Chapter 13, Title 11, United States Code

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Chapter 13 of the U.S. Bankruptcy Code helps people with a regular income reorganize their finances under court protection. Instead of wiping out debt, you propose a repayment plan to pay back creditors over three to five years. The court can approve the plan as long as it follows the law, even if some creditors don’t agree.

Key points

- Who can use it: Individuals with a steady income who want to pay back some or all of their debts. Debt limits apply: unsecured debt must be less than $419,275 and secured debt less than $1,257,850.

- How it works: You file a Chapter 13 petition and propose a detailed plan showing how you will repay creditors over 3–5 years. Payments start within 30–45 days after filing. While the plan is in progress, creditors must go through the bankruptcy court to collect.

- What the plan can do:
- Cure or bring mortgage arrears current
- Avoid or modify certain liens on property
- Pay taxes over time
- Partially repay general unsecured debts (like credit cards)

Some courts also use Chapter 13 to speed up mortgage modification.

- Debt categories the plan can address: priority claims, secured claims, priority unsecured claims, and general unsecured claims.

- How it compares to other chapters:
- Chapter 7 is liquidation (selling property to pay debts) and discharge of some debts.
- Chapter 11 is for businesses or very large personal debts and is more complex and expensive.
- Chapter 12 is for family farmers; Chapter 13 is common for individual debtors who want to keep their home and other property.

- Involuntary bankruptcies: Creditors can force a bankruptcy mainly under Chapters 7 or 11. Debtors can usually choose which chapter to file and may convert to another chapter if needed.

- Why people choose Chapter 13: You can stop foreclosures (though the foreclosure may resume after the plan), achieve a “super discharge” of some debts not dischargeable in Chapter 7, protect value in collateral, reduce too-high interest on secured debts (cram-down), and protect co-signers during the case.

- What happens to your plan: It must meet requirements in §1325, and it is a formal document filed with or soon after you file for Chapter 13. It explains how debts, liens, and assets will be treated during the case.

- Credit impact: A bankruptcy filing stays on your credit report for several years, which can affect your ability to borrow. Getting new credit or loans during the Chapter 13 case generally requires court permission, and lenders may be cautious. After discharge, it’s possible to rebuild credit over time.