Chapter 13 is the reorganization route for individuals, often called “wage earner” bankruptcy. Instead of liquidating property to pay creditors, you keep what you own and repay what you can afford under a plan the bankruptcy court approves. Plans run three to five years, and the remaining balance on qualifying debts is discharged at the end.
Three situations point toward it. Your income is too high to pass the Chapter 7 means test. You are behind on a mortgage and need time to catch up without losing the house. Or you hold property with equity that Chapter 7 would put at risk.
Who may file
Only individuals can file under Chapter 13. A business entity cannot file a petition in its own name, and that holds for a corporation, an LLC, and a sole proprietorship acting as a business. If you personally own or have an interest in a business, you can still file individually, and you may include business-related debts you are personally liable for.
Past that, two requirements apply. You need regular income sufficient to fund plan payments, which is what the “wage earner” label points at, though the income does not have to come from wages. Your debts also have to fall within the statutory limits of 11 U.S.C. § 109(e). For cases filed between April 1, 2025 and March 31, 2028, those limits are $1,580,125 in secured debt (mortgages, car loans, liens) and $526,700 in unsecured debt (credit cards, medical bills). The figures are adjusted for inflation every three years under 11 U.S.C. § 104, so check the current limits if you are filing outside that window.
One piece of recent history is worth knowing, because older articles still repeat it. From 2022 the separate secured and unsecured caps were temporarily replaced with a single combined limit of $2,750,000 under the Bankruptcy Threshold Adjustment and Technical Corrections Act. That provision expired on June 21, 2024, and the separate inflation-adjusted limits above apply again. Where your debts fall between the two frameworks, your filing date matters.
It may change again, and soon. The Bankruptcy Threshold Adjustment Act of 2026 (S. 3977) passed the Senate unanimously on August 3, 2026 and would replace the two separate caps with a single combined limit of $2,750,000 on a permanent basis. It is not yet law, and it awaits action in the House of Representatives. If your debts sit above the current unsecured cap but below that combined figure, ask whether the timing of a filing changes what is available to you. (Status as of August 2026.)
How the plan works
You file a plan alongside your petition setting out how creditors will be paid. It has to meet statutory requirements, so secured creditors, priority debts such as recent taxes and support arrears, and unsecured creditors each get treated the way the Bankruptcy Code directs. Nothing takes effect until the court confirms it.
Being clear about what this is and is not saves disappointment later. A Chapter 13 plan is not a negotiation where you persuade individual creditors to accept less. It is a court-supervised structure, and what unsecured creditors receive is determined by what you can afford after allowed expenses and by what the Code entitles them to. Many unsecured creditors are in practice paid only a fraction of what they are owed, and the balance is discharged when you complete the plan, but that result comes from the statute and the court’s confirmation rather than from bargaining.
Secured debt is where a Chapter 13 plan does real work. Mortgage arrears can be cured over the life of the plan while you keep making the ongoing payment, which is why Chapter 13 is the standard answer to a foreclosure you want to stop.
You keep your property
A Chapter 13 debtor normally stays in possession of their property throughout, unlike Chapter 7. No trustee liquidates non-exempt assets. If you own a home with equity, or a vehicle you need, that difference is usually what decides between the two chapters.
For some categories of debt the discharge at the end of a completed plan is also broader than what Chapter 7 offers, though considerably less so than before the 2005 amendments to the Bankruptcy Code narrowed it. Whether that matters to you depends on the specific debts involved.
Talk to a Baltimore bankruptcy attorney
Whether Chapter 13 fits depends on your income, your arrears and what you are trying to keep. Jan Berlage will work through the numbers with you and tell you which chapter is realistically open to you. Call (410) 752-9300 or use the contact form on this page.