Chapter 13 is a repayment plan the court enforces and your creditors cannot refuse. You pay one monthly amount to a trustee for three or five years, and at the end whatever is left of the qualifying debt is discharged.
People come to Chapter 13 for one of three reasons: they are behind on a mortgage and want to keep the house, they earn too much for Chapter 7, or they have an asset a Chapter 7 trustee would sell.
The mortgage case
This is the one Chapter 13 does better than anything else in American law. If you are eleven months behind and a sale date is set, filing stops the sale, and the plan lets you cure the arrears over five years while you resume the regular payment.
No loan modification does that on a timeline you control. We have filed cases the morning of a trustee's sale.
What the payment is
Your plan payment is not a number we pick. It comes out of a calculation: your income, minus allowed expenses, plus whatever you must pay to protect assets and priority debts. Some plans are $400 a month. Some are $3,200.
If the number the calculation produces is one you cannot actually live on, the plan will fail, and a failed Chapter 13 leaves you worse off than not filing. I will tell you that in the first meeting rather than the fourteenth month.
The fee structure is the part people miss
The Central District sets a no-look attorney fee of $7,000 for a non-business Chapter 13. Most of that is paid through your plan payment over the life of the case, not written as a check before we file. For a lot of people that makes a Chapter 13 easier to start than a Chapter 7.
The tools inside a Chapter 13
- Curing mortgage arrears over the life of the plan while the lender has to sit still
- Stripping a second mortgage or HELOC entirely, when the first mortgage is worth more than the house
- Cramming down a car loan to the value of the car, if you bought it more than 910 days before filing
- Paying priority tax debt through the plan without penalties continuing to run
- Protecting a co-signer, which Chapter 7 cannot do
“Lien stripping is the one that changes lives and nobody has heard of. If your house is worth less than the first mortgage, that second can come off entirely. I have seen it erase six figures.”
Naomi Reyes-AshfordThree years or five
Below the median income, three years. Above it, five. You can always propose a longer plan if you need a smaller payment, and you can pay it off early if your situation improves.
Questions we get asked
What happens if I lose my job mid-plan?
You have options, and this happens more than you would think. Plans can be modified, payments suspended, or the case converted to Chapter 7. What you cannot do is stop paying and hope. Call us the week it happens, not three months later.
Can I sell my house during the plan?
Yes, with court approval, and it is fairly routine.
Do I have to pay back everything?
Almost never. Most plans pay unsecured creditors a small fraction of what is owed, sometimes nothing at all, and the remainder is discharged.
Is my credit worse than Chapter 7?
It stays on the report seven years instead of ten, so in that sense it is shorter. The practical difference in scoring is small.
Start here
If there is a sale date on your house, call now and say so when you call. Those cases jump the queue. If you are earlier than that, bring a mortgage statement showing the arrears total and your last two months of income.