1. Assessing Eligibility before Filing
Regular income and qualifying debt levels are starting requirements. Household expenses, assets, tax filings, and prior cases also affect whether Chapter 13 is available and whether a repayment plan can succeed.
Individuals and Business Owners
Qualifying individuals, including sole proprietors, may file under Chapter 13. Corporations and LLCs cannot. A business owner’s personal filing does not place the company in bankruptcy or generally stop collection against it.
For owners with personal guarantees, an attorney separates personal obligations from company debts and checks income remaining after business expenses.
Debt Limits and Prior Cases
Section 109(e) applies separate limits to noncontingent, liquidated secured and unsecured debts. A disputed obligation may still count toward those limits.
Certain prior dismissals can temporarily bar filing. Recent dismissed cases may also limit the automatic stay, requiring a timely request to extend or impose it. Eligibility to file does not necessarily mean eligibility for a discharge.
2. Testing Repayment Feasibility
The court must find that the debtor can make the proposed payments. Section 1325 also requires good faith, proper creditor treatment, and other confirmation conditions. A documented budget should show how the debtor will meet plan obligations and continuing living expenses.
Records That Support the Budget
Pay statements, bank records, tax returns, and business reports establish income and expenses. Seasonal earnings or a recent job change may require additional explanation.
The review accounts for housing, transportation, insurance, support obligations, and necessary business spending. Omitting assets or understating expenses can undermine the plan.
Obligations That Shape Plan Payments
Projected disposable income is only part of the calculation. Other requirements may increase the amount needed.
| Obligation | Key Consideration |
|---|---|
| Mortgage arrears | Amount required to cure the default |
| Secured vehicle debt | Collateral value and treatment restrictions |
| Priority taxes or support | Required payment treatment |
| Unsecured claims | Disposable income and Chapter 7 liquidation value |
Plans commonly last three or five years, subject to statutory conditions and exceptions. A shorter term is not simply a matter of preference.
3. Reviewing Mortgage Arrears and Foreclosure Timing
Chapter 13 may allow a homeowner to cure arrears, but retaining the home also requires ongoing payments. Federal bankruptcy law governs the stay and plan; applicable state law affects foreclosure procedures, property rights, and the sale stage.
Arrears and Continuing Payments
Section 1322(b)(5) permits qualifying long-term mortgage defaults to be cured while regular payments continue. The budget must cover both. Local procedures determine whether payments go through the trustee or directly to the servicer.
Curing arrears generally does not permit reducing principal on a loan secured only by the debtor’s principal residence. Loan terms and statutory exceptions need separate review.
Sale Status and Stay Relief
An attorney checks sale notices and court orders before assessing available relief. Section 1322(c)(1) ties cure rights to a foreclosure sale under applicable nonbankruptcy law; filing after a sale may be too late.
A lender may also seek relief from the stay. Coordinated foreclosure defense examines the alleged default, payment history, and proposed cure.
4. Representation through Confirmation and Plan Changes
Representation can include preparing filings, responding to trustee requests, reviewing creditor claims, and addressing confirmation disputes. After confirmation, payment problems or income changes may require further action. The engagement should identify which proceedings and later services it covers.
Filing and Confirmation
An attorney prepares schedules and the plan and prepares the debtor for the § 341 meeting. Unless the court orders otherwise, § 1326(a) generally requires payments to start within 30 days after filing the plan or the order for relief, whichever occurs first.
Claim discrepancies, valuation disputes, and feasibility objections require supporting records. Contested hearings or adversary proceedings may involve additional bankruptcy litigation.
Practical Pitfalls during the Plan
Missed payments and inaccurate disclosures can lead to dismissal or other adverse orders. Retain payment records and report changes as required by the plan, court orders, and applicable rules.
Section 1329 permits certain modifications before payments finish. Reduced income may warrant reviewing modification, conversion, or dismissal. Each option has consequences for assets, debt treatment, and collection activity.
5. Frequently Asked Questions
Co-signers and discharge requirements raise questions beyond the debtor’s monthly payment. Their treatment depends on the debt involved and compliance with statutory conditions.
Does Chapter 13 Cover a Nonfiling Co-Signer?
Section 1301 provides a limited co-debtor stay for qualifying consumer debts, generally not business debts. Creditors may seek relief from that stay. Filing does not itself eliminate the co-signer’s obligation.
Does Completing Payments Automatically Produce a Discharge?
No. Section 1328 includes additional conditions, including required financial-management education and applicable support certifications. Some debts remain outside the discharge, and qualifying long-term mortgage obligations generally continue.
6. Reviewing Your Filing or Pending Case
Bring income records, debt statements, tax returns, foreclosure notices, and prior bankruptcy documents. For a pending case, include the plan, trustee notices, payment history, and creditor motions. An attorney can use these records to assess filing options, repayment problems, or the response needed before a hearing.
21 Jan, 2026
