What Is Chapter 13 Bankruptcy?
Chapter 13 — the "wage earner's plan" — runs on a 3-to-5-year court-supervised repayment plan under 11 U.S.C. Chapter 13, with the filing fee set at $313. Unlike Chapter 7 (which liquidates non-exempt assets and wipes debts in months), Chapter 13 lets you keep everything — house, car, collection — while you repay a court-approved share of your debts. You're still protected by the automatic stay the second you file.
Honestly, Chapter 13 serves a specific purpose in the bankruptcy system. It's for people who can repay at least some of their debts but need the court's help structuring those payments — and protection from creditors in the meantime. It's also the main tool for homeowners behind on a mortgage who want to catch up without losing the house (something Chapter 7 can't do).
According to data from the Administrative Office of the United States Courts (uscourts.gov), approximately 150,000 to 170,000 Chapter 13 cases are filed annually. Completion rates hover around 40%, meaning that planning carefully and understanding your obligations before filing is essential. This guide explains every aspect of the Chapter 13 process so you can make an informed decision. For a quick estimate of your potential monthly payment, use our Chapter 13 Payment Plan Calculator.
Who Is Eligible for Chapter 13?
Eligibility for Chapter 13 is governed by 11 U.S.C. § 109(e), which sets two key requirements. First, you must be an individual with regular income — this includes wages, self-employment income, Social Security benefits, pensions, and even regular contributions from a spouse or family member. Businesses can't file Chapter 13, though sole proprietors can include business debts in their personal filing.
Second, your debts must fall within statutory limits. As of the most recent adjustment, your noncontingent, liquidated unsecured debts must not exceed $526,700 and your secured debts must not exceed $1,580,125 (Judicial Conference triennial inflation adjustment effective April 1, 2025 through March 31, 2028; the COVID-era combined $2.75M cap from the Bankruptcy Threshold Adjustment and Technical Corrections Act of 2022 sunset on June 21, 2024). If your debts exceed this limit, Chapter 11 may be your alternative. These limits are periodically adjusted; current figures are published on uscourts.gov.
There is no means test for Chapter 13 — anyone who meets the income and debt requirements can file, regardless of how much they earn. However, your income level affects the length of your plan. Under 11 U.S.C. § 1325(b), if your current monthly income is above the state median (the same comparison used in the Chapter 7 means test), your plan must last five years. If your income is below the median, your plan can be as short as three years. Use our means test calculator to see where your income falls relative to your state's median.
How the Repayment Plan Is Calculated
The Chapter 13 repayment plan is the heart of the process. It dictates how much you pay each month, how long the plan lasts, and how much each class of creditor receives. The plan must satisfy three overlapping requirements: the best-interest-of-creditors test, the disposable income test, and full payment of priority and secured claims.
The best-interest-of-creditors test (11 U.S.C. § 1325(a)(4)) requires that unsecured creditors receive at least as much under your Chapter 13 plan as they would have received in a Chapter 7 liquidation. This means you must calculate the value of your non-exempt assets — the amount a Chapter 7 trustee could have distributed — and ensure your plan pays at least that amount to unsecured creditors. Our Bankruptcy Exemption Calculator can help you determine your non-exempt asset value.
The disposable income test (11 U.S.C. § 1325(b)) requires that all of your "projected disposable income" over the plan period be committed to the plan. Disposable income is your current monthly income minus reasonably necessary living expenses, including IRS-approved expense allowances for housing, transportation, food, and other categories. See our article on disposable income in Chapter 13 for a detailed breakdown of what counts and what doesn't.
Priority Debts, Secured Debts, and Unsecured Debts in the Plan
Chapter 13 plans organize debts into three classes, each treated differently. Priority debts — including domestic support obligations (child support and alimony), most tax debts, and administrative expenses — must be paid in full through the plan. There is no negotiation or reduction available for priority claims.
Secured debts backed by collateral (mortgages, car loans, furniture financing) are typically paid through the plan with interest. For car loans where the vehicle was purchased more than 910 days before filing, Chapter 13 allows "cramdown" — reducing the secured claim to the vehicle's current fair market value rather than the full loan balance. If your car is worth $12,000 but you owe $20,000, you may only need to pay $12,000 plus interest through the plan, with the remaining $8,000 treated as an unsecured claim. Mortgage arrears can be caught up through the plan while you continue making regular monthly payments directly to the lender.
Unsecured debts — credit cards, medical bills, personal loans — receive whatever is left after priority and secured claims are satisfied. In many Chapter 13 plans, unsecured creditors receive only a fraction of what they are owed, sometimes as little as 0%. The remainder is discharged when you complete the plan. To estimate your plan payment, including how much would go to each creditor class, try our Chapter 13 Payment Plan Calculator.
Saving Your Home Through Chapter 13
Chapter 13 is the primary bankruptcy tool for homeowners who have fallen behind on their mortgage. Under 11 U.S.C. § 1322(b)(5), you can cure mortgage arrears over the life of the plan while resuming regular monthly payments going forward. This isn't available in Chapter 7, which can delay foreclosure through the automatic stay but can't force a lender to accept a cure of past-due amounts.
For example, if you are $18,000 behind on your mortgage and file a five-year Chapter 13 plan, you would spread that arrearage over 60 months — adding $300 per month to your plan payment on top of your regular mortgage payment. As long as you make every payment on time, the foreclosure is reversed and you keep your home. However, you must maintain both the regular mortgage payment and the arrearage payment throughout the plan period, which requires careful budgeting.
Chapter 13 also allows you to "strip off" wholly unsecured junior liens in certain circumstances. If your home is worth less than the balance of your first mortgage, a second mortgage or home equity line has no collateral value and can be treated as an unsecured claim — potentially discharged at a fraction of its face value. This strategy, permitted under 11 U.S.C. § 1322(b)(2), can save homeowners tens of thousands of dollars. Use our Homestead Exemption Calculator to understand your equity position.
The Chapter 13 Timeline and Process
Like Chapter 7, Chapter 13 requires pre-filing credit counseling from a provider approved by the U.S. Trustee Program (the list is at justice.gov/ust). After filing your petition, schedules, and proposed repayment plan, the automatic stay takes effect immediately, stopping all collection actions.
The filing fee for Chapter 13 is $313 (per the uscourts.gov fee schedule). Within 30 days of filing, you must begin making plan payments to the Chapter 13 trustee, even before the plan is formally confirmed by the court. The 341 meeting of creditors occurs approximately 20 to 50 days after filing, and the confirmation hearing — where the judge approves your plan — takes place within 45 days after the 341 meeting.
Once confirmed, you make monthly payments to the Chapter 13 trustee for the duration of the plan (three or five years). The trustee distributes the funds to your creditors according to the plan. After completing all payments, you receive a discharge of any remaining eligible debts. You must also complete a post-filing financial management course before the discharge is entered. The entire process typically takes three to five years, plus a few months for pre-filing preparation and post-completion discharge processing.
What If You Cannot Complete the Plan?
Life doesn't stop during a Chapter 13 plan, and circumstances change. If you lose your job, become ill, or face other financial hardship during the plan, you have several options. First, you can request a plan modification to reduce your payments — courts generally allow modifications when there is a genuine change in circumstances. Second, you can convert your case to Chapter 7 if you now qualify (your eligibility will be reassessed at the time of conversion).
Third, in cases of extreme hardship, you may qualify for a "hardship discharge" under 11 U.S.C. § 1328(b). This discharges your remaining debts even though you didn't complete the plan, but it requires showing that the failure was due to circumstances beyond your control, that unsecured creditors received at least what they would have gotten in a Chapter 7, and that plan modification isn't feasible. Hardship discharges are granted sparingly.
Finally, you can voluntarily dismiss your case, which terminates the automatic stay and returns you to your pre-bankruptcy position — with all remaining debts intact. Dismissal may be appropriate if your financial situation has improved enough that you no longer need bankruptcy protection, or if you need to refile with a different strategy. Your bankruptcy attorney can help you evaluate which option best fits your circumstances.
Chapter 13 Costs and Fees
Chapter 13 involves several categories of costs. The court filing fee is $313. Attorney fees for Chapter 13 are typically higher than for Chapter 7 because the process is longer and more complex — most attorneys charge between $2,500 and $6,000, depending on the jurisdiction and complexity. Many Chapter 13 attorneys allow their fees to be paid through the plan itself, reducing the upfront cost of filing.
The Chapter 13 trustee also receives a commission, typically around 10% of the amounts distributed through the plan. This commission is built into your plan payments, not charged separately. For example, if your plan distributes $30,000 over five years, approximately $3,000 of that amount goes to the trustee. For a detailed breakdown, see our article on bankruptcy filing costs by state and use our Court Filing Fees tool.
When evaluating the cost of Chapter 13, compare it to what you would spend without bankruptcy protection. If you are facing a home foreclosure (with tens of thousands in arrears), multiple lawsuits, or snowballing interest on credit card debt, the cost of Chapter 13 may be far less than the alternative. The key is to run the numbers carefully — and our Chapter 13 Payment Plan Calculator can help you estimate your total plan cost.
Comparing Chapter 13 to Other Options
Chapter 13 is one of several paths to managing overwhelming debt. Chapter 7 bankruptcy is faster and eliminates most debts entirely, but it may require you to give up non-exempt assets and doesn't offer mortgage arrears cure. Debt settlement involves negotiating directly with creditors for reduced payoffs, but it offers no legal protection from lawsuits during the process and can have serious tax consequences. Debt consolidation simplifies your payments but doesn't reduce the principal you owe.
For a side-by-side comparison of Chapter 7 and Chapter 13, see our dedicated article on Chapter 7 vs. Chapter 13 bankruptcy. For a broader look at all available options, our debt relief options guide covers everything from credit counseling to bankruptcy.
The right choice depends on your specific circumstances: your income, the type and amount of your debts, whether you own a home, and your long-term financial goals. Use our free calculators to get an initial picture, and then speak with a bankruptcy attorney who can provide advice tailored to your situation.
Disclaimer: This article is for general educational purposes only and does not constitute legal advice. Made For Law is not a law firm, and our team are not attorneys. We are not affiliated with any federal, state, county, or local government agency or court system. Content may be researched or drafted with AI assistance and is reviewed by our editorial team before publication. Laws change frequently — always verify information with official sources and consult a licensed attorney for advice specific to your situation. Full disclaimer
Our editorial team researches and summarizes publicly available legal information. We are not attorneys and do not provide legal advice. Every article is checked against current state statutes and official sources, but you should always consult a licensed attorney for guidance specific to your situation.
