What is Chapter 13 bankruptcy?

Chapter 13 bankruptcy is a court-supervised repayment plan that lets you keep your assets (including a home in foreclosure) while repaying all or part of your debt over 3–5 years. It stays on your credit report for 7 years from filing — 3 years less than Chapter 7.

Chapter 13 is sometimes called "reorganization" bankruptcy because instead of liquidating assets, you propose a court-approved repayment plan. The plan lasts 3 years (if your income is below state median) or 5 years (if above median). During this time, an automatic stay halts foreclosure, repossession, and collection actions. The U.S. Courts describes it as the option that gives debtors with regular income a chance to save their homes and other property while repaying debts over time.

How Chapter 13 differs from Chapter 7

No liquidation: You keep all property, including home equity above exemption limits.
Income required: You need regular income to fund the repayment plan — Chapter 7 is for those with lower income or fewer assets to protect.
Debt limits: Chapter 13 has debt ceilings (adjusted periodically for inflation). Check current limits on the U.S. Courts site before filing.
Duration: 3–5 year repayment plan vs. Chapter 7's 3–6 month process.
Credit report duration: 7 years from filing date vs. 10 years for Chapter 7.
Foreclosure halt: Chapter 13 can stop a foreclosure in progress and allow past-due mortgage payments to be included in the repayment plan.

What happens during the repayment plan

You propose a plan to the court specifying how much you'll pay creditors each month. Priority debts (taxes, domestic support obligations) must be paid in full. Secured debts (mortgage arrears, car loans) may be restructured or caught up. Unsecured creditors (credit cards, medical bills) typically receive cents on the dollar or nothing — whatever disposable income is left after priority and secured debts are covered. A trustee oversees payments and distributions.

Who Chapter 13 is typically right for

Homeowners who are behind on their mortgage and want to catch up without losing the house.
People with too much income to pass Chapter 7's means test.
Anyone with assets worth protecting that exceed Chapter 7 exemption limits.
People who received a Chapter 7 discharge within the past 4 years (Chapter 13 has a 2-year limit instead).

Chapter 13 has a high dismissal rate without legal help

The majority of pro se (self-filed) Chapter 13 cases are dismissed before completion, meaning the debtor loses the protection of the automatic stay without discharging any debt. Chapter 13 is procedurally complex — plan confirmation, creditor objections, and trustee negotiations require legal expertise. Consult a licensed bankruptcy attorney. This page is educational only; ClearValue Lending is not a legal or financial advisor.

Sources

Chapter 13 allows individuals with regular income to develop a plan to repay all or part of their debts while keeping their property. — U.S. Courts
A Chapter 13 bankruptcy can remain on your credit report for 7 years from the date of filing. — CFPB

Key takeaways

Chapter 13 = 3–5 year court-supervised repayment plan. No liquidation; you keep your home and car.
The automatic stay halts foreclosure the moment you file — valuable if you're behind on a mortgage.
Stays on credit report 7 years from filing — 3 years less than Chapter 7.
Requires regular income; best for homeowners or those with assets worth protecting.
Consult a bankruptcy attorney — pro se Chapter 13 cases have high dismissal rates.

Browse all answers
More answers to common questions about financing, banking, and credit.