine cases. The trustee uses it to confirm your paperwork is accurate and your plan is workable.
A separate confirmation hearing follows where the judge decides whether to approve the plan. The trustee or any creditor can object if the plan fails a legal test: paying priority debts in full, meeting the Chapter 7 liquidation floor for unsecured creditors, or committing enough disposable income. You must start making plan payments within 30 days of filing, even before confirmation.14Office of the Law Revision Counsel. 11 USC 1326 – Payments
When You Cannot Keep Up
Three to five years is a long time. Job loss, illness, and other disruptions can make the original payment impossible. There are three main responses.
Modifying the Plan
You, the trustee, or a creditor can ask the judge to modify a confirmed plan. Modifications can raise or lower payments, extend or shorten the timeline, or change how specific creditors are paid.15Office of the Law Revision Counsel. 11 USC 1329 – Modification of Plan After Confirmation You can also reduce payments by the amount you spend on new health insurance if you or a dependent did not previously have coverage. The modified plan still has to pass the original legal tests.
Dismissing or Converting the Case
You have an absolute right to dismiss your Chapter 13 case at any time, and an absolute right to convert it to Chapter 7. Neither right can be waived, even in writing.16Office of the Law Revision Counsel. 11 USC 1307 – Conversion or Dismissal The trustee or a creditor can also ask the judge to dismiss or convert for cause, such as missed payments, delay, or unfiled tax returns, and the judge picks whichever option best serves creditors. Dismissal lifts the automatic stay and lets creditors resume collection. Conversion hands your case to a Chapter 7 trustee and puts non-exempt assets at risk.
Hardship Discharge
In rare cases, the court can discharge your debts even though you did not finish the plan. All three conditions have to be met: your failure to complete payments was caused by circumstances genuinely beyond your control, unsecured creditors have already received at least as much as they would have in Chapter 7, and modifying the plan is not realistic.17Office of the Law Revision Counsel. 11 USC 1328 – Discharge A hardship discharge covers fewer debts than a standard one, with Chapter 7 non-dischargeable debts still surviving.
The Discharge at the End
Once you make every payment the confirmed plan requires, the court issues a discharge order eliminating your personal liability on most debts covered by the plan.17Office of the Law Revision Counsel. 11 USC 1328 – Discharge Before the discharge is entered, you must complete a debtor education course in personal financial management from an approved provider. This is separate from the pre-filing credit counseling and cannot be skipped.18U.S. Courts. Credit Counseling and Debtor Education Courses
What the Discharge Does Not Erase
Some debts survive no matter what. Child support, alimony, most student loans, criminal restitution, and certain tax debts all remain. Debts arising from fraud, willful injury to another person, and DUI-related obligations also stay enforceable. For every discharged debt, creditors are permanently barred from further collection.
One useful detail about discharged debt: federal tax law excludes it from gross income, so you do not get a surprise tax bill for the balances your creditors wrote off through the plan.19Office of the Law Revision Counsel. 26 USC 108 – Income From Discharge of Indebtedness
Living With a Chapter 13 Case
While your case is open, you generally cannot take on new debt without permission from the trustee or the judge. That covers car loans, mortgage refinancing, student loans, co-signing, and even rent-to-own contracts. The exception is an emergency involving immediate threats to life, health, or property. Unauthorized new debt can get your case dismissed, and the court can void the transaction.
A Chapter 13 filing appears on your credit report for up to seven years from the filing date, compared with ten years for Chapter 7. The hit to your credit score is severe in the first year or two and fades over time, especially if you make plan payments on schedule and rebuild responsibly after discharge. You can get new credit after discharge; expect higher rates and fewer options in the early years.