Chapter 13 Bankruptcy: How the Repayment Plan Works

Chapter 13 bankruptcy is a reorganization for individuals with regular income. Instead of liquidating your property, you propose a repayment plan that lasts three to five years, make a single monthly payment to a court-appointed trustee, and receive a discharge of remaining eligible debts once the plan is complete. The plan is the heart of a Chapter 13 case, and how it is calculated determines what you pay and what you keep.

This article is general legal information, not legal advice. Laws vary by state and situation, and reading it does not create an attorney-client relationship. For advice about your case, talk to a licensed attorney.

Key Takeaways

• A Chapter 13 repayment plan runs three years if your income is below your state median and five years if it is above the median. You commit your disposable income to the plan for that whole period.
• You make one monthly payment to the Chapter 13 standing trustee, who distributes the money to your creditors according to bankruptcy priority rules.
• The plan must pass three tests: it must pay priority debts in full, pay secured creditors at least the value of their collateral (or cure the arrears), and pay unsecured creditors at least what they would receive in a Chapter 7 liquidation.
• A judge must confirm the plan at a hearing before it becomes a binding court order. The trustee or a creditor can object if the plan does not meet the legal requirements.
• Chapter 13 has powerful tools Chapter 7 does not: catching up on a mortgage to stop foreclosure, a possible cram down of certain car loans, and a co-debtor stay that protects people who co-signed your consumer debts.
• Missing plan payments can get your case dismissed, so the plan has to be realistic from the start.

What the Chapter 13 Repayment Plan Is

Chapter 13 is sometimes called the "wage earner's plan" because it is built for people with steady income who can repay debts over time. Rather than wiping out unsecured debts in a few months the way Chapter 7 bankruptcy does, Chapter 13 reorganizes what you owe into a structured, court-supervised payment schedule.

The plan is a written document you file with your bankruptcy petition. It lays out how much you will pay each month, how long the plan lasts, and how that money is divided among your creditors. Once a judge approves it, the plan becomes a binding order of the court that both you and your creditors must follow.

People typically choose Chapter 13 over Chapter 7 for a few reasons:

• They earn too much to pass the bankruptcy means test for Chapter 7.
• They are behind on a mortgage or car loan and want to catch up to avoid foreclosure or repossession.
• They have non-exempt property they would lose in a Chapter 7 liquidation and want to keep it.
• They want to protect a co-signer or take advantage of a tool that exists only in Chapter 13.

If you are weighing the two options, our comparison of Chapter 7 versus Chapter 13 bankruptcy walks through how to decide.

How the Plan Payment Is Calculated

This is the question most people care about: how much will I have to pay? There is no single number — the plan payment is whatever amount is needed to satisfy several legal requirements at once. Your attorney works backward from these rules to build a payment your budget can actually support.

The disposable income requirement

You must commit your projected disposable income to the plan for its entire length. Disposable income is, broadly, your income minus your reasonably necessary living expenses. For filers above the state median income, the calculation borrows from the means test and uses certain standardized expense figures rather than your actual spending, which can sometimes produce a number that feels disconnected from your checkbook.

The "best interest" or liquidation test

Your unsecured creditors must receive at least as much through the plan as they would have received if you had filed Chapter 7 and the trustee sold your non-exempt property. This is often called the liquidation test or the "best interest of creditors" test. If you have non-exempt assets, this sets a floor on what your plan must pay.

Required payments to specific creditors

The plan also has to account for:

Type of debt	What the plan must do
Priority debts (recent taxes, domestic support obligations, and certain others)	Pay in full over the life of the plan
Secured debts you want to keep (car, furniture, etc.)	Pay at least the value of the collateral, with interest as required
Mortgage arrears (past-due payments)	Cure the arrears over the plan term while you stay current on the ongoing payment
General unsecured debts (credit cards, medical bills, personal loans)	Pay at least the liquidation-test amount; the rest can be discharged at the end

Your actual monthly payment is the figure that makes all of these requirements work together. Some plans pay unsecured creditors 100 percent; many pay only a fraction, and the balance is discharged when the plan finishes. You can estimate whether Chapter 13 or Chapter 7 is a better fit for your situation with our bankruptcy qualification tool, then confirm the details with an attorney.

Three Years or Five Years?

The length of your plan — called the applicable commitment period — is not something you simply choose. It is tied to your income:

• If your current monthly income is below your state's median for a household of your size, your plan can be as short as three years.
• If your income is above the median, the plan generally must run five years.

You can sometimes propose a longer period if you need it to pay required debts in full, but you generally cannot pay 100 percent of your debts and exit early if doing so would shortchange creditors who are entitled to your disposable income for the full term. State median income figures are published by the U.S. Trustee Program and change periodically, so verify the current numbers rather than relying on an old figure.

The Step-by-Step Chapter 13 Process

Here is how a typical Chapter 13 case moves from filing to discharge.

1. Complete pre-filing credit counseling. You must finish a course from a U.S. Trustee Program-approved agency within 180 days before filing and get a certificate.
2. Confirm eligibility. You must be an individual with regular income, and your secured and unsecured debts must each fall below the limits set by statute. Those limits change, so confirm the current figures.
3. Draft the proposed plan. Working from your income, expenses, debts, and asset values, you build a plan that satisfies the requirements above. Many districts use a local plan form.
4. File the petition, schedules, and plan. You file with the U.S. Bankruptcy Court. The plan is filed with the petition or within 14 days. Chapter 13 has a filing fee (different from Chapter 7), which can be paid in installments — but there is no fee waiver in Chapter 13.
5. The automatic stay takes effect. The moment you file, the automatic stay stops most collection, including a pending foreclosure or repossession, giving you room to catch up through the plan.
6. A standing trustee is assigned. The Chapter 13 standing trustee handles all such cases in the district, receives your monthly payments, distributes them to creditors, reviews your plan, and monitors compliance.
7. Start making plan payments. In most districts you must begin payments within about 30 days of filing — even before the plan is confirmed.
8. Attend the 341 meeting of creditors. Roughly 21 to 40 days after filing, the trustee places you under oath and asks about your income, expenses, and the feasibility of your plan. Bring photo ID and proof of your Social Security number. Creditors are invited but rarely attend consumer cases.
9. Confirmation hearing. A judge reviews the plan. The trustee or a creditor may object; the judge can confirm the plan, require modifications, or deny confirmation if it is not feasible or legally compliant. Many objections are resolved before the hearing.
10. Make payments for the full plan term. After confirmation you keep paying the trustee each month, usually by payroll deduction or bank transfer, while staying current on any obligations you pay outside the plan (like an ongoing mortgage payment).
11. Complete the debtor education course. Before discharge, finish a personal financial management course from an approved provider and file the certificate.
12. Receive your discharge. Once you complete all payments, finish the courses, and are current on any domestic support obligation, the court issues a discharge of remaining eligible debts.

Tools That Exist Only in Chapter 13

Several powerful options are unavailable in Chapter 7. They are technical, and whether they apply depends on the specific facts of your case, so treat these as possibilities to explore with a lawyer rather than guarantees.

• Curing mortgage arrears. If you are behind on your house payments, you can spread the past-due amount across the plan and keep your home, as long as you also stay current on the ongoing monthly payment. This is the single most common reason people choose Chapter 13.
• Cram down on some secured debts. For certain secured loans — most often car loans bought outside a set time window before filing — you may be able to reduce the secured claim to the collateral's current value. If you owe $15,000 on a car worth $10,000, the secured portion may drop to $10,000 and the $5,000 difference becomes unsecured. A cram down does not apply to a mortgage on your primary residence, and there are timing restrictions on auto loans.
• Lien stripping. If a second mortgage or other junior lien is entirely "underwater" — the property is not worth enough to cover even the first mortgage — you may be able to strip that junior lien and treat it as unsecured. This is not available in Chapter 7.
• The co-debtor stay. Chapter 13 includes special protection that automatically shields people who co-signed your consumer debts from collection while your plan is active. If protecting a co-signer matters to you, this is a meaningful advantage of Chapter 13.

What Happens If You Miss a Payment

A Chapter 13 plan only works if you can keep up with it for the full term, which is why an honest, realistic budget matters more than a low payment that you cannot sustain. If you fall behind, the trustee or a creditor can file a motion to dismiss your case. A dismissal ends your bankruptcy protection, lifts the automatic stay, and lets creditors resume collection — including any foreclosure you were trying to stop.

You usually have options before it reaches that point. Depending on the circumstances, you may be able to cure the missed payments, modify your plan to account for a temporary hardship (a job loss or medical event, for example), or in some cases request a hardship discharge. Each of these requires acting quickly and filing the right motion with the court. The most important move is to contact your attorney the moment you see a problem coming, rather than waiting until the case is already at risk.

Important Deadlines

Deadlines in Chapter 13 are firm, and several are short. The exact timing varies by district and can change, so verify each one with the court or your attorney:

• Credit counseling: within 180 days before filing.
• The plan: filed with the petition or within 14 days of filing.
• First plan payment: generally within about 30 days of filing in most districts, even before confirmation.
• 341 meeting: usually 21 to 40 days after filing.
• Debtor education course: completed and filed before discharge can be entered.
• Plan completion: all required payments made by the end of the three-to-five-year term.

Missing a procedural deadline can lead to dismissal, so calendar them carefully and confirm the specific dates that apply to your case.

Common Mistakes to Avoid

• Proposing a payment you cannot actually afford. A plan that looks good on paper but breaks your monthly budget often leads to missed payments and dismissal.
• Falling behind on payments you owe outside the plan. If your ongoing mortgage or car payment is handled outside the plan, you must keep it current. Missing it can trigger a motion for relief from the stay.
• Forgetting to list a creditor. Unlisted creditors generally do not receive plan payments and may not be bound by your discharge. If you realize you left someone off, tell your attorney right away so the schedules can be amended.
• Taking on new debt during the plan. Incurring significant new debt without court approval can jeopardize your case.
• Going silent when money gets tight. Trustees and courts have more flexibility when you raise a problem early than when you simply stop paying.

When to Contact a Lawyer

Chapter 13 is the more complex consumer bankruptcy chapter. The plan must be drafted to satisfy several overlapping legal tests, and getting the math wrong can mean a denied confirmation or a payment you cannot sustain. Tools like cram down, lien stripping, and the co-debtor stay are governed by technical rules that turn on dates, values, and the type of debt. Most people who file Chapter 13 work with an attorney from the start, and the data consistently shows that represented filers are far more likely to complete their plans and reach discharge. You can find a bankruptcy attorney through our directory to review your situation.

Costs and Fees

Chapter 13 involves two main categories of cost. First, the court filing fee is set by the federal judiciary and differs from the Chapter 7 fee; you can pay it in installments, though Chapter 13 does not offer a fee waiver. Verify the current amount at uscourts.gov. Second, attorney's fees in Chapter 13 are typically higher than in Chapter 7 because the case lasts years rather than months, but a defining feature of Chapter 13 is that much of the attorney's fee can be paid through the plan rather than entirely up front. Many districts set a "no-look" fee — a presumptively reasonable flat amount that does not require detailed fee applications. Ask any attorney you consult how their fee is structured and how much must be paid before filing.

State and Local Differences

While bankruptcy is federal law, important pieces vary by location. Property exemptions — which determine the liquidation-test floor your plan must clear — differ dramatically from state to state, and some states require you to use state exemptions while others let you choose the federal set. State median income figures, which set your three-or-five-year commitment period, are specific to your state and household size. And local court rules govern plan forms, when payments must begin, and how confirmation is handled. Because of this, the same financial situation can produce a different plan in different districts. Confirm how your state's exemptions and your local court's rules apply before relying on general figures.

Helpful Resources

• U.S. Courts (uscourts.gov) — official information on bankruptcy basics, the Chapter 13 process, forms, and current filing fees.
• U.S. Trustee Program (justice.gov/ust) — lists approved credit counseling and debtor education providers and publishes state median income figures.
• Your local U.S. Bankruptcy Court — district-specific local rules, plan forms, and trustee information.
• For the bigger picture, see our complete guide to how bankruptcy works, which links to every chapter and concept in this series.

Frequently Asked Questions

How long does a Chapter 13 plan last?

Three to five years. If your income is below your state's median for your household size, your plan can run three years; if your income is above the median, it generally must run five years. You make monthly payments to the trustee for that entire period, and remaining eligible debts are discharged when the plan is complete.

How is my Chapter 13 payment calculated?

Your payment is set so the plan satisfies several requirements at once: it must commit your projected disposable income, pay priority debts in full, pay secured creditors at least the value of their collateral, and pay unsecured creditors at least what they would have received in a Chapter 7 liquidation. Your attorney builds the payment from these rules and your actual budget. Depending on your finances, unsecured creditors may receive anywhere from a small percentage to 100 percent.

Can Chapter 13 stop a foreclosure?

Yes, at least temporarily, and Chapter 13 is usually the more effective bankruptcy tool for saving a home. Filing triggers the automatic stay, which halts a pending foreclosure. Chapter 13 then lets you cure your past-due mortgage payments over the life of the plan while you stay current on the ongoing payment, which can let you keep the house. You must keep up with both the plan and the regular mortgage payment for this to work.

What happens if I miss a Chapter 13 plan payment?

Missing payments puts your case at risk. The trustee or a creditor can file a motion to dismiss, which would end your bankruptcy protection and let creditors resume collection. You may be able to cure the missed payments, modify your plan to handle a temporary hardship, or in some cases seek a hardship discharge, but each requires acting quickly and filing a motion. Contact your attorney as soon as a problem arises.

Can I convert from Chapter 13 to Chapter 7?

In most circumstances, yes — you generally have the right to convert a Chapter 13 case to Chapter 7 at any time. You must still qualify for Chapter 7 by meeting the means test, and your non-exempt assets at the time of conversion may be subject to liquidation, which can differ from what you owned when you first filed. Whether conversion makes sense depends on your situation, so talk it through with your attorney first.

Does Chapter 13 protect people who co-signed my loans?

It can. Chapter 13 includes a special "co-debtor stay" that automatically protects co-signers on your consumer debts from collection while your plan is active. This protection does not exist in Chapter 7, which is one reason Chapter 13 may be preferable when a family member or friend co-signed a debt with you.

How long does Chapter 13 stay on my credit report?

A Chapter 13 bankruptcy stays on your credit report for seven years from the filing date — shorter than the ten years for Chapter 7. Individual accounts included in the case may also be reported as discharged. Credit bureaus must remove the entries after the applicable period under the Fair Credit Reporting Act, and the impact on your score lessens over time as you add positive payment history.

What debts can Chapter 13 discharge that Chapter 7 cannot?

Chapter 13 offers a somewhat broader discharge in specific areas, such as certain debts from a divorce property settlement that are not in the nature of support and some debts for willful and malicious property damage. It also lets you pay off priority debts like recent taxes through the plan. These distinctions are nuanced and depend on current law and your facts, so have an attorney assess which of your debts would actually be resolved.

Chapter 13 can be a strong way to keep your home, protect a co-signer, and repay what you owe on terms you can manage — but only if the plan is built correctly and you can sustain it. Because the requirements are technical and the deadlines are short, talk to a licensed bankruptcy attorney in your state before you file so your plan is realistic, confirmable, and right for your situation.