Chapter 13 is for individuals with regular income whose debts fall under the statutory caps. Businesses can't file it, and neither can a corporation or an LLC.
The caps are separate numbers for secured and unsecured debt, and Congress adjusts them every three years, so anyone quoting you a figure from memory is quoting you a figure that may already be stale. We check the current amounts against your schedules before we file.
The three things the code actually requires
- You're an individual with regular income. Regular doesn't mean a W-2. Self-employment, Social Security, rental income, a pension, even reliable support from a family member can qualify, as long as it's steady enough to fund a plan.
- Your secured and unsecured debts are each below the current limit. Two separate ceilings, checked separately.
- You completed a credit counseling course from an approved agency within the 180 days before filing. It runs about an hour online and costs around $15 to $50.
That's it for the statute. The practical bar is higher, because a plan you can't fund is a plan the trustee will move to dismiss.
Where people actually fail
Not the debt caps. Most consumer cases are nowhere near them. What sinks people is income that won't cover the plan payment plus rent plus everything else.
If your mortgage arrears are $48,000 and you're in a five-year plan, that arrearage alone is $800 a month before the trustee's percentage, before priority taxes, before your regular mortgage payment resumes. Some households can carry that. Some can't, and it's better to hear so in a consultation than fourteen months into a case.
The tax return problem
You have to have filed your tax returns for the four years before your case. If you're three years behind with the FTB and the IRS, that's the first thing to fix, and it can take weeks.
When you're pushed into Chapter 13 whether you like it or not
Two common situations. First, your income is above the California median for your household size and the means test says Chapter 7 isn't available. Second, you have non-exempt equity you'd lose in a Chapter 7, usually home equity in a house you bought before 2019, and Chapter 13 lets you keep it by paying that value to creditors over time instead.
“I'll be blunt about this one. A lot of people who come in wanting Chapter 7 are Chapter 13 clients because they own a house in this county. The equity that makes you feel secure is the same equity a trustee would sell.”
Naomi Reyes-AshfordPrior filings
A prior bankruptcy doesn't bar a Chapter 13 filing. It may bar a Chapter 13 discharge, depending on the chapter and the timing of the earlier case, and it can shorten the automatic stay to 30 days if you had a case dismissed within the past year. Tell your lawyer about every prior filing, including ones that got dismissed in week two. We can pull the record anyway, and it's a bad look to have it surface later.
Questions we get asked
Can I file Chapter 13 if I'm self-employed?
Yes. Sole proprietors file Chapter 13 regularly. You'll need to show income through bank statements and profit-and-loss figures instead of pay stubs, and the trustee will want to see that you're setting aside money for taxes.
What if my debts are over the limit?
Chapter 11 becomes the option, and Subchapter V exists for some individuals with business debt. It's more expensive and more involved. This is an uncommon problem in consumer cases.
Does my spouse have to file with me?
No. You can file alone. But the trustee still looks at household income, including your spouse's, when calculating what your plan has to pay.
How soon can I file after a dismissed case?
Usually right away, though you may need to ask the court to extend the automatic stay past 30 days and explain what changed. That motion needs a real answer, not a hopeful one.
What to do next
Pull your last two years of tax returns and a recent pay stub or three months of bank statements. With those and a rough list of what you owe, we can tell you on a video consultation whether Chapter 13 fits, and roughly what a plan payment would look like.