## Chapter 13 bankruptcy in New York **Chapter 13** — sometimes called "wage-earner bankruptcy" or "reorganization" — lets you keep your assets (including a house with a mortgage you've fallen behind on) while repaying creditors over a 3- or 5-year court-supervised plan. After the plan completes, remaining unsecured debts are discharged. ### Plan length is controlled by median income New York's median household income (4-person family, 2024 figure: about $130,000) is the threshold: - **Below median:** 3-year plan minimum - **At or above median:** 5-year plan required Median figures update every 6 months — confirm the current number with your bankruptcy attorney. ## Who Chapter 13 is for Chapter 13 is the right tool when: - **You're behind on a mortgage** and want to keep the house — Chapter 13 lets you cure arrears over 3-5 years - **You're behind on a car loan** — "cramdown" lets you reduce the loan to current car value if the loan is over 910 days old - **You make too much for Chapter 7** — failed the means test - **You have non-dischargeable priority debts** (recent taxes, child support arrears) you can pay over time - **You have non-exempt assets** you'd lose in Chapter 7 - **You filed Chapter 7 recently** (8-year wait between Chapter 7 discharges) - **You want to discharge debts that survived a prior Chapter 7** (Chapter 20 — Chapter 7 followed by Chapter 13) ## Eligibility limits - **Debt limits** — As of 2024, total debt under ~$2.75M (combined secured and unsecured) for cases filed after June 21, 2024 — Congress allowed the higher SBRA limits to sunset partially - **Regular income** required — wage earners, self-employed, business owners, retirees with pension/Social Security - **Tax returns filed** — must be current on the past 4 years - **Credit counseling** — required pre-filing certificate - **No prior dismissal** in past 180 days for cause ## How the plan works Your monthly plan payment goes to a Chapter 13 trustee, who distributes to creditors in priority order: 1. **Secured debts being cured** (mortgage arrears, car loans) 2. **Trustee fees** (typically 5-10% of plan payments) 3. **Priority unsecured** (recent taxes, domestic-support arrears) 4. **General unsecured** (credit cards, medical, signature loans) — receives whatever's left, often pennies on the dollar ## What discharges at the end After successful completion of the plan: - Most unsecured debt that wasn't paid in full is discharged - Some debts survive (student loans, recent taxes, domestic support, criminal restitution, fraud-based debts) - Secured debt is discharged only if the collateral is surrendered or the loan is fully cured Discharge is broader than Chapter 7 in some ways — Chapter 13 can discharge certain marital-property debts and certain criminal fines that Chapter 7 cannot. ## What can go wrong Most Chapter 13 cases that fail do so because: - **Debtor stops making plan payments** — plan dismissed, creditors come after you again - **Loss of income mid-plan** — plan modification possible but limited - **Failure to maintain post-petition payments** (mortgage, car, support) — relief from stay granted to creditors - **Failure to file annual income/tax certifications** - **New debt incurred without trustee approval** Only about 1/3 of Chapter 13 cases reach discharge — most are dismissed or converted. ## Costs - **Filing fee:** $313 (federal); installment payment allowed - **Attorney fees:** typically $3,500-$6,000 (mostly paid through the plan, not upfront) - **Credit counseling and debtor education:** ~$50 each - **Trustee fees:** 5-10% of plan payments (paid by the debtor, distributed to creditors) ## Chapter 7 vs Chapter 13 quick compare | | Chapter 7 | Chapter 13 | |---|---|---| | Length | 3-6 months | 3-5 years | | Income requirement | Must pass means test | Must have regular income | | Asset treatment | Non-exempt sold by trustee | Keep all assets | | Mortgage cure | No | Yes | | Frequency | 8-year wait | 2-year wait between discharges | | Co-debtor protection | No | Yes (limited) | | Discharge of fraud-based debt | No | No (similar exception) | ## What you should do Chapter 13 cases require ongoing trustee oversight for years — DIY is rarely realistic. New York bankruptcy attorneys typically charge flat fees that are mostly paid through the plan rather than upfront — making representation far more accessible than it sounds. Most offer free initial consultations to assess whether Chapter 7 or Chapter 13 is the right tool. --- *This guide is general information about federal bankruptcy law and New York-specific exemptions as of early 2026 and is not legal advice. Median income thresholds, debt limits, and procedural rules update every 1-3 years. Talk to a licensed New York bankruptcy attorney about your specific situation.*