Chapter 13 Bankruptcy Eligibility: Who Qualifies and What the Limits Are

What Is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy — formally called a "wage earner's plan" — allows individuals with regular income to reorganize their debts and repay creditors over a three- to five-year period. Unlike Chapter 7 bankruptcy, which liquidates non-exempt assets to discharge debts quickly, Chapter 13 lets you keep your property while catching up on missed payments and discharging remaining eligible balances at the end of the plan.

The chapter is particularly valuable for homeowners behind on mortgage payments, individuals with non-exempt assets they want to protect, and people who earn too much to qualify for Chapter 7 but still need court protection from creditors. Understanding eligibility before you file is essential — filing under the wrong chapter wastes time and money, and a dismissed case can delay your ability to refile.

The Core Eligibility Requirements

To file Chapter 13, you must satisfy four basic requirements under the U.S. Bankruptcy Code.

1. You Must Be an Individual (Not a Business)

Chapter 13 is available only to individuals and sole proprietors. Corporations, partnerships, and limited liability companies cannot use Chapter 13; they must file under Chapter 11 or Chapter 7. If you operate a business as a sole proprietor, your personal and business debts may both be included in a Chapter 13 case.

2. You Must Have Regular Income

The Bankruptcy Code requires that a Chapter 13 debtor have "regular income" — meaning income that is sufficiently stable and regular to fund a repayment plan. This does not mean you must be employed full-time. Courts have approved Chapter 13 plans funded by wages, salaries, self-employment income, Social Security benefits, pension payments, rental income, and even regular financial support from a spouse or family member.

The key question is whether your income is predictable enough to support a multi-year plan. A bankruptcy attorney can help you document irregular income sources in a way that satisfies the court's requirements.

3. Your Debts Must Be Below the Statutory Limits

Chapter 13 has debt caps that are adjusted periodically for inflation. As of 2024, the limits are:

• Unsecured debts: No more than $465,275 (e.g., credit cards, medical bills, personal loans)
• Secured debts: No more than $1,395,875 (e.g., mortgages, car loans, tax liens)

These figures are adjusted every three years under 11 U.S.C. § 109(e). If your debts exceed these limits, you may need to consider Chapter 11 bankruptcy, which has no debt caps but is significantly more complex and expensive.

4. You Must Have Filed Required Tax Returns

Before a Chapter 13 plan can be confirmed, you must have filed all required federal and state tax returns for the four years prior to your bankruptcy filing. If you have unfiled returns, you must file them before the confirmation hearing. Failure to do so is grounds for dismissal.

Prior Bankruptcy Filings and the Waiting Period

If you have filed bankruptcy before, waiting periods apply before you can receive a discharge in a new case. The rules are as follows:

Note that these waiting periods apply to receiving a discharge, not to filing the case. You can file a new case before the waiting period expires — and the automatic stay will still apply — but you will not receive a discharge at the end of the plan. In some situations, filing a "no-discharge" Chapter 13 still makes sense to stop foreclosure or reorganize debts.

Disqualifying Factors

Several circumstances can disqualify you from filing Chapter 13 or cause your case to be dismissed:

• Prior dismissal within 180 days: If a prior bankruptcy case was dismissed within the last 180 days because you willfully failed to comply with court orders or voluntarily dismissed the case after a creditor sought relief from the automatic stay, you cannot refile immediately.
• Credit counseling requirement: You must complete an approved credit counseling course within 180 days before filing. Failure to do so is grounds for dismissal. The U.S. Trustee Program maintains a list of approved providers.
• Debts above the limits: As noted above, exceeding the debt caps disqualifies you from Chapter 13.
• Failure to pay filing fees: The Chapter 13 filing fee is $313. Fee waivers are not available for Chapter 13 (unlike Chapter 7), though you may request to pay in installments.

Chapter 13 vs. Chapter 7: Choosing the Right Chapter

Many people who qualify for Chapter 13 also qualify for Chapter 7. The right choice depends on your specific circumstances. Chapter 7 is faster (3–6 months vs. 3–5 years) and eliminates most unsecured debt without repayment. But Chapter 13 offers advantages that Chapter 7 cannot provide:

• Saving your home: Chapter 13 allows you to cure mortgage arrears over the plan period, stopping foreclosure and giving you time to catch up. Chapter 7 provides only a temporary stay.
• Protecting non-exempt assets: If you have equity in a home, a vehicle, or other assets that exceed your state's exemption limits, Chapter 7 could require liquidation. Chapter 13 lets you keep those assets by paying their non-exempt value to unsecured creditors through the plan.
• Discharging non-dischargeable debts: Chapter 13 can discharge certain debts that Chapter 7 cannot, including some property settlement obligations from divorce and debts from willful and malicious injury (in limited circumstances).
• Stripping a second mortgage: In some cases, Chapter 13 allows you to "strip" a wholly unsecured second mortgage or home equity line of credit, reclassifying it as unsecured debt and discharging the remaining balance at the end of the plan.

How to Determine Whether You Qualify

The fastest way to determine Chapter 13 eligibility is a free consultation with a bankruptcy attorney. An attorney will review your income, assets, debts, and prior filing history to confirm eligibility and help you decide whether Chapter 13 is the right choice. If you are facing foreclosure, garnishment, or a creditor lawsuit, time matters — the sooner you consult an attorney, the more options you have.

Use our directory to find a bankruptcy attorney near you who offers free consultations. Many attorneys can file an emergency petition within 24 to 48 hours if you face an imminent foreclosure sale or wage garnishment.

References

1. U.S. Courts — Chapter 13 Bankruptcy Basics
2. 11 U.S.C. § 109 — Who May Be a Debtor
3. U.S. Trustee Program — Credit Counseling and Debtor Education
4. Nolo — Chapter 13 Bankruptcy: Who Can File?
5. CFPB — What Is Chapter 13 Bankruptcy?