What is a Chapter 13 Bankruptcy?

Chapter 13 is often described as “repayment” bankruptcy. In a chapter 13 case, you file a written plan showing how you will pay off some of your past-due and current debts over three to five years. The most important thing about a chapter 13 case is that it will allow you to keep valuable property—especially your home and car—which might otherwise be lost. No property is taken and sold to pay creditors. In most cases, the plan payments will be at least as much as your regular monthly payments on your mortgage or car loan, with some extra payment to get caught up on the amount you have fallen behind. You should consider filing a chapter 13 plan if you:

  • Are behind on a house, car, or other secured property, but can catch up the back payments over 3 to 5 years;
  • Have certain debts that you can’t get rid of in Chapter 7, but can pay over time;
  • Have valuable property which is not exempt, but you can afford to pay creditors from your income over time.
  • Your gross income is to high to qualify for Chapter 7 based on the means test.

You will need to have enough income during your chapter 13 case to pay for your necessities and to keep up with the required payments as they come due.