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What Is Chapter 13 Bankruptcy

Let’s say you are drowning in mortgage debt due to unexpected medical bills. You want to keep your house and are thinking of possible ways to catch up with your payments. Chapter 13 bankruptcy could be an option for you. 

Chapter 13 Bankruptcy 101

What is a Chapter 13 bankruptcy? Also known as a wage earner’s plan or reorganization bankruptcy, Chapter 13 bankruptcy is an attractive solution for people with regular income. It allows them to repay all or part of their debt as opposed to settling for liquidation (Chapter 7 bankruptcy).

You can think of it as another chance to catch up with your payments while being able to keep your property. You aren’t seeking to have your debts forgiven; rather, you’re reorganizing your debt payments to eventually get out of bankruptcy. Under Chapter 13, people typically have three to five years to fulfill their payments. 

Chapter 13 is often filed for the following situations: 

  • Mortgage foreclosure
  • Repossession of automobiles
  • Paying back real estate taxes
  • Paying back taxes to the IRS

Chapter 13 is particularly popular among homeowners. They can work to repay their mortgage debt while still being able to keep their home. 

How Does Chapter 13 Bankruptcy Work?

So what happens when you file Chapter 13 bankruptcy? If you are a homeowner who has mortgage debt. You would file a petition to the court and fill out paperwork that reflects your eligibility for Chapter 13. In order to qualify, you must: 

  • Be up-to-date on tax filings
  • Be employed and have enough income to cover the required monthly payment
  • Have no more than $394,725 in unsecured debt
  • Have no more than $1,184,200 in secured debts (mortgages, car loans, etc.)

You would then attend a meeting and confirmation hearing where you make sure that your creditors accept your repayment plan. 

Once you get approval from both them and the court to proceed with Chapter 13, you are assigned a trustee. For the next three to five years, this person would be your main point of contact. You will send your debt payments to them, and your trustee will deliver these payments to creditors.

How to File Chapter 13 without an Attorney

When you have a lot of financial issues to deal with, it can be difficult to afford an attorney too. It is possible to bring your case on your own. So how do you file Chapter 13 without an attorney?

1. Prepare in Advance 

Calculate all liabilities that you owe and their current value. Use a consumer credit report to find the names of all your creditors and their contact information.

2. Complete the Proper Paperwork 

You can download Chapter 13 bankruptcy forms from the U.S. Courts site for free. There are several required forms to fill out. Complete them thoroughly. You will also need to file a petition in your local court district.

3. Meet with a Credit Counselor

Before filing, you must receive credit counseling from an approved agency. There are non-profit agencies that do not charge you for their services. 

4. Show up and Stay on Track

Be responsible for all your paperwork and records that you provide and receive from the court and your trustee. And make sure to show up to all court hearings. 

It’s important to note that there has been a low success rate for legal self-representation, and if you fail, it may affect your ability to file for Chapter 13 again in the future. Be sure to read and become knowledgeable on the U.S. Bankruptcy Code, the Federal Rules of Bankruptcy Procedure, and local rules of the court.  

Chapter 7 vs. Chapter 13 Bankruptcy 

So what is the difference between Chapter 7 and Chapter 13 bankruptcies? Mainly, they relieve debt in different ways. They also contrast on:

  • Liquidation vs. reorganization: Chapter 7 focuses on selling off property to repay debts. In contrast, Chapter 13 centers on completing a court-mandated repayment plan while maintaining ownership of the property.   
  • Time frame: While the Chapter 7 process generally takes a few months, Chapter 13 spans three to five years. 
  • Relationship with trustee: In a Chapter 7 bankruptcy, a trustee sells your property, whereas in a Chapter 13, the trustee takes your payments and transfers them to creditors.
  • Debt amount: There are no minimum debt limits to Chapter 7, whereas in Chapter 13 there are limits on the secured and unsecured debt you can have and still qualify.
  • Time periods between multiple claims: While you can file for bankruptcy under Chapter 7 once every eight years, the waiting period between Chapter 13 filings is shorter. You have to wait at least two years from your last filing date to file a new Chapter 13 claim.

CreditAnswers Can Help 

If you qualify, Chapter 13 might be the right path for you. It can give you another chance to get back on track and protect what is yours. CreditAnswers does not give legal advice. Please consult an attorney if you are contemplating filing for bankruptcy.

CreditAnswers understands that emergencies come up in life that make paying bills difficult. Be sure to reach out to us to get a free debt assessment. You can lean on CreditAnswers for our debt resolution expertise.


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