Chapter 13 bankruptcy in California is a federal court process that lets you keep your property and repay your debts through a court-supervised plan that runs three to five years, instead of liquidating assets to pay creditors. To use it, you need regular income, and your noncontingent, liquidated unsecured debts must be under $526,700 and secured debts under $1,580,125 as of April 1, 2025.1Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor Those limits adjust every three years, so they hold through early 2028.
Who Qualifies
Chapter 13 is for individuals, not businesses. You need income that is stable and predictable enough to fund monthly payments for the life of the plan. Wages, self-employment earnings, commissions, pensions, Social Security, and spousal support all count.
Your debts must fit inside the statutory ceilings above.1Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor “Noncontingent and liquidated” means the debt is definite and the amount is known, so disputed claims and potential lawsuits don’t push you over the cap.
You also must have filed every required federal, state, and local tax return for the four tax years before your filing date. Missing returns can get your case dismissed before it starts.2Internal Revenue Service. Chapter 13 Bankruptcy – Voluntary Reorganization of Debt for Individuals
Many Californians land in Chapter 13 because their income is too high to pass the Chapter 7 means test.3Office of the Law Revision Counsel. 11 US Code 707 – Dismissal of a Case or Conversion to a Case Under Chapter 11 or 13 Others choose it even when they could qualify for Chapter 7, because they want to keep specific property or cure mortgage arrears.
How the Repayment Plan Works
You propose a plan that tells the court and your creditors how much you will pay each month, for how long, and which debts receive what. A court-appointed Chapter 13 trustee collects your payments and distributes them according to the confirmed plan.4United States Courts. Chapter 13 – Bankruptcy Basics
Plan Length
Length is tied to your income. If your household income falls below California’s median for your household size, the plan runs three years unless the court approves longer for good cause. If your income is above the median, it generally runs five years. Five years is the hard ceiling in every case.5Office of the Law Revision Counsel. 11 US Code 1322 – Contents of Plan
What Gets Paid
Debts fall into a hierarchy. Priority debts like domestic support obligations and recent tax debts must be paid in full through the plan. Secured debts like mortgages and car loans come next; the plan lets you cure missed payments over time while keeping the collateral. Unsecured debts like credit cards and medical bills often get only a partial payment at the back of the line.
How much unsecured creditors receive turns on two tests. The “best interest of creditors” test requires that they get at least what a Chapter 7 liquidation would have produced. If the trustee or an unsecured creditor objects, you also have to commit all of your disposable income to the plan for its full term, where disposable income is what remains after reasonable living expenses, support obligations, and certain charitable contributions.6Office of the Law Revision Counsel. 11 US Code 1325 – Confirmation of Plan
Trustee Fee
The trustee takes a percentage of each payment, capped at 10 percent by federal law. The actual rate varies by district. That fee is built into your plan payments, so the monthly amount has to cover the trustee’s cut on top of what reaches creditors. People commonly overlook this when estimating what the plan will cost them.
What You Gain by Filing
The moment you file, the automatic stay takes effect. It is a federal injunction that stops most collection actions right away: foreclosure sales, wage garnishments, repossessions, and creditor lawsuits.7Office of the Law Revision Counsel. 11 US Code 362 – Automatic Stay For a homeowner facing a trustee’s sale next week, this is often the single most valuable feature of Chapter 13.
You also keep your property. Unlike Chapter 7, where non-exempt assets can be sold, Chapter 13 lets you hold onto your home, vehicles, accounts, and personal belongings as long as the plan funds the required creditor payments.
Cramdown on Underwater Car Loans
If you owe more on a car than it is worth, and you bought the vehicle more than 910 days before filing, the plan can reduce the secured claim to the car’s fair market value.6Office of the Law Revision Counsel. 11 US Code 1325 – Confirmation of Plan The leftover balance becomes unsecured debt and typically gets paid at a fraction. The 910-day rule exists to stop people from buying a car on credit and immediately cramming down the loan.
Stripping a Second Mortgage
If your home is worth less than the balance on your first mortgage, Chapter 13 may let you strip off a second mortgage or HELOC entirely. With no equity to secure the junior lien, it is reclassified as unsecured debt. In the Ninth Circuit, which covers California, this is well established in Chapter 13 cases. It does not work in Chapter 7, which is one reason underwater homeowners choose Chapter 13.
California Exemptions
California offers two exemption systems, commonly called System 1 (California Code of Civil Procedure section 704) and System 2 (CCP section 703). You pick one and apply it in full; mixing is not allowed. System 1 is generally better for homeowners because its homestead exemption protects substantial home equity, with the figure tied to county median sale prices. System 2 mirrors the federal framework and includes a generous wildcard that can be applied to any property, which tends to favor renters or people without much equity.
Exemptions work differently here than in Chapter 7. You keep all your property either way, but the value of your non-exempt assets sets the minimum that unsecured creditors have to receive through the plan. Choosing the right system can meaningfully lower your monthly payment.
The Filing Steps
Credit Counseling Before You File
You must complete a credit counseling session with an agency approved by the U.S. Trustee Program before filing.8United States Department of Justice. Credit Counseling and Debtor Education Information It takes about an hour and can be done online, by phone, or in person. Skipping it is grounds for dismissal.9United States Courts. Credit Counseling and Debtor Education Courses
The Petition
You file your petition in the federal bankruptcy court for the district where you live. The petition includes detailed schedules of every asset, every debt, your monthly income, and your monthly expenses. The current filing fee is $313, and in Chapter 13 you can pay it in installments through the plan.
The 341 Meeting
Within a few weeks of filing, the trustee holds a meeting of creditors, called the 341 meeting.10Office of the Law Revision Counsel. 11 US Code 341 – Meetings of Creditors and Equity Security Holders The trustee asks questions under oath about your finances, verifies your identity, and reviews your documents.11United States Department of Justice. Section 341 Meeting of Creditors No judge is present.
Confirmation
After the 341 meeting, the court holds a confirmation hearing on the proposed plan. The trustee and creditors can object if it fails any statutory requirement. Once confirmed, you make monthly payments to the trustee for the plan’s duration.
Debtor Education and Discharge
Before you can get a discharge, you must complete a second course on personal financial management from an approved provider.9United States Courts. Credit Counseling and Debtor Education Courses After you finish all plan payments and file proof of the course, the court grants your discharge.12Office of the Law Revision Counsel. 11 USC 1328 – Discharge
What It Costs
The $313 court filing fee can be paid in installments. Attorney fees are the bigger expense. In California, Chapter 13 attorney fees typically run from roughly $3,000 to $6,000 or more depending on complexity, district, and attorney. Many districts set presumptively reasonable fee amounts that attorneys can charge without filing a separate fee application. Fees can be paid through the plan itself, so a modest retainer is usually enough to get started.
Living Under the Plan
For the next three to five years, your financial life operates under real constraints. You generally cannot take on new debt without court or trustee approval. That includes car loans, credit cards, student loans, mortgage refinancing, rent-to-own agreements, and cosigning for someone else. Borrowing without permission can get your case dismissed.
Property or income you acquire during the plan becomes part of the bankruptcy estate, including raises, bonuses, inheritances, and lawsuit settlements.13Office of the Law Revision Counsel. 11 US Code 1306 – Property of the Estate A windfall like an inheritance may prompt the trustee to seek a plan modification that raises your payment.
You also have to stay current on post-filing taxes. Filing returns on time and paying what you owe is a condition of keeping the case active.14Internal Revenue Service. Understanding Federal Tax Obligations During Chapter 13 Bankruptcy
If You Can’t Finish the Plan
Job loss, medical crises, and divorce derail Chapter 13 plans constantly. You generally have three options when payments become unmanageable.
You can ask the court to modify the plan. If your income dropped, the court may approve a lower monthly payment or extend the plan, though not beyond the five-year ceiling.
You can let the case be dismissed. Dismissal lifts the automatic stay and puts you back where you started, with creditors free to resume collection. Payments you already made go to creditors and are not returned, and the unpaid balances remain your responsibility.
You can convert to Chapter 7. This makes sense when a repayment plan is no longer realistic. You will need to qualify under the Chapter 7 means test, and debts you took on after your original Chapter 13 filing date may be included.
A narrow “hardship discharge” exists for cases where circumstances beyond your control make completion impossible, creditors have already received at least what Chapter 7 would have paid them, and modification is not feasible. It covers fewer debts than a standard Chapter 13 discharge.15Office of the Law Revision Counsel. 11 US Code 1328 – Discharge
Debts That Survive Discharge
Finishing the plan does not wipe out everything. Certain debts survive a Chapter 13 discharge:
- Domestic support obligations, including child support and alimony.
- Most student loans, unless you file and win a separate adversary proceeding showing undue hardship.
- Priority tax debts that had to be paid in full through the plan.
- Criminal restitution and fines included in a criminal sentence.
- Debts from willful or malicious injury causing personal injury or death.
- Long-term obligations like ongoing mortgage payments that extend beyond the plan, where the plan only cured the arrears.
Chapter 13’s discharge is actually broader than Chapter 7’s. Some debts that would survive a Chapter 7 discharge, including property settlements from divorce and certain willful property damage claims, can be discharged in Chapter 13.12Office of the Law Revision Counsel. 11 USC 1328 – Discharge That is one of the less obvious reasons attorneys sometimes steer clients toward Chapter 13 even when Chapter 7 is available.