Who Can File for Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is designed for people with a regular income who want to keep their property while catching up on their outstanding debt. People who opt for this type of bankruptcy often have a history of missed payments on their debts and believe the best way to bring their debts current is through a court-supervised repayment plan.

In this article, we’ll explain how a Chapter 13 bankruptcy case works and how it differs from Chapter 7 bankruptcy. We will also discuss how a person qualifies for a Chapter 13 case and what happens once your bankruptcy case is complete.

If you’re considering filing for bankruptcy or are in the middle of a bankruptcy case, contact a local bankruptcy attorney. Your attorney will make sure that you follow the proper steps for a Chapter 13 bankruptcy and, if necessary, explain how to amend your petition to a Chapter 7 bankruptcy case.

Chapter 13 Bankruptcy Basics: How Does It Work?

A Chapter 13 bankruptcy is sometimes called a “reorganization” bankruptcy. Unlike a Chapter 7 bankruptcy, a Chapter 13 filing allows debtors to keep their property and pay their creditors under a court-approved monthly repayment plan.

Both types of bankruptcy are forms of judicial debt relief, but work in different ways. In a Chapter 7 bankruptcy, the court discharges all of your included debt. Once your Chapter 7 bankruptcy case is complete, you no longer owe money to your creditors.

With a Chapter 13 case, you settle your debts by meeting them in a monthly payment plan. This plan typically lasts anywhere from three to five years, depending on your income. Before your Chapter 13 trustee will approve your bankruptcy plan, they must confirm that it is feasible and acceptable to your creditors.

Your Repayment Plan and the Confirmation Hearing

If the trustee approves your plan, they will schedule a “confirmation hearing.” This is when your trustee presents the proposed plan to the judge and your creditors. The judge reviews the plan, and the creditors have the opportunity to object to it.

The hope is that the judge will approve (confirm), but there’s a chance they’ll order the trustee to make modifications. Depending on the creditors’ objections, the judge might dismiss your case. However, this is rare. The trustee knows what the bankruptcy courts expect and should be able to devise an acceptable repayment plan.

Once your trustee and the bankruptcy court approve your plan, you begin making payments to your creditors. If you don’t make your payments on time, you run the risk of the trustee dismissing your payment plan. If this happens, you will have to pay all past-due amounts to your creditors immediately, or they will resume collection activity.

Chapter 13 Eligibility Requirements: Quick Checklist

It can be difficult to decide which type of bankruptcy is best for your financial situation. If you owe a lot of unsecured debt and own little to no property, Chapter 7 is probably your best option. However, if you own property and want to keep it, you should consider a Chapter 13 bankruptcy.

It’s important to keep in mind that just because you want to file a Chapter 13, that doesn’t necessarily mean you’ll qualify for a reorganization bankruptcy. You must meet certain criteria to pursue a Chapter 13 bankruptcy case.

Some of the requirements for filing Chapter 13 include the following:

• You are an individual or married couple filing jointly with the IRS
• You are a regular wage earner
• Your unsecured debts are under $526,700
• Your secured debts are under $1,580,180
• You have not had a Chapter 13 discharge in the past two years
• You have not had a Chapter 7 discharge in the past four years
• You have not had a bankruptcy dismissed in the past 180 days
• You can complete credit counseling or a financial management course before filing
• You can produce tax filings for the past four years
• Your income is sufficient to fund a three- to five-year repayment plan
• You must pay the requisite filing fee

If you don’t meet these requirements, you may need to consider filing Chapter 7 instead.

Requirements for Chapter 13 Bankruptcy

Debtors must meet all the eligibility requirements of the U.S. Bankruptcy Code to file a Chapter 13 bankruptcy. Deciding to file for bankruptcy is not something you should take lightly. It’s a big decision that will impact the rest of your life.

Filing your Chapter 13 bankruptcy petition and paying the filing fee only to learn that you don’t qualify for this type of bankruptcy is not your best option. If you still have questions about qualifying for a reorganization bankruptcy, contact a local bankruptcy attorney before taking the next step.

You Must Be an Individual

Only individuals and people who file their taxes jointly can apply for Chapter 13 bankruptcy. This option is not available to corporations and limited liability companies (LLCs). Business entities can file for Chapter 11 bankruptcy reorganization instead.

This doesn’t mean that sole proprietors and members of partnerships don’t qualify for Chapter 13. They can file a Chapter 13 petition to reorganize their personal debts.

As far as businesses are concerned, the following types of business entities are barred from filing for Chapter 13:

• Corporations
• Limited liability companies (LLCs)
• Partnerships (as entities)
• Stockbrokers
• Commodity brokers

If you own a business and aren’t sure what your options are for bankruptcy, contact a local bankruptcy lawyer.

You Must Have Regular Income

Chapter 13 requires that filers have a regular income, which means they receive a predictable, recurring source of funds. The debtor’s income must be reliable enough to make the monthly payments under their three- to five-year repayment plan.

The Bankruptcy Code does not require that a debtor earn a minimum amount of income. The only requirement is that their income be sufficient to cover their living expenses and the proposed plan payments.

Regular income can come from many sources, including:

• Wages or salary
• Spouse’s income, whether the spouse is filing joint bankruptcy or not
• Self-employment income
• Social Security benefits
• Unemployment benefits
• Pension or retirement income
• Disability benefits
• Rental income from investment properties
• Alimony or child support received
• Regular commission income
• Consistent gig economy earnings

Your income must be predictable and ongoing for the duration of your repayment plan. One-time windfalls (inheritance, lawsuit settlement) do not constitute regular income under the federal bankruptcy laws.

Your income doesn’t have to be the same amount every month. Seasonal workers and self-employed individuals with fluctuating income can still qualify for Chapter 13 if they can show an average income over time.

Your Debts Must Be Under the Federal Maximum

Chapter 13 requirements impose a limit on the amount of a filer‘s debt. This is the case for both secured and unsecured debt. Unsecured debt includes money you owe for non-collateralized debts. For example, medical bills and credit card bills are unsecured debt, as is a personal loan that’s not attached to collateral.

A secured debt is debt secured by personal or real property as collateral. The most common types of secured debt include mortgages and car loans. If you fail to repay these debts, the creditor can repossess the collateral. For instance, if you don’t pay your mortgage, your loan will go into foreclosure, and the bank can seize your home.

The federal bankruptcy laws limit how much you can owe in unsecured and secured debts. The government adjusts these limits every three years to account for inflation.

Under the 2026 limits, a Chapter 13 debtor’s unsecured debts cannot exceed $526,700. Your secured debts cannot exceed $1,580,125. When you meet with your bankruptcy attorney, ask them to explain the current debt limits to determine if Chapter 13 bankruptcy is an option for you.

You Have No Recent Bankruptcies

You cannot file for Chapter 13 bankruptcy if you’ve already done so within the last two years. This is also true for people who have filed a Chapter 7 bankruptcy case within the last four years. These rules prevent debtors from abusing the bankruptcy system and ensure that debtors make a good-faith effort to repay their creditors before seeking bankruptcy relief again.

There is a possible exemption to this rule. If your previous Chapter 13 plan paid off 100% of your unsecured debt, or at least 70% in good faith, the court may waive the above waiting periods.

You Have No Recent Bankruptcy Dismissals

In general, you cannot file a bankruptcy petition for at least 180 days after the bankruptcy court dismisses your bankruptcy case. This rule applies if the judge dismissed your case for either of the following reasons:

• A willful violation of a court order or failure to appear before the court
• You requested that the court dismiss your case after a creditor asked the court to lift an automatic stay

If the court dismissed your case for other reasons, such as not qualifying or for making an honest mistake, you may be able to file again immediately.

Uncertain of your ability to file? Consider speaking with a bankruptcy attorney for legal advice.

You Have Fulfilled the Credit Counseling Requirement

You must complete a court-approved credit counseling course within 180 days before you file for Chapter 13. You will receive a certificate from the course proving you completed the class. The credit counseling agency will also help you create your debt management plan.

You must include both a copy of the certificate and the proposed plan with your bankruptcy petition. If you fail to attach these documents with your petition, the court will give you 15 days to submit this information.

You must meet the following credit counseling requirements before filing for Chapter 13:

• You must complete the course within 180 days of your petition
• You must use an approved credit counseling agency (check the U.S. Trustee’s website for approved providers)

Most credit counseling sessions last about 60-90 minutes, and you can complete the sessions online, by phone, or in person. The cost of these sessions is typically between $25 and $50. Once you complete the course, you will receive your Certificate of Completion.

In addition to your credit counseling session, you must also meet two other requirements:

• Pre-filing credit counseling: You must complete this before your bankruptcy filing
• Debtor education course: This is required before you receive your discharge, and you usually take this course near the end of your repayment plan

Don’t confuse these two requirements, as both are mandatory. If you fail to submit proof that you completed these courses, the court will dismiss your bankruptcy petition.

You Have Filed Your Income Tax Returns

To qualify for Chapter 13, you must submit copies of your tax returns for the last four years. This includes both state and federal income tax returns. You must give your bankruptcy trustee a copy of your tax returns at least seven days before the first meeting of creditors.

If you haven’t filed taxes for the past four years, you can’t file your bankruptcy petition. You must file all missing returns before filing for bankruptcy. This doesn’t mean that you have to pay your taxes for the last four years. You just have to show that you filed them.

Your Income Must Support Your Repayment Plan

The purpose of a Chapter 13 payment plan is to let you pay off your debts while still having enough money to pay your bills. The court and bankruptcy trustee will review your plan and disposable income to ensure you’ll have enough money to live.

Your income must cover your living expenses and mandatory payments to creditors. There must be enough disposable income to fund your repayment plan. The trustee also receives a commission based on a percentage of the plan payments (typically 3-10% depending on your district). You must earn enough to pay this fee as well.

To calculate your disposable income, the trustee starts with your total monthly income from all sources. They then subtract the following:

• Reasonable and necessary monthly expenses (housing, food, transportation, insurance, etc.)
• Payments on secured debts (mortgage payments, car loan)
• Required priority debt payments (child support, recent taxes)

This provides them with the disposable income total available for your Chapter 13 plan.

Your repayment plan will earmark your disposable income to pay unsecured creditors over three to five years. If you have little or no disposable income, you may not be able to fund a Chapter 13 plan and should consider Chapter 7 instead.

Should I File Chapter 13 or Chapter 7?

Deciding which type of bankruptcy to file is rarely easy. It depends on your income, total debt, whether you have property, and how much of your debt will be dischargeable in a Chapter 7 bankruptcy case.

You should consider filing for Chapter 13 if the following statements are true:

• You want to keep your home and catch up on your mortgage
• You have non-exempt assets to protect
• Your income is too high to pass the Chapter 7 “means test”

You should pursue a Chapter 7 bankruptcy instead of a Chapter 13 in the following situations:

• You have little income and few assets
• You want a quick fresh start
• You qualify under the means test

Regardless of which option is better, bankruptcy should always be a last resort.

Who Cannot File Chapter 13?

Having the bankruptcy court dismiss your Chapter 13 bankruptcy case can be frustrating. Take the time to make sure filing a Chapter 13 petition is permitted, or if you should convert it to a Chapter 7 or Chapter 11 bankruptcy instead.

Under the U.S. Bankruptcy Code, the following entities cannot file for Chapter 13:

• Corporations, LLCs, partnerships (must file a Chapter 11 bankruptcy)
• Stockbrokers and commodity brokers
• People whose total debts exceed the debt limits
• People with recent bankruptcies
• Individuals who don’t have a regular income
• Those who can’t complete credit counseling
• People who haven’t filed their tax returns

If you’re on this list, any attempt to file Chapter 13 is likely to fail. Instead, consider contacting a local bankruptcy attorney to discuss your options.

Seek Legal Advice From a Bankruptcy Attorney

Bankruptcy laws can be confusing and frustrating. It’s not easy to know which type of bankruptcy is best for your financial situation. If you’re not sure, there’s no shame in speaking with a bankruptcy attorney to ensure you make the correct choice. It’s a good idea to do so if any of the following apply to your current situation:

• You’re close to the debt limits and unsure if you qualify
• You have complex income (self-employment, irregular pay)
• You want to keep your home and catch up on mortgage arrears
• You’re trying to decide between Chapter 7 and Chapter 13
• You had a previous bankruptcy or dismissal
• You have both business and personal debts
• Your tax returns are incomplete or missing

Before making any decision about bankruptcy, contact a bankruptcy attorney today and get help with your case.