What Is Chapter 13 Bankruptcy?
Chapter 13, sometimes called a "wage earner's plan," lets an individual with regular income repay all or part of their debts through a court-approved plan lasting three to five years. Payments go to a Chapter 13 trustee, who distributes them to creditors. Chapter 13 can be used to stop a foreclosure and catch up on missed mortgage payments, and it temporarily protects co-signers on consumer debts. If plan payments stop, the court may dismiss the case or convert it to Chapter 7, though a limited "hardship discharge" is possible in some situations.
What the law says
- U.S. Courts describes Chapter 13 as working like a consolidation loan: the debtor makes plan payments to a Chapter 13 trustee, who distributes them to creditors, and the debtor has no direct contact with creditors while under Chapter 13 protection. U.S. Courts, Chapter 13 - Bankruptcy Basics
- Chapter 13 debt limits are set in 11 U.S.C. § 109(e) and adjusted periodically. Under a Judicial Conference notice effective April 1, 2025, the limits are less than $526,700 in unsecured debts and less than $1,580,125 in secured debts on the filing date, up from $465,275 and $1,395,875 effective April 1, 2022. 11 U.S.C. § 109 and Adjustment of Dollar Amounts notes (via Cornell LII)
- The required plan length, the "applicable commitment period," is three years if the debtor's current monthly income is below the state median for a family of the same size and five years if it is above. A plan can be shorter only if unsecured debts are paid in full over the shorter period. U.S. Courts, Chapter 13 - Bankruptcy Basics
- The plan need not pay unsecured claims in full if the debtor commits all projected "disposable income" over the commitment period and unsecured creditors receive at least what they would get in a Chapter 7 liquidation. Priority claims, such as most taxes, generally must be paid in full. U.S. Courts, Chapter 13 - Bankruptcy Basics
- In some districts, the U.S. trustee appoints a standing trustee to serve in all Chapter 13 cases. The Chapter 13 trustee both evaluates the case and serves as a disbursing agent, collecting payments from the debtor and making distributions to creditors. U.S. Courts, Chapter 13 - Bankruptcy Basics
- The debtor must file a plan with the petition or within 14 days after, unless the court extends the time. The plan must provide for fixed payments to the trustee on a regular basis, typically biweekly or monthly. Before confirmation, car or home loan payments that come due are paid directly to the lender as "adequate protection" payments and deducted from the trustee payment. U.S. Courts, Chapter 13 - Bankruptcy Basics
- No later than 45 days after the meeting of creditors, the bankruptcy judge must hold a confirmation hearing to decide whether the plan is feasible and meets the legal standards. Creditors receive 28 days' notice and may object. If the plan is not confirmed, the debtor may file a modified plan or convert to Chapter 7. U.S. Courts, Chapter 13 - Bankruptcy Basics
- Filing Chapter 13 stops a foreclosure, and the debtor may bring past-due mortgage payments current over a reasonable time while still paying each new mortgage payment on time. The home may still be lost if the foreclosure sale was completed under state law before filing, or if new payments are missed. U.S. Courts, Chapter 13 - Bankruptcy Basics
- Under the co-debtor stay in 11 U.S.C. § 1301, a creditor may not try to collect a consumer debt from an individual who is liable on it with the debtor, unless that person became liable in the ordinary course of their business or the case is closed, dismissed, or converted to Chapter 7 or 11. The court must lift this stay to the extent the co-debtor received the consideration, the plan proposes not to pay the claim, or the creditor would be irreparably harmed. 11 U.S.C. § 1301 (via Cornell LII)
- If the debtor fails to make payments under a confirmed plan, the court may dismiss the case or convert it to Chapter 7 for cause, whichever is in the best interests of creditors and the estate. Other listed causes include failing to start timely payments, failing to pay a domestic support obligation that first comes due after filing, and unreasonable delay that prejudices creditors. 11 U.S.C. § 1307 (via Cornell LII)
FAQ
What is a hardship discharge?
After a plan is confirmed, the court may grant a discharge without full payment only if the debtor's failure to finish is due to circumstances for which the debtor should not justly be held accountable, unsecured creditors have received at least what they would have in a Chapter 7 liquidation, and modifying the plan is not practicable. It does not discharge debts of a kind listed in 11 U.S.C. § 523(a) or long-term debts provided for under 11 U.S.C. § 1322(b)(5).
Can I leave Chapter 13 on my own?
A debtor may convert a Chapter 13 case to Chapter 7 at any time. If the case was not previously converted from another chapter, the court must dismiss it at the debtor's request. A waiver of either right is unenforceable.
What does it cost to convert from Chapter 13 to Chapter 7?
The Miscellaneous Fee Schedule lists a $10 fee for a motion to convert a Chapter 13 case to Chapter 7 or a notice of conversion under 11 U.S.C. § 1307(a).
Can the plan be changed after it's approved?
Yes. The plan may be modified before or after confirmation, and after confirmation a change may be requested by the debtor, the trustee, or an unsecured creditor.
Can creditors object to my Chapter 13 discharge?
U.S. Courts says creditors can object to confirmation of the plan but not to the discharge once the debtor has completed plan payments. A discharge may still be withheld if the debtor does not complete a required financial management course or received a discharge in a recent earlier case.
When is the Chapter 13 discharge granted?
The court generally grants the discharge as soon as practicable after the debtor completes all plan payments; U.S. Courts says this typically occurs about four years after filing.
Can I take on new debt during the plan?
U.S. Courts says the debtor may not incur new debt without consulting the trustee, because additional debt may compromise the ability to complete the plan.
Is the Chapter 13 trustee a government employee?
No. The U.S. Trustee Program says private trustees under Chapters 7, 12, and 13 are not government employees; they are private parties appointed by the U.S. Trustees and supervised by them in their judicial districts.
Where do I find the Chapter 13 trustee for my area?
The U.S. Trustee Program's list of Chapter 13 standing trustees is organized by state. It notes that the Program does not administer bankruptcy estates in Alabama; cases in Alabama and North Carolina are handled by Bankruptcy Administrators under the federal judiciary.
Related
- Can You File Bankruptcy on Student Loans?
- Chapter 7 vs. Chapter 13 Bankruptcy
- Do I Need a Lawyer for Bankruptcy?
- How Long Does Bankruptcy Stay on Your Credit Report?
- How Much Does a Bankruptcy Lawyer Cost?
- How Much Does It Cost to File Bankruptcy?
- How Often Can You File Bankruptcy?
- What Happens When You File for Bankruptcy?
- What Is Chapter 7 Bankruptcy?
- Bankruptcy by state
General legal information, not legal advice. Laws change and local rules can differ; check the linked official source or talk to a lawyer about your situation.