Chapter 13 Bankruptcy FAQ

Chapter 13 is a reorganization bankruptcy that lets you repay some or all of your debt over three to five years through a court-approved plan, while keeping your property.

Unlike Chapter 7, Chapter 13 isn’t about eliminating debt as fast as possible. It’s about building a structured, manageable path forward, usually so you can catch up on a mortgage, retain assets that exceed your exemptions, or address debt that Chapter 7 can’t fully resolve.

The moment you file, the automatic stay stops foreclosure, lawsuits, garnishment, and most other collection activity. Your plan then becomes your roadmap for the next three to five years.

Chapter 7 eliminates qualifying unsecured debt quickly, usually within a few months, but it doesn’t let you catch up on missed payments over time. Chapter 13 spreads repayment over three to five years and is built specifically for catching up on arrears.

Chapter 7 has income limits under the means test. Chapter 13 doesn’t have the same income cap, which makes it available to higher earners who don’t qualify for Chapter 7.

Chapter 7 can put non-exempt assets at risk if their value exceeds your exemptions. Chapter 13 lets you keep all your property regardless of exemptions, as long as your plan pays creditors at least what they’d receive in a Chapter 7 liquidation.

The right chapter depends on your income, your assets, and your goals. That’s exactly what I work through with you in a consultation.

Chapter 13 makes the most sense if you want to save your home from foreclosure by catching up on mortgage arrears through the plan, if your income disqualifies you from Chapter 7 under the means test, if you have assets that exceed your available exemptions and would otherwise be at risk in a Chapter 7, or if you have non-dischargeable priority debt, like recent taxes or domestic support arrears, that needs to be paid through a structured plan.

It also fits people who simply want to keep specific property, a car with a lot of equity, for example, that a Chapter 7 trustee might otherwise take.

This analysis is one of the most valuable things I do during a consultation. I’ll look at your income, your debts, and your goals, and tell you honestly whether Chapter 13 is the better fit.

Within weeks of filing, I submit a proposed repayment plan to the court. The plan sets out a monthly payment based on your income, your expenses, and what you owe.

Your plan payment goes to a Chapter 13 trustee, who distributes it to your creditors according to priorities set by law. Secured debts you want to keep, like mortgage arrears or a car loan, generally get paid in full through the plan. Priority debts, like recent taxes or support arrears, also get paid in full. Unsecured debt, like credit cards, gets paid whatever percentage your budget allows, sometimes very little.

The court holds a confirmation hearing to approve your plan. Once confirmed, you make your plan payment every month for the plan’s full term.

If you complete the plan successfully, any remaining eligible unsecured debt gets discharged at the end of your case, the same as in a Chapter 7 case.

Yes, and this is the single most common reason people choose Chapter 13.

The automatic stay halts a scheduled foreclosure sale the moment you file, regardless of how close the sale date is. I’ve filed cases on an emergency basis with a sale scheduled for the same day and stopped the sale.

Beyond the immediate stop, Chapter 13 lets you catch up on your mortgage arrears over three to five years through your plan, while continuing to make your regular monthly mortgage payment going forward. As long as you keep up with both, your lender cannot foreclose during the plan.

At the end of a successful plan, your mortgage is current and your home is yours. I cover foreclosure-specific strategy in more detail on my Foreclosure Defense FAQ page.

Plan length depends on your income relative to the median income for your household size and state.

If your income is below the median, your plan typically runs three years, though you can propose a five-year plan if you need more time to pay priority debts or arrears.

If your income is above the median, the law requires a five-year plan.

Either way, you make the same monthly payment for the plan’s full term, so the length of your plan is one of the key numbers I calculate with you before you ever file.

Missing an occasional payment isn’t automatically fatal to your case, but it has to be addressed quickly. Trustees and the court generally want to see a case succeed, not fail, and there are usually options short of dismissal.

If your income drops temporarily, I can sometimes negotiate a short suspension or modification of your plan payment with the trustee.

If your financial circumstances change significantly and permanently, for example a job loss or major medical event, I can file a motion to modify your plan, adjusting the payment amount or extending the term within the legal limits.

If none of those options work, converting to Chapter 7 is sometimes possible, though it depends on your circumstances at that point.

The key is calling me the moment you know you’re going to miss a payment, not after you’ve already missed several. Early communication keeps your options open.

Generally, you need court approval before taking on new debt during your Chapter 13 plan, including a car loan.

This isn’t usually a major obstacle. If your car breaks down and you genuinely need a replacement, I can file a motion asking the court to approve new financing. Courts routinely approve these requests when the need is real and the new payment fits within your budget.

What you can’t do is take on significant new debt without approval, since doing so could jeopardize your plan and your case.

If you anticipate needing a major purchase during your plan, talk to me before you sign anything. I can usually get ahead of the issue.

No. One of the main advantages of Chapter 13 is that you keep all your property, regardless of whether its value exceeds your exemptions, as long as your plan pays unsecured creditors at least what they’d receive in a Chapter 7 liquidation.

This makes Chapter 13 the better option for people with valuable, non-exempt assets they want to protect, like significant home equity beyond the homestead exemption, or a paid-off vehicle worth more than the vehicle exemption.

You do have to keep making payments on anything you want to keep that’s financed, your mortgage and car payments included, either directly or through the plan.

Chapter 13 doesn’t eliminate the same categories of debt that survive a Chapter 7 case: student loans in nearly all circumstances, domestic support obligations like child support and alimony, most recent income tax debt, and debt from fraud or willful injury.

What Chapter 13 does differently is let you pay non-dischargeable priority debts, like recent taxes or support arrears, over the life of your plan instead of all at once, which is often the main reason people choose it.

Secured debt you want to keep, your mortgage or car loan, also isn’t eliminated. You catch up on arrears through the plan and continue your regular payments going forward.

Yes, and Chapter 13 actually offers some advantages over Chapter 7 here.

For FHA-insured mortgages, you can apply while still in your Chapter 13 plan, as long as you’ve made at least twelve months of on-time plan payments and get court approval. For conventional loans backed by Fannie Mae or Freddie Mac, the wait is two years from discharge, or four years from dismissal. VA loans allow applications during Chapter 13 in some circumstances.

For a car loan, you generally need court approval to take on new auto financing during your plan, which I help clients request when the need is genuine.

These waiting periods assume you otherwise meet a lender’s requirements for credit score, income, and down payment, so rebuilding credit during your plan matters.

Once you’ve made every required payment under your plan, the court enters a discharge order. Any remaining eligible unsecured debt gets permanently eliminated.

Your mortgage arrears are fully caught up, and your home is no longer at risk for the default that triggered your case. Your car loan, if included in the plan, is current.

From that point forward, you’re current on your secured debts and free of your remaining dischargeable unsecured debt. Many clients describe completing a Chapter 13 plan as genuinely the most relieving day of the entire process.

Often, yes. If your circumstances change during a Chapter 13 case, a job loss that makes plan payments impossible, for example, you generally have the right to convert to Chapter 7, as long as you still qualify under the means test and haven’t converted before in a way that triggers other restrictions.

Converting from Chapter 7 to Chapter 13 is also possible, and sometimes makes sense if a Chapter 7 case reveals non-exempt assets you’d rather protect through a repayment plan, or if you fall behind on a mortgage during the case and want to catch up.

Conversion isn’t automatic and has real consequences for your timeline and your creditors, so it’s a decision to make with legal advice, not on your own.

Yes. Married couples can file a single joint Chapter 13 case, which is common when both spouses share debt, income, or a mortgage.

A joint filing means one set of court costs and one combined plan covering both spouses’ debts and both incomes. It often makes sense when you’re both on the mortgage you’re trying to save, or when most of your debt is jointly held.

In some situations, it makes more sense for only one spouse to file, particularly if one spouse has significantly more debt in their own name, or if filing jointly would pull a non-filing spouse’s separate assets into the case unnecessarily.

Whether to file jointly or individually is a strategic decision based on whose name is on what debt, whose income counts toward the means test, and what you’re trying to protect. I walk through this with married clients during the consultation.

A significant, lasting change in income, in either direction, can be a reason to modify your plan.

If your income drops, I can file a motion to reduce your plan payment, extend your plan term within legal limits, or in some cases convert to Chapter 7 if that becomes the better option.

If your income increases significantly, the trustee may seek to increase your plan payment, particularly in a five-year plan where disposable income is part of the calculation. This is less common but does happen, especially with a major raise or a new job.

Either way, tell me about a significant income change as soon as it happens. Plans can be adjusted, but only if you call before missed payments or trustee objections complicate things.

Your plan payment is based on your income, your necessary expenses, and what you owe, not on a flat percentage of your debt.

At a minimum, your plan has to pay certain debts in full: the mortgage arrears you’re catching up on, recent taxes, support arrears, and any car loan you’re keeping. Then it pays unsecured creditors, like credit cards, whatever your remaining disposable income allows, which is sometimes a small fraction of what you owe.

Your plan also has to pay unsecured creditors at least what they’d get if you filed Chapter 7 instead. That’s the floor amount you must repay.

I calculate your actual plan payment with your real numbers before you file, so you know exactly what you’re committing to. Call (202) 448-5136 and I’ll run it with you.

Usually not just by paying faster, and that surprises people.

If your income is above the state median, the law generally requires a five-year commitment period, and you have to pay your projected disposable income across that whole term. Paying a lump sum early normally means paying your unsecured creditors in full, not closing out early at a discount.

There are exceptions. If you can pay every allowed claim in full, you can often finish early. A windfall, like an inheritance or a home sale, can sometimes shorten things, but it can also raise what you owe creditors, so it has to be handled carefully.

Before you try to accelerate or pay off a plan, talk to me. The wrong move can cost you more than staying the course.

Sometimes, yes. If your first mortgage is bigger than your home is worth, Chapter 13 can sometimes strip off a second mortgage or home equity line of credit entirely. This is a tool Chapter 7 doesn’t offer.

Here’s how it works. Lien stripping means a second mortgage with no equity behind it gets reclassified as unsecured debt, the same category as a credit card. To qualify, your home’s value has to be less than what you owe on the first mortgage alone, so there’s nothing left to secure the second.

When that’s true, the stripped second mortgage gets paid the same small percentage as your other unsecured debt through your plan. At the end of a successful plan, the lien is gone and the remaining balance is discharged.

If even a dollar of your home’s value reaches the second mortgage, you can’t strip it, so the valuation is everything. That’s why I value your home carefully before I rely on this strategy. If your home is worth less than your first mortgage, tell me at your consultation. It can change your whole approach.