Chapter 13 Bankruptcy
Reorganize your debts with a structured repayment plan while protecting your assets
Calculate Your Savings
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, often called "reorganization bankruptcy" or "wage earner's plan," allows individuals with regular income to create a structured repayment plan to pay back all or part of their debts over 3 to 5 years.
In a Chapter 13 case:
- You propose a repayment plan to pay creditors over 3-5 years
- You keep all your property, including non-exempt assets
- You make regular monthly payments to a bankruptcy trustee
- The trustee distributes payments to creditors according to the plan
- After completing the plan, remaining dischargeable debts are eliminated
- You receive an automatic stay that stops collection actions and foreclosure
Chapter 13 is often ideal for individuals who have fallen behind on mortgage or car payments but want to keep their property. The plan can include catching up on missed payments over time while maintaining current payments. To qualify, your secured debts must be below $1,395,875 and unsecured debts below $465,275 (2023 limits).
Advantages of Chapter 13 Bankruptcy
Keep All Your Property
Unlike Chapter 7, you don't risk losing any assets. You keep your home, car, and all other property while repaying debts.
Stop Foreclosure
Catch up on missed mortgage payments over the life of the plan while keeping your home.
Cramdown on Secured Debts
Reduce the balance on certain secured debts (like car loans) to the current value of the collateral.
Protect Co-signers
The automatic stay extends to co-signers on consumer debts, protecting them from collection efforts.
Discharge More Debts Than Chapter 7
Some debts that aren't dischargeable in Chapter 7 may be discharged in Chapter 13, including certain tax obligations.
Shorter Credit Impact
Chapter 13 stays on your credit report for 7 years instead of 10 years for Chapter 7.
Disadvantages of Chapter 13 Bankruptcy
Long Commitment
You must commit to a 3-5 year repayment plan with strict budget requirements and court oversight.
Requires Regular Income
You must have sufficient, stable income to make plan payments. Job loss can lead to case dismissal.
Pay Back More Than Chapter 7
You must pay back priority debts in full and often pay something to unsecured creditors based on your disposable income.
Restrictions on New Credit
You need court approval to obtain new credit during the plan, limiting financial flexibility.
High Failure Rate
Many Chapter 13 cases fail to complete, often due to inability to maintain payments for 3-5 years.
Credit Score Impact
While shorter than Chapter 7, Chapter 13 still significantly impacts your credit for 7 years.
Who Should Consider Chapter 13?
Chapter 13 bankruptcy may be the right choice if you:
- Have a steady income that can support a repayment plan
- Want to keep your home and catch up on missed mortgage payments
- Have valuable non-exempt assets you would lose in Chapter 7
- Don't qualify for Chapter 7 due to income above the means test threshold
- Have co-signers on debts you want to protect
- Have debts that exceed Chapter 7 limits but fall within Chapter 13 limits
See If Chapter 13 Could Work for You
Use our calculator to compare Chapter 13 with other options and see potential interest savings.