Everything You Need to Know About Chapter 13 Bankruptcy

person reviewing and consolidating bills

If you’re feeling overwhelmed by debt and looking for a way to regain control of your finances, Chapter 13 bankruptcy might be the lifeline you need. Often referred to as a “wage earner’s plan,” Chapter 13 allows individuals with a regular income to develop a plan to repay all or part of their debts over time—typically three to five years.

In the next few sections, we’ll cover everything you need to know about Chapter 13 bankruptcy—from how it works, who qualifies, and its benefits, to what the process looks like and how we can help you make the most of it.

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy is a legal process that enables individuals to restructure their debt into a manageable repayment plan. Unlike Chapter 7 bankruptcy, which involves liquidating assets to pay off debts, Chapter 13 allows debtors to retain their property while catching up on past-due balances.

The key feature of Chapter 13 is the repayment plan, which is submitted to the bankruptcy court for approval. Under this plan, debtors make monthly payments to a trustee, who then distributes the funds to creditors according to the plan’s terms.

Who Qualifies for Chapter 13 Bankruptcy?

To be eligible for Chapter 13 bankruptcy, you must:

  • Have regular income (wages, Social Security, pensions, etc.)
  • Have secured debts (like mortgages or car loans) totaling less than $1,257,850
  • Have unsecured debts (like credit cards or medical bills) totaling less than $419,275
  • Not have filed for Chapter 13 in the last two years or Chapter 7 in the last four years

If you’re unsure whether you qualify, the team at Sirody Bankruptcy Center can provide a free consultation to review your financial situation and determine the right path forward.

Benefits of Filing Chapter 13

Chapter 13 offers several advantages for those seeking long-term debt relief:
1. Avoid Foreclosure and Repossession
One of the most powerful features of Chapter 13 is the ability to stop foreclosure proceedings. If you’re behind on mortgage payments, you can catch up through the repayment plan and keep your home. Similarly, if your vehicle is at risk of repossession, Chapter 13 can provide protection.
2. Consolidate Debt Into One Monthly Payment
Instead of juggling multiple bills and due dates, Chapter 13 consolidates your debt into a single monthly payment based on your income and expenses. This makes budgeting easier and reduces the stress of managing multiple creditors.
3. Protect Co-Debtors
Chapter 13 includes a co-debtor stay, which prevents creditors from pursuing your co-signers (e.g., a spouse or parent) during the repayment period.
4. Discharge Remaining Debt
At the end of your repayment plan, any remaining unsecured debt may be discharged, meaning you’re no longer legally responsible for paying it back.

The Chapter 13 Process: Step-by-Step

Filing for Chapter 13 bankruptcy involves several steps, but with the right legal guidance, the process can be straightforward and stress-free.
Step 1: Consultation with an Experienced Attorney
Your journey begins with a free consultation with a qualified bankruptcy attorney. They’ll review your financial history, debts, and income to determine your eligibility and best options.
Step 2: Preparation of the Petition
Next, your attorney will prepare a comprehensive bankruptcy petition that includes:

  • Schedules of assets and liabilities
  • Statement of financial affairs
  • Repayment plan proposal

Note: Accuracy is very critical here, and the team must ensure your documents are complete and filed correctly.
Step 3: Automatic Stay Takes Effect
Once filed, an automatic stay is issued by the court, immediately halting collection actions, lawsuits, wage garnishments, and foreclosure proceedings.
Step 4: Meeting of Creditors (341 Meeting)
Roughly a month after filing, you’ll attend a 341 meeting, where creditors can ask questions about your finances. Don’t worry—your attorney will be right by your side.
Step 5: Plan Confirmation
If there are no objections, the bankruptcy judge will confirm your repayment plan. Once confirmed, you’ll begin making monthly payments as outlined.
Step 6: Debt Repayment and Discharge
Over the next three to five years, you’ll make your scheduled payments. After completing the plan, remaining eligible debts are discharged, and you get a clean financial slate.

Common Misconceptions About Chapter 13

Let’s clear up some common myths that may be preventing you from exploring Chapter 13:

  • “I’ll lose all my assets.” False—Chapter 13 helps you keep your home, car, and other belongings while repaying debts.
  • “It ruins your credit forever.” Bankruptcy does impact your credit, but it’s often better than continuing to miss payments. Many people see credit improvements within a year of filing.
  • “Filing bankruptcy is shameful.” Not true—thousands of Americans use bankruptcy every year as a legal, responsible way to manage overwhelming debt.

Practical Tips for a Successful Chapter 13 Case

Here are some actionable tips to ensure your Chapter 13 case goes smoothly:
Stick to Your Budget
Your repayment plan is based on your disposable income, so track expenses carefully to avoid falling behind.
Communicate With Your Attorney
Life happens. If you lose your job, face medical emergencies, or struggle to make payments, contact your attorney immediately—they can help modify your plan if necessary.
Stay Current on New Debts
You must stay current on post-filing obligations like mortgage payments, taxes, and child support. Falling behind can derail your case.
Take the Required Financial Education Courses
Before your case is completed, you’ll need to complete a financial management course approved by the court. It’s typically online and affordable.

Why Choose Sirody Bankruptcy Center?

At Sirody Bankruptcy Center, we understand how stressful financial hardship can be. That’s why our team offers personalized guidance, expert legal representation, and compassionate support at every step of your bankruptcy journey.

With over 30 years of experience helping individuals and families throughout Maryland, we’ve built a reputation for delivering real results. Whether you’re looking to save your home, stop wage garnishments, or simply get freedom from crushing debt, we’ll offer a solution that fits your needs.

Our team also handles everything from preparing your petition to representing you in court, so you don’t have to go through this process alone.

Ready to Reclaim Your Future?

Chapter 13 bankruptcy can be the first step toward your financial stability, and the team at Sirody Bankruptcy Center is here to guide you every step of the way. If you’re struggling with debt and want to explore your options, don’t wait. Contact us today to steer your life back on track!