Chapter 13 Bankruptcy

Eligibility, Debt Limits, and the Confirmation Standard

Chapter 13 is available to individuals (including sole proprietors) with regular income whose debts fall under the statutory limits set in §109(e), and who have completed the required pre-filing credit counseling (uscourts.gov). Because the plan must be funded from income, a filer must demonstrate the ability to make consistent payments. The confirmation standard requires that the plan be proposed in good faith, that it pass the best-interests-of-creditors test (unsecured creditors receive at least the Chapter 7 liquidation value of non-exempt assets), and — for above-median filers — that all projected disposable income over the five-year commitment period be devoted to the plan.

Priority Debts and Secured-Claim Treatment

Chapter 13 plans distribute payments by priority. Administrative claims and priority debts — including most recent taxes and domestic-support obligations — must generally be paid in full over the plan term (uscourts.gov). Secured claims you wish to keep current, like a mortgage in arrears, are cured through the plan. General unsecured creditors receive whatever remains, which may be only a fraction of what is owed. This structure is precisely why someone with a large priority tax debt or significant mortgage arrears often cannot use Chapter 7 effectively and turns to Chapter 13.

How the Student-Loan Adversary Proceeding Fits Inside a Chapter 13 Case

An adversary proceeding is a separate lawsuit filed within the bankruptcy to obtain a court determination that repaying student loans would be an undue hardship under §523(a)(8). It can be brought in a Chapter 13 case as readily as in Chapter 7. The November 2022 DOJ/ED guidance directs government attorneys to use a standardized attestation form to evaluate a borrower's income, expenses, and future circumstances, and to stipulate to discharge where the facts support it (justice.gov; current form at justice.gov/d9/2024-05/StudentLoanAttestationFillableForm.pdf). The reported outcome — full or partial discharge in approximately 98% of cases decided November 2022 through March 2024 (studentaid.gov) — reflects cases that proceeded under the new process and is not a guarantee for any individual. Federal loans require the AP; private loans are treated as ordinary unsecured debt and can be discharged through the plan without an undue-hardship showing (studentaid.gov; CFPB).