What Should Filers Know About Chapter 13 Bankruptcy?

If you're planning to talk with an attorney at a Chapter 13 bankruptcy law group, it's a good idea to understand how the filing process is likely to work. A Chapter 13 bankruptcy lawyer will want their clients to know these 5 things about the system.

Restructuring vs. Liquidation

The central idea of Chapter 13 is restructuring a filer's debts. If someone has a reasonable income but an unreasonable debt load, they have the right to ask the court to restructure what they owe. The objective is to set up a court-ordered payment plan that fits within the financial means of the filer. For example, the court might cut a person's debt load by 40 percent. They would then have to make payments on the remaining 60 percent within an agreed-upon period. Notably, the court doesn't liquidate a filer's personal assets like they would in Chapter 7 bankruptcy.

Payment Timelines

Generally, courts order repayment schedules of three years. There are scenarios where the judge may allow a repayment timeline of five years, however. The decision is at the judge's discretion, although the court will hear any arguments from the debtor and their creditors about why the timeline should be three versus five years. If you're planning to ask for a longer timeline, it's wise to have a Chapter 13 bankruptcy law firm assemble your petition.


Chapter 13 is almost exclusively for individuals and couples with personal debts. The only exception is if someone has accumulated business debts while operating a sole proprietorship. If you're unsure whether your business debts might qualify for Chapter 13, the rule of thumb is that a sole property was never formally chartered as an LLC, S-Corp, or other type of legally recognized company.

Proposing a Plan

The burden of proposing a restructured payment plan falls on the petitioner. This is one of many reasons why filters frequently will hire a Chapter 13 bankruptcy law firm to represent them. A Chapter 13 bankruptcy attorney can help a petitioner determine what might be a reasonable request. The judge has significant power to accept, reject, or modify the plan, so a Chapter 13 bankruptcy law group will try hard to not propose a plan that seems ridiculous.

Hearings and Court Decisions

Depending on the complexity of the case and whether any creditors have objections, the judge may need to schedule hearings. Usually, this process takes no more than a few months unless there are complicated legal objections. Once the court enters a decision, they will make arrangements so you can begin paying what you owe based on the accepted plan.

For more information, reach out to a lawyer such as Ricardo B. Casas to learn more.