How Does Chapter 13 Bankruptcy Work?

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A Chapter 13 case begins by filing a bankruptcy petition and a proposed repayment plan with the Bankruptcy Court. The plan sets out how creditors will be paid and is reviewed by the Chapter 13 trustee and ultimately approved—or “confirmed”—by the Court if it satisfies the requirements of the Bankruptcy Code.

Rather than making separate payments to every creditor included in the plan, the debtor makes a regular Chapter 13 payment to the trustee. The trustee then distributes those funds to creditors according to the confirmed plan.

The plan is not simply based on whatever amount the debtor would prefer to pay. The required payment can depend on several factors, including:

• mortgage or vehicle arrears that need to be cured;
• secured debts being paid through the plan;
• priority tax or support obligations;
• household income and reasonable expenses;
• the amount of disposable income available;
• the value of nonexempt property; and
• the treatment required for unsecured creditors.

Our job is to determine how those rules apply to your actual financial situation and propose a plan that both satisfies bankruptcy law and is feasible for you to complete.

What Can Chapter 13 Do for You?

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Depending on the circumstances, Chapter 13 can be used to:

• stop a scheduled foreclosure before the sale occurs;
• catch up on mortgage arrears over time;
• stop an active wage garnishment;
• protect a vehicle from repossession;
• recover some vehicles repossessed shortly before filing;
• restructure the repayment of certain vehicle loans;
• pay priority tax debt over time;
• address past-due child support or alimony;
• protect property that could be exposed to a Chapter 7 trustee;
• stop most creditor lawsuits and collection activity; and
• discharge qualifying unsecured debt after successful completion of the plan.

That flexibility is the main reason Chapter 13 can solve financial problems that Chapter 7 cannot.

How Is the Chapter 13 Plan Payment Calculated?

There is no single percentage or formula that applies to every case.

A debtor’s Chapter 13 payment has to be sufficient to fund everything the Bankruptcy Code and the proposed plan require. That may include attorney fees, trustee fees, mortgage arrears, vehicle claims, priority taxes, domestic support arrears, and payments to unsecured creditors.

Income and expenses also matter. If creditors are not being paid in full, the debtor may be required to devote projected disposable income to the plan for the applicable commitment period. Unsecured creditors must also receive at least as much as they would receive if the debtor’s nonexempt property were liquidated in Chapter 7.

In practice, this means two people with the same amount of credit-card debt can have very different Chapter 13 payments because their income, property, mortgage arrears, vehicles, taxes, and household expenses are different.

How Long Does Chapter 13 Last?

Most Chapter 13 plans last three to five years.

If the debtor’s current monthly income is below the applicable state median, the applicable commitment period is generally three years, although a longer plan may be proposed for cause. If income is above median, the plan generally runs five years when unsecured creditors are not being paid in full. A Chapter 13 plan cannot extend beyond five years.

That is why it is more accurate to say Chapter 13 usually lasts three to five years rather than saying every case must last at least 36 months.

How Much Do Unsecured Creditors Get Paid?

There is no rule requiring every Chapter 13 debtor to repay all debts in full.

Credit cards, medical bills, personal loans, and other general unsecured debts may receive anywhere from a relatively small percentage to 100%, depending on the case.

Among other requirements, unsecured creditors generally must receive:

1. at least as much as they would receive in a hypothetical Chapter 7 liquidation; and
2. the amount required by the debtor’s projected disposable income when the applicable provisions of the Bankruptcy Code require it.

Some debtors therefore complete Chapter 13 after paying only a portion of their ordinary unsecured debts, with the remaining qualifying balances discharged.

Can Chapter 13 Stop Foreclosure?

Yes. A Chapter 13 filing ordinarily stops a pending foreclosure immediately if the case is filed before the foreclosure sale occurs.

Chapter 13 then allows the debtor to cure the pre-bankruptcy mortgage arrears over time while maintaining the regular mortgage payments that come due after filing. That ability to save a home from foreclosure is one of Chapter 13’s most important protections.

The debtor must still be able to afford the mortgage going forward. Chapter 13 can provide time to cure the old default, but it does not eliminate the need to make ongoing mortgage payments.

What Happens to a Car Loan in Chapter 13?

Chapter 13 can provide much more flexibility with a financed vehicle than Chapter 7.

A debtor who is behind on payments can often keep the vehicle by providing for the lender through the Chapter 13 plan. Depending on the age of the loan and other circumstances, the plan may also change the interest rate or the way the secured claim is paid.

If a vehicle was repossessed shortly before filing, recovery may still be possible. In our Richmond-area practice, lenders frequently return repossessed vehicles when the debtor proposes to retain the vehicle and pay the lender through the Chapter 13 plan, although the lender may require proof of insurance, a filed plan, and other information before releasing it.

If the lender refuses to return the vehicle voluntarily, further court action may sometimes be required.

How Does Chapter 13 Handle Taxes and Support Obligations?

Chapter 13 can be especially useful for debts that cannot simply be discharged.

Certain priority tax debts generally must be paid in full through the plan, but Chapter 13 can provide up to five years to make those required payments. Older qualifying tax debt may sometimes be treated differently and may be dischargeable.

Past-due child support and alimony can also be addressed through Chapter 13, although ongoing domestic support obligations must continue to be paid after filing. Failure to remain current on post-petition support can jeopardize the bankruptcy case.

This ability to deal with nondischargeable obligations over time is often one of the strongest reasons to choose Chapter 13 instead of Chapter 7.

Can You Keep Your Property in Chapter 13?

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Yes. Unlike Chapter 7, Chapter 13 does not involve a Chapter 7 trustee taking and selling nonexempt property.

That makes Chapter 13 particularly useful for someone who has substantial equity in a home, valuable vehicles or other property, or another asset that would create risk in Chapter 7.

The value of that property can still affect the Chapter 13 plan. Under the liquidation test, unsecured creditors generally must receive at least as much through Chapter 13 as they would have received if the debtor’s nonexempt property had been liquidated in Chapter 7.

So Chapter 13 lets you keep the property, but the equity may affect how much must be paid through the plan.

Who Is Eligible for Chapter 13?

Chapter 13 is available to individuals—including self-employed individuals and people operating unincorporated businesses—who have regular income and satisfy the applicable eligibility requirements. Corporations and LLCs cannot themselves file Chapter 13.

As of September 2026, the currently effective debt limits are:

• less than $526,700 in noncontingent, liquidated unsecured debt; and
• less than $1,580,125 in noncontingent, liquidated secured debt.

We already know Congress is considering legislation that would replace these separate limits with a $2.75 million aggregate limit. Since that change is not yet effective, I would put the current figures on the page now and replace this short section as soon as the new law takes effect.

Eligibility can also be affected by certain recent bankruptcy dismissals and other filing-history issues.

When Do Chapter 13 Payments Begin?

Plan payments generally begin within 30 days after the bankruptcy case is filed, even though the plan has not yet been confirmed by the Court.

That sometimes surprises clients. You do not wait until the confirmation hearing several months later to begin paying.

If ongoing mortgage, rent, support, or other payments are required outside the plan, those obligations also need to remain current after filing.

What Happens at the Chapter 13 Meeting of Creditors?

The Chapter 13 trustee conducts a meeting of creditors—commonly called the 341 meeting—generally several weeks after filing.

The debtor is placed under oath and answers questions concerning the bankruptcy schedules, income, expenses, assets, debts, tax returns, and proposed Chapter 13 plan.

Despite the name, creditors rarely appear in routine consumer cases. The trustee’s office is usually the main participant.

The trustee is looking closely at whether the information filed with the Court is accurate and whether the proposed plan satisfies the requirements of Chapter 13 and is financially feasible.

What Is Chapter 13 Confirmation?

“Confirmation” means the Bankruptcy Court has approved the Chapter 13 plan.

Before confirmation, the trustee and creditors have an opportunity to review the plan and object if they believe it does not comply with bankruptcy law. Issues may need to be resolved through amended schedules, additional documents, changes to the plan, or agreements with creditors.

Once the plan is confirmed, its terms generally govern how the debts included in the case will be treated.

Confirmation is an important milestone, but the case is not finished. The debtor must continue making all required payments and comply with the plan for the remainder of the case.

What Do You Have to Do During a Chapter 13 Case?

Chapter 13 lasts for several years, so successful completion requires ongoing compliance.

Depending on the case, that generally includes:

• making every required Chapter 13 plan payment;
• making ongoing mortgage payments when applicable;
• remaining current on post-petition child support or alimony;
• filing required tax returns;
• providing tax returns and other information requested during the case;
• maintaining required insurance on vehicles and real estate;
• notifying your attorney about significant financial changes; and
• obtaining court or trustee approval when required before certain major financial transactions.

Do not assume that selling property, refinancing a home, taking out a major loan, or making other significant financial moves during Chapter 13 can be done without addressing the bankruptcy case first.

What Happens If Your Income Changes During Chapter 13?

Life does not stop during a three-to-five-year bankruptcy case.

People change jobs, receive raises, lose overtime, become unemployed, experience medical issues, get married or divorced, and face other significant changes.

A material change in income or expenses may affect the feasibility of the existing Chapter 13 plan and sometimes requires a modification.

If your financial circumstances change substantially, tell us promptly. It is much easier to address a developing problem before several plan payments have been missed.

What Happens If You Fall Behind on Chapter 13 Payments?

Missing a payment does not necessarily mean the case immediately ends, but unresolved payment defaults can lead the Chapter 13 trustee to seek dismissal of the case.

Depending on the circumstances, there may be options to cure the delinquency, modify the plan, or otherwise resolve the problem.

The key is communication. If you know you cannot make a required payment, contacting your attorney early gives us more opportunity to evaluate possible solutions.

What Happens When You Finish Chapter 13?

After completing the required Chapter 13 plan payments and satisfying the other statutory requirements, an eligible debtor receives a Chapter 13 discharge.

The discharge eliminates personal liability for qualifying debts provided for by the plan. Some debts remain nondischargeable, including domestic support obligations, certain taxes, most qualifying educational loans, and other debts specifically excluded by the Bankruptcy Code.

Before discharge, the debtor must also complete the required financial-management course and satisfy applicable certification requirements concerning domestic support obligations.

For many debtors, the end result is that the mortgage is current, vehicle and priority debts have been addressed, collection activity is over, and qualifying unsecured debt has been discharged.

Chapter 7 vs. Chapter 13

Chapter 7 and Chapter 13 both provide bankruptcy protection, but they solve different problems.

Chapter 7 is usually faster and is often the better option when someone qualifies, can protect all of the property they want to keep, and primarily needs to eliminate dischargeable unsecured debt.

Chapter 13 is often the better tool when someone needs to:

• save a home from foreclosure;
• catch up on a secured debt;
• recover or protect a vehicle;
• pay taxes or support arrears over time;
• protect property that would be exposed in Chapter 7; or
• otherwise reorganize obligations through a structured repayment plan.

The best chapter is not necessarily the one with the lowest payment or shortest duration. It is the one that actually solves the debtor’s financial problems while protecting the things that matter.

Talk to a Richmond Chapter 13 Bankruptcy Attorney

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If you are considering Chapter 13 bankruptcy in Virginia, the important question is not simply whether you can file. It is whether Chapter 13 can be structured in a way that accomplishes your goals and produces a plan you can successfully complete.

Kane & Papa has represented individuals in Chapter 13 cases throughout the Richmond area for more than 30 years. We review your income, expenses, property, mortgage or vehicle arrears, tax and support obligations, unsecured debt, and other circumstances before recommending a plan.

If you are facing foreclosure, wage garnishment, repossession, tax collection, support arrears, or other overwhelming debt, contact us to discuss whether Chapter 13 can provide a workable path forward.