How Chapter 13 Bankruptcy Works: A Legal Guide by Kamini Fox, PLLC
- Kamini Fox
- Mar 19
- 3 min read
If you’re struggling with debt but want to keep your home, car, and other assets, Chapter 13 bankruptcy may be the right solution for you. Unlike Chapter 7, which liquidates assets to pay creditors, Chapter 13 allows you to restructure your debts and make affordable payments over time.
At Kamini Fox, PLLC, we have over 20 years of experience helping clients navigate the complexities of bankruptcy law. This guide will explain how Chapter 13 works, its benefits, and whether it’s the right option for you.
What is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy, also known as a wage earner’s plan, allows individuals with regular income to create a 3 to 5-year repayment plan to pay back their debts. It provides a structured way to catch up on mortgage arrears, car loans, and unsecured debt while protecting assets from liquidation.
How the Chapter 13 Process Works
Step 1: Filing for Bankruptcy
To begin, you must file a petition with the bankruptcy court and submit required financial documents, including:
Income statements
Tax returns (last four years)
List of debts and assets
Monthly expenses
Step 2: The Automatic Stay
Once filed, Chapter 13 immediately stops foreclosure, repossession, wage garnishments, and creditor harassment through an automatic stay.
Step 3: Creating a Repayment Plan
The repayment plan must be approved by the court and typically includes:
Secured debts (mortgage, car loans): Paid in full over time
Unsecured debts (credit cards, medical bills): May be reduced or discharged after repayment plan completion
Step 4: Court Approval & Payments Begin
Once the court approves the plan, you must begin making payments to a Chapter 13 trustee, who distributes funds to creditors.
Step 5: Completing the Plan & Debt Discharge
After successfully making payments for 3 to 5 years, any remaining eligible debts may be discharged, giving you a fresh financial start.
Who Qualifies for Chapter 13 Bankruptcy?
To be eligible for Chapter 13, you must:
Have regular income to support a repayment plan.
Have secured and unsecured debt limits below the legal threshold.
Be up to date on tax filings.
Complete credit counseling before filing.
Pros and Cons of Chapter 13 Bankruptcy
Pros
✔ Stops foreclosure & repossession
✔ Allows you to keep your assets
✔ Consolidates debt into one manageable payment
✔ Potentially discharges some unsecured debt
Cons
❌ Takes 3-5 years to complete
❌ Requires strict budgeting & financial discipline
❌ Missing payments can result in case dismissal
Frequently Asked Questions
1. Will Chapter 13 stop foreclosure?
Yes! Filing Chapter 13 immediately stops foreclosure and allows you to catch up on missed mortgage payments.
2. Can I keep my car if I file for Chapter 13?
Yes. Chapter 13 allows you to restructure car loans and lower payments in some cases.
3. What happens if I miss a Chapter 13 payment?
Missed payments can lead to case dismissal or creditors resuming collection actions.
4. Can I include credit card debt in my repayment plan?
Yes. Most unsecured debts, including credit card balances, are included in your repayment plan and may be partially or fully discharged.
5. How long does Chapter 13 bankruptcy stay on my credit report?
Chapter 13 remains on your credit report for 7 years, but its impact lessens over time as you rebuild credit.
Contact Kamini Fox, PLLC for Chapter 13 Bankruptcy Guidance
If you're considering Chapter 13 bankruptcy, Kamini Fox, PLLC can help. We offer expert legal guidance to ensure you make the best financial decision. Contact us today for a free consultation at (516) 493-9920 or visit kfoxlaw.com.
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