Chapter 13 Bankruptcy: Everything You Need To Know

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is the second most common type of personal bankruptcy. It’s often referred to as a wage earner’s bankruptcy or a reorganization because you have to commit to a 3–5-year payment plan.

🗓️ Under this plan, you'll make monthly payments to a bankruptcy trustee, who distributes the money to your creditors. Your monthly payment is based on your income, living expenses, and the types of debt you have. You must show that you have enough disposable income to make the required monthly payments.

💸 If you successfully complete the payment plan, any remaining eligible debts will be discharged. This means you won’t have to pay them back. 

If you aren’t sure if Chapter 13 is right for you, you can schedule a free consultation with a credit counselor or an attorney to learn more.

How Long Does Chapter 13 Bankruptcy Take?

⏳Chapter 13 bankruptcy usually takes three to five years from start to finish. That’s because it’s based on a long-term repayment plan where you pay back some or all of your debt over time.

The exact length of your plan depends mostly on your income. 

• If your income is below your state’s median for your household size, you may be able to finish your case in three years. 

• If it’s above the median, you’ll likely be on a five-year plan. But even if you qualify for a shorter plan, you might still choose a five-year plan to make smaller monthly payments.

Once you complete all required plan payments, the court will issue your discharge, which wipes out most remaining eligible debts. But if you miss payments or run into financial setbacks during your plan, your case could take longer or even be dismissed.

👉 Though it can be a powerful tool if you need time to catch up on things like mortgage or car loan payments, Chapter 13 is a long commitment.

How Does a Chapter 13 Repayment Plan Work?

Your Chapter 13 repayment plan is the heart of your case. It lays out exactly how much you’ll pay each month and which debts will be paid during the plan. Most repayment plans last three to five years, and your monthly payment is based on your income, living expenses, and types of debt.

🏛️ When you file your plan with the court, you propose how the money will be split among different creditors. You’ll usually start making payments to the trustee within 30 days of filing — even before the court approves your plan. Once the judge confirms the plan, it becomes a binding court order.

Not all debts are treated the same in Chapter 13:

• Secured debts, like car loans or a mortgage, often must be paid in full. But Chapter 13 can often help you lower your monthly amount.

• Priority debts, like back child support or certain taxes, also have to be paid in full.

• Unsecured debts, like credit cards or medical bills, might be partially paid or not paid at all, depending on your disposable income.

✨ If you make every payment and follow the plan rules, most remaining unsecured debts will be erased at the end. But if you miss payments or can’t keep up, your case could be dismissed or converted to Chapter 7, which has different rules.

Pros and Cons of Chapter 13 Bankruptcy

Chapter 13 bankruptcy can be a helpful tool for people who need time to catch up on debt, especially secured debts like mortgages or car loans. But it’s not the right fit for everyone. Here are some key pros and cons to think about:

Pros of Chapter 13 Bankruptcy

Chapter 13 has some upsides, including:

• ✅ You can keep your property. Even if you're behind on mortgage or car payments, Chapter 13 allows you to catch up over time and avoid foreclosure or repossession.

• ✅ You get protection from creditors. As soon as you file, the automatic stay goes into effect. This stops most collection actions — including wage garnishments, lawsuits, and harassing phone calls.

• ✅ You may be able to reduce certain debts. Chapter 13 can help you lower interest rates, reduce the balance on some secured debts (through something called a cramdown), or stretch out your payments to make them more affordable.

• ✅ It can help with non-dischargeable debts. While some debts (like recent tax debt or child support) can’t be wiped out, Chapter 13 gives you a structured way to pay them off over time.

• ✅ It may be your only option. If you don’t qualify for Chapter 7 or have too much equity in your property, Chapter 13 may be your best path forward.

💡A cramdown lets you reduce the balance on certain secured debts — like a car loan — to the current value of the property. The rest of the balance is treated as unsecured debt, which may not have to be paid in full.

Cons of Chapter 13 Bankruptcy

Chapter 13 also comes with a lot of downsides, including:

• ❌ It’s a long commitment. Chapter 13 cases usually last 3–5 years. You’ll need to stick to a strict budget and make every payment on time.

• ❌ You’ll be under financial supervision. You can’t take on new debt or sell major assets during the plan without court approval.

• ❌ Many cases don’t succeed. A lot of people start Chapter 13 but don’t finish. Missed payments, unexpected expenses, or job loss can lead to dismissal before discharge.

• ❌ It can be expensive. Attorney fees and court costs are often higher than in Chapter 7. You also have to repay more of your debts.

• ❌ You might lose your tax refunds. In many Chapter 13 cases, the trustee will take your federal or state tax refunds during your plan to help pay off debts.

Chapter 13 Alternatives

Chapter 13 has a high failure rate. That’s because it’s very difficult for most people to stick with a strict budget and repayment plan for several years. If you’re researching your options, it’s good to also look at Chapter 7 bankruptcy and other debt relief options like debt management plans, debt consolidation, and debt settlement. 

Let’s dig more into each of these.

Which Is Better: Chapter 13 or Chapter 7 Bankruptcy?

Generally speaking, Chapter 7 is the quickest way to wipe out your debt without having to repay any portion of it. 

But there are income limits and eligibility requirements. If your income is too high and you don’t pass the means test, you may not be eligible for Chapter 7. That’s one of the main reasons people look to Chapter 13 bankruptcy.

🏠 The other big reason some people pursue Chapter 13 instead of Chapter 7 is because they have assets or property — such as a home or an expensive car — that they don’t want to risk losing in bankruptcy. 

In Chapter 7, exemptions help protect most property and belongings that are considered essential for daily living. But if you own a luxury car, own expensive jewelry, or have a lot of equity in a home, exemptions in most states won’t cover those items.

 If you own something that’s not covered by an exemption, the bankruptcy trustee can sell the property and give the proceeds to your creditors. This is why Chapter 7 is sometimes referred to as liquidation bankruptcy.

Every bankruptcy case is different. Only you can decide which type of bankruptcy is best for your circumstances.

Which Is Better: Chapter 13 or Debt Relief?

Bankruptcy is a powerful form of debt relief, but there are several other debt relief options available, including:

• Debt management plans (DMP): Similarly to Chapter 13, a DMP is a multiyear debt repayment plan that works best if most of your debt is from credit cards. A DMP can save you money by reducing the interest on your debt. These plans are overseen by credit counselors.

• Debt consolidation loans: Consolidating your debt can help streamline repayment and reduce the interest rate on your debt. You’ll usually need a good credit score to get a consolidation loan with a low interest rate. Most consolidation loans are personal loans.

• Debt settlement: Settling your debt allows you to pay less than the full amount you owe. To successfully settle your debt, you usually need to already be behind on payments and you’ll need access to a lump-sum of money.

💬 If you want to discuss your options or learn more about debt management plans, you can set up a free call with Upsolve’s partner, Cambridge Credit Counseling. Cambridge is an NFCC-accredited nonprofit.

Cambridge is an affiliate partner, which means Upsolve may earn a small commission if you choose to use their paid service. This helps keep our services free.

Step-by-Step Guide To Filing Chapter 13 Bankruptcy

The step-by-step process below can help you get a sense of what’s involved in filing bankruptcy under Chapter 13. Generally speaking, it’s best to hire an experienced bankruptcy lawyer to help with Chapter 13 cases. 

An experienced attorney will be familiar with the Bankruptcy Code and all the legal requirements necessary to successfully file Chapter 13.

Step 1: Collect Your Documents

You will need to run your credit report from the three major agencies — Experian, TransUnion, and Equifax. You can get a copy of your credit reports for free each week.

Before you start filling out any forms, you’ll want to find out how much debt you owe and who your creditors are. Keep in mind that not all of your debts will be listed on your credit report. You’ll be required to disclose all of your debts on your bankruptcy forms, regardless of whether they are listed on your credit report. Medical debts, tax debts, and certain fees and fines aren’t usually listed on your credit report.

In addition to obtaining your credit report, you will need the following documents:

• Tax returns for the past four years

• Paystubs or other proof of income for the last six months before filing

• Bank account statements from the past 3–6 months

• Recent mortgage statement(s) and real estate tax bills (if applicable)

• Residential lease agreement (if applicable)

• Recent retirement account or brokerage account statements

• Valuations or appraisals of any real estate you own

• Recent car loan statement(s)

• Any other documents relating to your assets, debts, or income

These documents will help you get a complete picture of your finances. Having them readily available will make filling out your bankruptcy forms that much easier.

Step 2: Analyze Your Debt

Now that you have a list of all your debts, it’s time to analyze! Next to each debt, write in what type of debt it is — credit card debt, medical bill, personal loan, etc.

Once you’ve labeled the type of debt you owe, you’ll need to figure out whether the debts you have are secured debts or unsecured debts. Secured debts are debts that are backed by some type of collateral. Mortgages and car loans are two of the most common examples of secured debts.

Unsecured debts include credit card debts, medical bills, payday loans, and any other debt not attached to a specific piece of property.

The next step in analyzing your debts is to determine which debts are priority debts and which debts are non-priority debts. Common priority debts are child support payments, domestic support obligations, and certain tax debts. Whether your debts are secured or unsecured and priority or non-priority, will impact your repayment amount and the order that your bankruptcy trustee will distribute your Chapter 13 plan payments each month.

Step 3: Take an Inventory of Your Property

Make a list of all the property you own and how much each item is worth. This step is important because you’ll need to know what you have and how much of it you can protect using bankruptcy exemptions.

Although filing a Chapter 13 bankruptcy allows you to protect and keep all your property, your Chapter 13 plan will require you to pay certain creditors an amount that is equal to the value of your unprotected property. In other words, you can expect to pay the same amount that certain creditors would be getting if you had filed a Chapter 7 case.

Step 4: Create a Budget and Figure Out the Status of Your Income

You can file a Chapter 13 bankruptcy if you’re unemployed. However, you must be receiving regular income from another verifiable source other than unemployment. If you receive government benefits, financial assistance from friends or family, or monthly pension payments, for example, you will be able to file a Chapter 13 as long as you can show you have enough income to make monthly plan payments.

If you create a budget and discover you don't have enough monthly income to pay both your living expenses and your Chapter 13 monthly plan payments, you won’t be able to proceed. You’ll need to prove to the bankruptcy courts that you have a feasible plan in order to move forward with your case.

Understanding your debts, property, and income can be difficult. Again, this is why it’s recommended to hire a bankruptcy attorney if you plan to file Chapter 13. You can start with a free consultation.

Step 5: Take the Credit Counseling Course

Before filing your Chapter 13 bankruptcy forms, you’ll need to complete an approved credit counseling course. The course takes about an hour and can be completed online or by telephone. The fee ranges from \$10 to \$50, depending on the provider. You may be able to get this fee waived if your household income is under 150% of the federal poverty guideline.

Once you’ve completed the course, you’ll receive a certificate of completion. Keep a copy and file it with your bankruptcy paperwork.

Step 6: Complete the Bankruptcy Forms

This will most likely be the most time-consuming step of the bankruptcy process. The bankruptcy forms ask you about everything you make, spend, own, and owe.

There are 23 separate forms, totaling roughly 70 pages in your Chapter 13 petition. You must enter all of your financial data and be able to give the court a full and accurate picture of your financial situation. Part of filling out the bankruptcy forms in a Chapter 13 case includes drafting your Chapter 13 repayment plan.

If you work with a bankruptcy attorney, they will help you complete the bankruptcy forms and draft the repayment plan proposal you’ll present to the bankruptcy court.

Step 7: File the Chapter 13 Bankruptcy Petition and Pay the Filing Fee

When you’ve completely filled out and reviewed your bankruptcy forms, you’ll print them out, sign the signature pages, and bring them to court. Don’t forget to include your credit counseling certificate along with your printed bankruptcy forms. Again, if you’re working with a lawyer, they’ll send the completed forms — usually electronically — to the bankruptcy court on your behalf.

The filing fee for a Chapter 13 case is \$313. You’ll need to pay the full amount directly to the court when you file your forms. There is no fee waiver option when filing a Chapter 13 case like there is with a Chapter 7.

Step 8: Send Documents to Your Trustee

After you file your bankruptcy petition, the court will assign a bankruptcy trustee to oversee your case and your repayment plan. The trustee will ask you to send in some financial documents — like paystubs, tax returns, and bank statements — prior to your meeting of creditors.

Your trustee will use these supporting documents to compare and verify the information you provided in your bankruptcy forms. If you don’t provide these documents as requested, your case can be dismissed by the court.

Step 9: Attend the 341 Meeting of Creditors and Your Confirmation Hearing

Approximately a month after you file your bankruptcy petition, you’ll meet with your Chapter 13 trustee. Don’t worry, you won’t be meeting the judge assigned to your case on this day! Your creditors have the right to attend your 341 meeting, but they very rarely show up.

At the meeting, you’ll be required to verify your identity and provide supporting documents. Your trustee will review your supporting documents and use the testimony in your meeting to make sure your bankruptcy forms are filled out correctly and that your proposed repayment plan is feasible.

The next appearance you have to make is at your confirmation hearing. You will appear in front of a bankruptcy judge on this day. The judge will decide whether to confirm (approve) your Chapter 13 plan and allow your case to move forward. If there are no objections by either your trustee or your creditors, your case will be confirmed.

Step 10: Keep Up With Your Chapter 13 Plan Payments

If you’ve made it this far, congratulations on getting your Chapter 13 plan approved! Now you’ll need to continue making your monthly plan payments for the next 3–5 years before your case successfully concludes and your bankruptcy discharge can be entered.

The first payment is due within 30 days of filing your bankruptcy forms. Keep in mind that until your case is confirmed, your monthly plan payments can increase or decrease. If you fall behind on your payments and are unable to catch up within a reasonable amount of time, your case will be dismissed and you won’t receive a discharge.

Step 11: Take the Debtor Education Course and Receive Your Discharge

Once you’ve completed your payment plan, you’ve made it to the end! Taking the debtor education course is the very last step before receiving your discharge.

As long as you’ve followed the terms in your Chapter 13 plan, you’ll receive a discharge at the conclusion of your case. Any unpaid balances on most unsecured debts will be eliminated.

FAQs About Chapter 13 Bankruptcy

It's normal to have lots of questions about bankruptcy. Here are some of the most commonly asked questions about filing Chapter 13.

Can I File Chapter 13 Bankruptcy if I'm Unemployed?

You can file Chapter 13 bankruptcy if you're unemployed, but only if you can prove you have a reliable source of income. That’s because Chapter 13 is based on a long-term repayment plan — usually lasting three to five years — and you’ll need to show the bankruptcy court that you can make regular monthly payments during that time.

Even though you don’t need to have a traditional job, you do need to show that you have enough steady income to pay both your living expenses and your Chapter 13 plan payments. Some people use income from sources like Social Security, disability benefits, retirement accounts, rental income, or financial help from family to qualify.

If you don’t have any reliable income, the court probably won't approve your Chapter 13 plan. In that case, many people consider Chapter 7 bankruptcy instead. Chapter 7 doesn’t require plan payments, and it’s often a better option for people with lower or no income who mostly have unsecured debt like credit cards or medical bills.

Keep in mind that if your income changes after you file — like if you start a new job — your repayment plan may need to be updated. Your trustee or creditors could ask the court to increase your plan payments if you now have more disposable income.

Can I File Chapter 13 Bankruptcy Without a Lawyer?

Yes. But the success rates are very low.

Filing 13 bankruptcy without a lawyer is called filing “pro se.” It’s legal, but that doesn’t mean it’s a good idea for most people.

Why? Chapter 13 is much more complicated than Chapter 7. You’ll need to create a repayment plan that meets strict legal requirements, attend court hearings, follow local and federal rules, and deal with creditors or a bankruptcy trustee who may challenge parts of your plan. The process lasts several years and a lot can change along the way.

Because of all these moving parts, the success rate for people who file Chapter 13 without a lawyer is very low. In some courts, less than 3% of pro se filers manage to get their repayment plan approved.

Can I File Chapter 13 Bankruptcy Without My Spouse?

Yes, you can file Chapter 13 bankruptcy without your spouse. Many people do this for personal, financial, or legal reasons.

If you’re married but filing alone, your spouse’s name and Social Security number won’t be included in the case. However, you’ll still need to report their income, which may affect how long your repayment plan lasts and how much you’ll have to pay.

Where you live also matters. In community property states, shared assets and income can be affected even if only one spouse files. In common law states, your spouse’s separate property is usually not part of your case.

Here are a few reasons someone might file Chapter 13 without their spouse:

• Only one spouse has debt or the debt was incurred before marriage

• There’s a prenuptial agreement keeping finances separate

• The other spouse has a recent bankruptcy or high debt that would complicate the case

• The non-filing spouse wants to protect their separate assets or avoid credit harm

⚠️ If you have joint debts, creditors may still report missed payments on your spouse’s credit, even if the debt is being handled in your bankruptcy plan.

Can Small Business Owners Use Chapter 13 Bankruptcy To Deal With Business Debt?

Yes, but it depends on how your business is set up and what kind of debt you’re trying to deal with.

If you’re a sole proprietor, meaning there’s no legal separation between you and your business, then Chapter 13 can help you reorganize both your personal and business debts in the same case. You can include business credit cards, vendor debt, tax debt, and even some equipment loans in your repayment plan.

If your business is a separate legal entity — like an LLC or a corporation — you can’t file Chapter 13 for the business. But if you personally guaranteed any of the business debts (which is common), you might still be able to include those debts in your individual Chapter 13 case. Just know that the business itself will still owe any debts it’s legally responsible for.

Chapter 13 can also help protect personal assets tied to business debt, like vehicles or equipment you financed in your name. But business owners often have added reporting requirements and more complex finances, so these cases can be harder to manage.

Will I Still Get My Tax Refund During Chapter 13 Bankruptcy?

You may still be entitled to tax refunds while your Chapter 13 case is active, but you might not get to keep them. Many Chapter 13 repayment plans require you to turn over any tax refunds you receive during the 3–5 year period. That money is then used to help pay off your debts through the plan. 

Some filers are allowed to keep part or all of their refund — but only with court approval. If keeping your refund is important for your budget, talk to your trustee or attorney early about your options.

Can Tax Debts Be Discharged in Chapter 13?

Some tax debts can be wiped out at the end of your Chapter 13 plan, but not all. The court classifies most federal and state income tax debts as priority debts, which must be paid in full through your repayment plan. 

That said, older income tax debts may be considered non-priority and could be discharged if they meet certain conditions — like being at least three years old and properly filed. Many people consult a bankruptcy attorney to find out which tax debts may qualify for discharge.

Do I Need to File Tax Returns Before Filing Chapter 13?

Yes. To be eligible for Chapter 13, you must have filed all required tax returns for the past four years. The bankruptcy trustee may ask for copies, and the court may dismiss your case if your returns are missing. You also need to stay current on filing your tax returns while your case is active.