Chapter 13
The three-to-five-year plan: catching up a mortgage, keeping a car, and what happens when life changes mid-plan.
- How Chapter 13 works: the three-to-five-year planChapter 13 is a court-supervised repayment plan lasting three to five years. You keep your property, make one monthly payment to a trustee based on what you can actually afford, and when the plan ends, remaining unsecured debt is discharged. The biggest myth is that you must repay everything; most plans repay only a fraction of unsecured debt.
- How much would my Chapter 13 payment be?There's no rate card. Your payment is built from your actual numbers: what you must pay through the plan (mortgage arrears, car, recent taxes, attorney fees) plus what your budget shows you can afford for everything else. Two households with identical debts can have very different payments. The way to a real number is a real budget.
- How Chapter 13 saves a house: curing mortgage arrearsChapter 13 stops a foreclosure the moment it's filed, even days before the sale, and then does what almost nothing else can: it forces the lender to accept the missed payments spread over three to five years while you resume regular payments. No lender approval needed. The catch is discipline: you must make both the plan payment and the ongoing mortgage payment, every month, to the end.
- Keeping your car in Chapter 13 (and what a cramdown is)Chapter 13 stops a repossession and lets you pay for the car through your plan. If you've owned the car loan for more than 910 days (about two and a half years), the plan can 'cram down' the loan: you pay the car's current value instead of the full balance, usually at a lower interest rate, and the rest of the loan becomes unsecured debt that's mostly discharged.
- What happens if I can't finish my Chapter 13 plan?You have options, and none of them is jail or automatic disaster. Depending on why the plan broke, you can modify the payments, convert the case to Chapter 7, ask for a hardship discharge, or dismiss and sometimes refile. The only truly bad move is going silent and letting the case fail by default. Plans bend; tell your attorney the moment life changes.
- Can I pay off my Chapter 13 plan early?Usually not by simply writing a check, and the reason surprises people: for most plans, paying 'the plan balance' early invites the trustee to argue your improved finances should raise what unsecured creditors receive, up to 100% of their claims. True early completion works mainly when you pay all allowed claims in full. The real questions behind this one, an inheritance arrived, income jumped, I want out, each have better answers than quiet prepayment.
- Chapter 13 when you're self-employedSelf-employed people file Chapter 13 successfully all the time; 'regular income' means reliably recurring, not W-2. The differences are workload, not eligibility: you'll document income with profit-and-loss statements instead of pay stubs, propose a payment sized for a fluctuating business, keep operating (the Code says so), and stay ruthlessly current on quarterly taxes, because new tax debt is the classic way self-employed plans die.
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