Chapter 13 Bankruptcy: A Debt Repayment Solution
Published on February 14, 2025 by Casey Yontz, Bankruptcy Attorney
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, also known as a **wage earner’s plan**, is a form of debt relief that allows individuals with regular income to develop a **structured repayment plan** over 3 to 5 years. Unlike **Chapter 7 bankruptcy**, which eliminates most debts, Chapter 13 **helps you reorganize your debts** while keeping your assets.
This option is especially beneficial for those who are facing **foreclosure, vehicle repossession, or excessive unsecured debt** but want to **avoid liquidation** of their assets.
Who Qualifies for Chapter 13 Bankruptcy?
To be eligible for Chapter 13 bankruptcy, you must meet the following criteria:
- ✅ Have **regular income** (employment, self-employment, or benefits).
- ✅ Your **secured debts** (e.g., mortgages, car loans) must be under **$1,257,850**.
- ✅ Your **unsecured debts** (e.g., credit cards, medical bills) must be under **$419,275**.
- ✅ Must have **filed tax returns** for the past four years.
- ✅ Complete **credit counseling** before filing.
How Does Chapter 13 Bankruptcy Work?
Chapter 13 bankruptcy follows a structured process that typically takes between **3 to 5 years**:
- Filing the Petition: Submit necessary forms to start the process.
- Automatic Stay: Creditors must **immediately stop** collection actions, including foreclosures.
- Creating a Repayment Plan: Work with the court to create a **manageable** debt repayment plan.
- 341 Meeting of Creditors: Attend a short hearing where creditors can ask questions.
- Making Monthly Payments: Begin making payments to the trustee as per the agreed plan.
- Debt Discharge: After successfully completing the repayment plan, remaining eligible debts are **eliminated**.
What Debts Are Included in Chapter 13?
✅ Debts Included in the Repayment Plan
- Mortgage arrears
- Car loans
- Credit card debt
- Medical bills
- Personal loans
- Unpaid taxes
❌ Debts Not Included
- Child support & alimony
- Student loans (except in rare cases)
- Criminal fines
- Most tax debts
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Considering Chapter 13? An **experienced bankruptcy attorney** can guide you through the process.
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