How To File Chapter 13 Bankruptcy: A Step-by-Step Guide

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.” 

When you file Chapter 13, you have to commit to a 3–5-year payment plan. Under this plan, you'll make monthly payments to a bankruptcy trustee, who will distribute the money to your creditors. The amount you pay each month is based on your income, living expenses, and the types of debt you have.

This type of bankruptcy allows you to keep your property, like your home or car, even if you're behind on payments. Filing Chapter 13 can help you catch up on your mortgage payments and give you temporary relief from creditors via the automatic stay. This can be a big advantage for people facing foreclosure or repossession. However, you must have enough disposable income to make your monthly payments under the plan.

If you successfully complete the payment plan, any remaining eligible debts will be discharged. This means you won’t have to pay them back. However, some debts, like child support, alimony, and most student loans, aren’t dischargeable in Chapter 13 and must be paid in full.

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. Learn more by reading Chapter 7 vs. Chapter 13 Bankruptcy: Which Is Better? You can also see if you qualify to use our free Chapter 7 filing tool or set up a free consultation with a bankruptcy attorney to learn more about your options.

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.

Want some personalized guidance about which debt relief option may be best for you? Take our quick screener and easily compare your options.

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. While many people successfully file Chapter 7 cases on their own without hiring an attorney, self-represented Chapter 13 filers have a very high failure rate. 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. 

Let’s Summarize…

Chapter 13 bankruptcy can be a good option for people who don’t qualify for Chapter 7 and own a home or other expensive property they want to hang on to. But it’s good to research all your options before deciding to file Chapter 13 because the success rate is much lower than for Chapter 7 and other forms of debt relief. 

Because Chapter 13 requires a 3–5-year repayment plan and is much more complicated than Chapter 7, it’s advisable to hire an experienced attorney to help with your case. Upsolve can connect you with an attorney near you for a free consultation.