The Moment
You are behind on your mortgage, drowning in debt, but have regular income. You may earn too much for Chapter 7, or you have assets you want to protect. Chapter 13 is designed for exactly this situation — it lets you keep everything and repay what you can afford over 3-5 years.
How Chapter 13 Works
The repayment plan: A bankruptcy trustee calculates your disposable income (income minus reasonable living expenses). All disposable income goes to creditors for 3 years (if income is below state median) or 5 years (if above median).
What gets repaid: - Priority debts (100%): Recent taxes, child support, alimony - Secured debts (100%): Mortgage arrears, car loan — you catch up on missed payments through the plan - Unsecured debts (varies): Credit cards, medical bills, personal loans — you pay a percentage based on your disposable income (often 10-50% of the total). The remainder is discharged at completion.
The automatic stay: The moment you file, all creditor actions stop — foreclosure, repossession, wage garnishment, collection calls. This is often the most immediate benefit. Your home and car are protected while the plan is in place.
Chapter 13 vs Chapter 7
| Feature | Chapter 7 | Chapter 13 | |---|---|---| | Duration | 3-4 months | 3-5 years | | Debt treatment | Eliminated | Restructured and partially repaid | | Income requirement | Below state median (means test) | Regular income required | | Assets | May lose non-exempt assets | Keep all assets | | Mortgage arrears | Cannot cure | Can catch up through plan | | Credit report | 10 years | 7 years | | Cost | $1,000-$2,500 | $2,500-$5,000 |
Choose Chapter 13 if: - You are behind on mortgage/car and want to keep them - You earn too much for Chapter 7 - You have non-exempt assets (home equity above exemption, valuable property) - You have debts that Chapter 7 cannot discharge (certain tax debts)
Choose Chapter 7 if: - You qualify (income below median) - You do not have secured debt arrears to cure - You want a faster, cleaner fresh start
Run Your Numbers
Estimate your Chapter 13 plan payment.
Personal Loan Payoff Planner
What to explore next
- →How do I find a bankruptcy attorney?
- →Can I refinance my mortgage during Chapter 13?
- →How do I rebuild credit during and after Chapter 13?
Frequently Asked Questions
Can I keep my house in Chapter 13?
Yes — this is one of the primary benefits. Chapter 13 allows you to cure mortgage arrears (missed payments) over the 3-5 year plan while resuming regular mortgage payments. As long as you stay current on the plan and the ongoing mortgage, your home is protected from foreclosure.
What happens if I cannot complete the plan?
If your financial situation changes (job loss, medical emergency), you can request a plan modification, a hardship discharge (partial completion), or convert to Chapter 7. The court has flexibility to accommodate changed circumstances.