If you have fallen behind on your mortgage and your lender has scheduled a foreclosure sale, filing for Chapter 13 bankruptcy can stop that sale and give you years to catch up.
More households are taking that step: total U.S. bankruptcy filings rose 12% in the first half of 2026, and more than 215,000 Chapter 13 cases were filed in the 12 months ending June 30, according to the federal courts.
Congress has also just passed a bill that would let more people with large debts qualify.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a court-supervised repayment plan that lets you keep your property while you pay back all or part of your debts over three to five years.
It is open only to individuals with steady income, which is why the federal courts also call it a wage earner's plan.
Instead of paying most of your creditors separately, you make one monthly payment to a trustee, a neutral official who collects your payments and divides them among your creditors, the lenders and companies you owe.
When you complete the plan, the court grants a discharge, an order that permanently cancels most of the qualifying debt you did not repay.
Why People Choose Chapter 13
Stop a Foreclosure
Filing triggers the automatic stay, a legal freeze that generally halts collection calls, lawsuits, wage garnishments, and foreclosures the moment your case is filed.
You can then repay the missed mortgage payments over the life of the plan, as long as you also make every regular payment that comes due after you file.
Lower Your Car Payment
Chapter 13 can stretch secured debts, meaning loans backed by property the lender can take back, such as a car loan, across the plan, which may shrink the monthly payment.
If you bought the car within about two and a half years of filing, you generally must repay the full balance rather than just what the car is worth today.
Protect a Co-Signer
If a relative co-signed a personal or household loan, a special Chapter 13 rule generally stops that creditor from pursuing the co-signer while your case is open.
Keep Property Chapter 7 Could Take
In a Chapter 7 case, a trustee can sell property that isn't covered by your state's exemptions, the legal limits on what you are allowed to keep.
Chapter 13 lets you keep that property, as long as your plan pays creditors at least as much as its sale would have.
How Does Chapter 13 Work?
Because the rules are complex, the federal courts urge filers to get advice from a bankruptcy attorney before starting.
Complete Credit Counseling
Within 180 days before filing, you must complete a credit counseling session with an agency approved by the U.S. Trustee Program, the Justice Department office that oversees bankruptcy cases.
File Your Petition and Plan
You file a petition with your local bankruptcy court listing your debts, income, property, and expenses, and pay $313 in court fees, which the court can let you pay in installments.
Your proposed repayment plan is due with the petition or within 14 days.
Start Paying the Trustee
Your first plan payment is due within 30 days of filing, even before a judge has approved the plan.
Answer Questions and Get the Plan Confirmed
Between 21 and 50 days after you file, the trustee and any creditors who attend can question you under oath about your finances and your plan.
Within 45 days after that meeting, a judge decides at a confirmation hearing whether the plan is realistic and legal, and if it is rejected, you can usually file a revised version.
Finish the Plan and Receive a Discharge
Once you make every payment and complete a financial management course, the court discharges the remaining eligible debts covered by the plan.
How Much Will You Repay?
Your plan payment is built around your disposable income, the money left each month after reasonable living expenses for you and your dependents.
If your household income is below the median for a family your size in your state, the plan generally lasts three years, and if it is above, five years.
Some debts must be paid in full through the plan, including most taxes and any missed payments on a home you want to keep.
Unsecured debts, which have no property attached, such as credit cards and medical bills, often get only a portion, as long as those creditors receive at least what they would have gotten in a Chapter 7 case.
Picture a homeowner who missed six $1,500 mortgage payments during a medical leave, leaving $9,000 past due, and who also owes $28,000 on credit cards and medical bills.
The household earns above the state median, so the plan runs 60 months, and after necessary expenses the budget leaves $500 a month in disposable income.
Over five years, that adds up to $30,000 paid to the trustee.
About $9,000 catches up the mortgage and about $3,000 covers the trustee's fee and remaining legal costs, leaving $18,000 for the card and medical creditors, or roughly 64 cents on the dollar.
Once the final payment clears, the remaining $10,000 of card and medical debt is discharged, and the homeowner keeps the house, as long as the regular $1,500 payments stayed current the whole time.
Who Qualifies for Chapter 13?
You must be an individual, not a corporation or partnership, although people who run a business in their own name can file.
Your debts must fall below two limits: less than $526,700 in unsecured debt and less than $1,580,125 in secured debt, amounts that are adjusted for inflation every three years.
That may soon change, because Congress has passed the Bankruptcy Threshold Adjustment Act, which would replace both caps with a single $2.75 million limit for cases filed after it becomes law.
As of early October 2026, the bill was awaiting the president's signature.
You also can't get a Chapter 13 discharge if you received a discharge in a Chapter 7 case filed within the past four years or a Chapter 13 case filed within the past two.
How Is Chapter 13 Different From Chapter 7?
Chapter 7, often called liquidation, is the faster and more common type of personal bankruptcy: a trustee sells property your state does not protect, pays creditors with the proceeds, and most remaining debts are wiped out.
In 2025, the typical Chapter 7 consumer case closed in about 109 days, federal court data shows, compared with three to five years for a Chapter 13 plan.
Chapter 7 also requires passing a means test, which compares your income with your state's median, so higher earners who don't pass often file Chapter 13 instead.
Does Chapter 13 Mean Losing Everything?
Many people avoid bankruptcy because they assume it means handing over their house, car, and savings.
Chapter 13 is built for the opposite outcome: you generally keep your property and pay creditors out of future income instead.
The fair version of that worry is that you give up flexibility, since your disposable income goes to the plan for years and you generally cannot take on new debt, such as a car loan, without the trustee's approval.
What Chapter 13 Cannot Do
Some debts survive a completed plan unless they were paid in full through it, including child support, alimony, most student loans, certain taxes, criminal fines, and debts for injuries caused by driving drunk or high.
Your mortgage itself stays in place, since Chapter 13 catches up missed payments rather than erasing the loan.
Chapter 13 also cannot reverse a foreclosure sale that was completed before you filed.
What If You Can't Keep Up With Payments?
In 2025, only 45% of Chapter 13 consumer cases that closed ended with a discharge after a completed plan, according to the federal courts, and missed plan payments were the reason given in half of all dismissals.
A dismissal ends the automatic stay and lets creditors resume collecting everything you still owe, so it helps to know your options before it gets that far.
Modify the Plan
You can ask the court to change your plan, for example by lowering payments after a pay cut, and about a quarter of plans completed in 2025 had been modified at least once.
Ask for a Hardship Discharge
If a serious illness or other event beyond your control makes finishing impossible, the court can grant a narrower discharge, as long as creditors have already received at least what Chapter 7 would have paid them.
Convert to Chapter 7
You can switch your case to Chapter 7, which may wipe out remaining unsecured debt if you qualify, but it exposes any unprotected property to sale.
How Chapter 13 Affects Your Credit
A Chapter 13 filing stays on your credit reports for seven years from the filing date, compared with 10 years for Chapter 7, according to Experian.
Because many plans last five years, the record can disappear just two years after you finish.
Is Chapter 13 the Right Move?
Chapter 13 tends to fit best when you have steady income and a home or car you are behind on and want to keep.
If your trouble is mostly credit cards, personal loans, and medical bills, and nothing is headed to foreclosure, debt settlement is another path, in which a company negotiates with creditors to accept less than you owe.
Accredited Debt Relief offers a free consultation to review whether your unsecured debts qualify for its program, and it charges no fees until it settles a debt.
Settlement has real costs of its own: it cannot stop a foreclosure, you typically stop paying creditors while savings build, your credit takes a hit, creditors can still sue, and forgiven debt can count as taxable income.
Whichever way you lean, the credit counseling required before bankruptcy doubles as a second opinion on your options, and if your household income is under 150% of the federal poverty level, approved agencies must presume you qualify for a fee waiver or reduction.
