№ PADUKY
Marcus Herbert
BankruptcyReal Estate
- City
- Paducah
Bankruptcy · Sub-Practice
Chapter 13 Bankruptcy
Chapter 13 lets you keep your home and catch up on missed payments — while discharging what you can't pay.
§ Overview
What your case actually involves.
Chapter 13 is the bankruptcy chapter for people with regular income who want to keep secured assets — especially their home — while reorganizing debts through a 3–5 year repayment plan.
Unlike Chapter 7, which liquidates assets to pay creditors, Chapter 13 allows debtors to keep all their property and repay a portion of their debts over a court-approved 3–5 year plan. The plan must propose to pay at least what creditors would receive in a Chapter 7 liquidation. Priority debts (taxes, domestic support obligations) must be paid in full; secured debts (mortgage arrears, car loans) can be restructured; and unsecured debts (credit cards, medical bills) typically receive pennies on the dollar or nothing, with any remaining balance discharged at the end of the plan. Chapter 13 is particularly powerful for homeowners facing foreclosure — the automatic stay stops foreclosure proceedings immediately, and the repayment plan can cure mortgage arrears over time. It is also the only bankruptcy chapter that can discharge certain debts that Chapter 7 cannot.
§ Protections and benefits
- ▸Stop foreclosure — the automatic stay halts foreclosure proceedings at any stage
- ▸Cure mortgage arrears — spread missed mortgage payments over 3–5 years through the plan
- ▸Strip second mortgage — in some cases, eliminate a wholly unsecured junior mortgage
- ▸Reduce car loan balance — "cram down" the balance to the vehicle's current value if older than 910 days
- ▸Discharge non-priority unsecured debt remaining after plan completion
- ▸Keep all property — unlike Chapter 7, no asset liquidation; everything is preserved
§ The process, step by step
- ›Credit counseling — required briefing from approved agency within 180 days before filing
- ›Filing the petition and proposed repayment plan — detailing income, expenses, and payment terms
- ›Automatic stay — immediately stops foreclosures, repossessions, and collection activity
- ›Plan confirmation hearing — court approves the plan, usually within 45 days of filing
- ›Monthly plan payments — made to the trustee who distributes to creditors for 36–60 months
- ›Discharge — remaining qualifying debts eliminated upon successful plan completion
“The single most powerful use of Chapter 13 is foreclosure defense. Many homeowners who are 6–18 months behind on their mortgage believe they have no options. Chapter 13 stops the foreclosure the moment it's filed — even the day of the sheriff's sale — and gives the homeowner 3–5 years to catch up on arrears through the plan while continuing to make current mortgage payments. Lenders cannot refuse to accept plan payments. The homeowner who files the day before the foreclosure sale is in the same legal position as one who filed months earlier — the automatic stay applies identically. For homeowners who want to keep their house, this is the most important tool in bankruptcy law.”
§ What to look for in an attorney
- 01Experience with Chapter 13 plan drafting — a well-structured plan is the core of the case
- 02Foreclosure defense experience — many Chapter 13 filers face imminent foreclosure
- 03Lien stripping expertise — second mortgage elimination requires specific motion practice
- 04Cramdown experience for vehicle loan reduction
- 05Understanding of which debts can only be discharged through Chapter 13, not Chapter 7
- 06Ability to modify the plan if income or expenses change during the 3–5 year period
⚖️
§ Ask these at your consultation
6 questions that matter
- ❓Will Chapter 13 stop my foreclosure — and can I cure the arrears through the plan?
- 💰What will my monthly plan payment be, and can I realistically afford it?
- 🔍Can my second mortgage or home equity loan be stripped in my case?
- 📋Which of my debts must be paid in full through the plan, and which can be reduced?
- 💬What happens if I miss a plan payment — can the plan be modified?
- 💡How does Chapter 13 compare to Chapter 7 for my specific situation?
§ Frequently asked questions
Common questions about chapter 13 bankruptcy.
Q 01
What happens if I can't keep up with my Chapter 13 plan payments?
You have several options. You can modify the plan to reduce payments if your income has decreased or expenses have increased. You can request a hardship discharge if circumstances are truly beyond your control. You can convert the case to Chapter 7 if you now qualify. Or the case can be dismissed — which ends the bankruptcy protection but does not affect whether you're still liable for your debts. Courts generally work with debtors to keep plans viable rather than dismiss cases. An attorney can help you navigate plan modifications if your situation changes.
Q 02
Can I file Chapter 13 if I previously filed bankruptcy?
Yes, with limitations. If you received a Chapter 7 discharge, you must wait 4 years before receiving a Chapter 13 discharge. If you received a prior Chapter 13 discharge, you must wait 2 years. However, you can file and get the benefit of the automatic stay (including stopping foreclosure) without receiving a discharge, subject to additional court scrutiny for serial filers. The rules around prior filings and automatic stay duration are complex — an attorney's analysis is essential.
Q 03
What is lien stripping and does it apply to me?
Lien stripping eliminates a junior mortgage (second mortgage, home equity line of credit) when it is entirely unsecured — meaning the outstanding balance on the first mortgage alone exceeds the home's current value. If your home is worth $200,000 and you owe $210,000 on your first mortgage, a $50,000 second mortgage is completely unsecured and can potentially be stripped in Chapter 13. The stripped lien becomes unsecured debt and receives minimal or no payment through the plan, then is discharged. This can eliminate tens of thousands of dollars in secured debt from your home.
Q 04
Does Chapter 13 affect my spouse if we file separately?
Bankruptcy law protects against collection of community property in states with community property law. If you file alone, your spouse's separate income is not committed to your plan unless it contributes to household expenses. Your spouse's separate property is not part of your bankruptcy estate. However, co-signed debts are the spouse's responsibility even after your discharge. In community property states, the analysis is more complex. An attorney can explain exactly how a solo filing affects your spouse's situation.
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