Chapter 13 Bankruptcy in 2026

Chapter 13 offers options not available in Chapter 7, such as stopping foreclosure and repossession and paying debts over time. And, except for mortgages, student loans, and certain other obligations, you'll emerge debt-free. Sounds good, right? It is, but the monthly payments can be expensive. To find out if it will work for you, you'll want to ask several questions.

Will Chapter 13 Bankruptcy Work for Me?

Don't worry; you're not the only person juggling finances. Chapter 13 filers are often in similar financial spots. Do any of these situations sound familiar? If so, you're on the right track. Otherwise, you might want to learn about the Chapter 7 process.

Look for Jack, Kaylee, and Gabriel as we dive deeper into the nuts and bolts of Chapter 13. We'll use their situations to help explain each topic.

Will Chapter 13 Bankruptcy Solve My Debt Problems?

Chapter 13 is a numbers game. If you have enough monthly income to pay the required obligations, Chapter 13 will solve your debt problems. You'll be debt-free except for long-term commitments more than five years in length, like mortgages and student loans.

Calculating Your Chapter 13 Repayment Plan

While figuring out how much you'll pay in a Chapter 13 plan isn't simple, it's doable. Plus, it's the only way to know whether Chapter 13 might provide a solution. Here's what you'll do:

• determine your plan length
• calculate how much you'll need to pay toward debt, and
• figure out if you'll have to pay extra for your property.

Step One: How Long Will Your Chapter 13 Plan Be?

A Chapter 13 plan lasts either three or five years, depending on your income. If your income is below your state's median family income, your plan will be three years (though you may pay over five years if it helps lower your monthly payment). If your income is above the median, you must pay into a five-year plan. (11 U.S.C. § 1325(b)(4).)

Special rules for above-median-income filers. If your income exceeds your state's median, the court will use IRS expense standards—rather than your actual expenses—to calculate your disposable income. Below-median-income filers use their actual monthly expenses instead.

Step Two: Which Debts Get Paid in Your Chapter 13 Plan?

Everyone must pay monthly living expenses, so your calculations will start there. But your costs must be reasonable, so plan to cut back if you're living a lavish lifestyle. Include mortgage and car payments if you intend to keep the property. These are known as "secured" debts.

You're likely thinking, "That wasn't so bad." Well, buckle up because the next step is where the rubber meets the road. It will help to understand the differences between secured, priority, and unsecured debts. It will make it easier to understand which debts you must pay in full:

• "Priority" debts. Important obligations, such as child and spousal support arrears, recent tax debt, and back wages owed to employees, must be repaid in full through the plan. If you owe a lot, your plan payment can get expensive fast. (11 U.S.C. § 507.)
• Late mortgage payments, car loans, and other "secured" property. You can return a house or vehicle to the lender. But if you want to keep the property secured, you must make the regular monthly payment and catch up on any overdue payments through the plan. Otherwise, the lender can take the property by exercising its lien rights after obtaining the judge's permission. Homeowners will continue to make the payments after bankruptcy.

You'll convert these numbers into your monthly payment by dividing the total by sixty and adding it to your monthly expenses. If your income exceeds that amount, you're doing well, and you'll likely be able to fund a plan.

Here's where you get a break (but you're not out of the woods yet; there's a third step). Any remaining "disposable income" will be shared by creditors in the bottom "nonpriority, unsecured" category. So you won't have to pay them in full. The discharge order will wipe out the following debts:

• credit card debt
• medical bills
• utility bills and back rent
• money owed on a lease or contract
• payday loans and other personal loans
• marital property division debts (in Chapter 13 only), and
• even more (but the others are more obscure).

You'll notice that the list doesn't include student loans. You'll pay them in this category, so you'll likely pay less than usual. However, you won't be able to wipe them out unless you file and win a separate adversary proceeding. If you don't take that step, you'll still have a student loan balance at the end of your case.

Also, be sure to look into how a bankruptcy will affect your current repayment schedule. Bankruptcy could delay the forgiveness of your loans. Learn more about debts that get wiped out in Chapter 13 bankruptcy.

Step Three: Will You Have to Pay for Property?

Bankruptcy promises a fresh start, not new struggles. So don't worry about losing everything you own in Chapter 13. Unlike Chapter 7, you won't lose anything at all. But there's a catch. You might have to pay for some of your property. Here's why.

Every state allows you to "exempt" or protect essential belongings like furnishings, a car, some amount of home equity, and a retirement account. But you must pay the value of items that an exemption doesn't cover (minus sales costs) through your repayment plan. (11 U.S.C. § 1325(a)(4).)

Start by reviewing your state exemptions and checking whether you can use the federal bankruptcy exemptions instead. Some states allow you to choose the list you prefer, and depending on what you own, the federal list might protect more of your property than your state's exemptions. After choosing your list, add the value of any property you can't exempt.

You'll find your state's bankruptcy exemptions here. Links to individual states are at the bottom of the article.

Of course, there's another tricky angle here. You won't add this amount to the total monthly payment amount we calculated in Step Two. Instead, compare it to the priority and nonpriority unsecured debt amounts. You'll use the current number instead of the priority or nonpriority unsecured debt amount if it's higher.

So what's the point of this? Unsecured creditors must get at least as much as they would in a Chapter 7 case. The new amount is what your creditors would receive if the Chapter 7 bankruptcy trustee sold your nonexempt property in Chapter 7.

How Much Would Our Filers' Chapter 13 Payments Be?

You're not alone if you find it challenging to understand how these figures work together. This chart should help. We assume our filers will pay secured mortgage and car payments outside the plan, so the 10% trustee fee hasn't been applied to those expenses. If your jurisdiction requires you to make those payments within the plan, the trustee fees will increase significantly.

How Do I File for Chapter 13 Bankruptcy?

You'll start the bankruptcy process by filing the bankruptcy "petition" and a proposed Chapter 13 repayment plan with the bankruptcy court. Most Chapter 13 bankruptcy petitions are about 55 to 60 pages long, and they take some work to complete. You'll include information about your assets and debts, income and expenses, and previous financial transactions. Filers must also take a credit counseling course before filing and submit the completion certificate with the petition. (11 U.S.C. § 109(h).)

Filing your paperwork isn't free, but the bankruptcy forms are. You'll find the bankruptcy form list here.

What Will Happen After Filing for Chapter 13 Bankruptcy?

Shortly after filing your bankruptcy petition, the court will mail a notice to you and your creditors that will include the following information:

• bankruptcy filing number and date
• automatic stay order notifying creditors to stop collections
• meeting of creditors date, and
• other filing deadlines.

The automatic stay stops most creditors from trying to collect from you, so the calls, letters, wage garnishments, and even collection lawsuits should come to a quick halt. But it doesn't stop all actions. (11 U.S.C. § 362.)

The 341 meeting of creditors is the one event all filers must attend. You'll turn over financial documents for the trustee's review beforehand. At the meeting, the trustee will check your identification and ask questions about your filing and proposed Chapter 13 repayment plan. Creditors can appear and ask questions, too, but they rarely do.

Before finishing your plan, you'll take the debtor education course and file the completion certificate with the court. After completing your plan, you'll file a few more forms and wait for your bankruptcy discharge, the order that wipes out your debts. (11 U.S.C. § 1328.)

What Happens After My Chapter 13 Bankruptcy Case Ends?

You'll begin rebuilding your credit. You might be surprised to learn that many people are offered credit cards soon after filing. Accept an unsecured card with the highest limit when you're ready to manage credit responsibly. Your credit score will increase if you keep the balance low or pay it in full.