Chapter 13 bankruptcy is a process for debtors with regular income to rebuild their finances through a three- to five-year repayment plan that allows them to adjust their debts, protect assets like their home, and rebuild their finances. Instead of selling your assets like in Chapter 7, you pay back what you can with your income and have the rest discharged.
Key features of Chapter 13
- Protecting assets: Debt consolidation while keeping assets like your home, car, etc.
- Repayment period: 3 years (below median income) or 5 years (above median income)
- Automatic Stay Stop creditor collections, garnishments, and evictions immediately upon application
- Joint debtor protection: Stop collections on co-signers
Eligibility requirements
- Have a regular income (salary, self-employment, pension, etc.)
- Unsecured debt less than $507,150 AND Secured debt less than $1,521,450 (as of 2026)
- Completed credit counseling within 180 days prior to application
- Two years since your last Chapter 13 discharge and four years since your last Chapter 7 discharge.
Structure of repayment plans
- Priority Debt: Taxes, child support, etc. - 100% repayment required
- Secured debt: Home mortgage arrears, car loan - repay according to plan
- Unsecured debt: Credit cards, medical bills - paid in part or in full depending on available income
Your repayment plan is based on your “disposable income.” You use the rest of your income after essential living expenses to repay your debt.
How to keep your home with Chapter 13
- Pay off mortgage arrears: Pay off delinquent mortgages in installments over 3-5 years
- Stop garnishments Stopping Home Foreclosure Proceedings Upon Application
- Remove secondary collateral Second mortgage can be reclassified as unsecured if the value of the home is lower than the first mortgage.
Chapter 7 vs Chapter 13 selection criteria
| Situation | The right chapter |
|---|---|
| Low income and few assets | Chapter 7 |
| Need to stop home foreclosures | Chapter 13 |
| Your income is above the median income | Chapter 13 |
| Non-dischargeable tax debt repayment required | Chapter 13 |
| Require co-signer protection | Chapter 13 |
Frequently asked questions
Q. What if my income decreases in the middle of my repayment plan?
If your income drops, you lose your job, or you become ill, you can ask the court to modify your plan. You may be able to adjust your repayment amount, extend the term, or, in extreme cases, convert to Chapter 7 or file for a “hardship discharge.”.
Q. Can a self-employed person file for Chapter 13?
Yes. Self-employment income also qualifies as “regular income.” However, large fluctuations in income can make repayment plans and court approval more challenging, so make sure you have thorough proof of income for the last year or two.
You can keep your home and consolidate your debt. Contact the Law Offices of Jin D. Cho for a Chapter 13 consultation.
Phone: (718) 353-2699 | Email: jd@choattorneys.com