New York Chapter 13 Bankruptcy: Exemptions, Plan, and Discharge

New York Chapter 13 bankruptcy lets a person with regular income reorganize debts into a single monthly payment stretched over three to five years, while keeping a home, a car, and other property that a Chapter 7 case might put at risk. To use it, your noncontingent, liquidated unsecured debts must stay under $526,700 and your secured debts under $1,580,125.¹ New York also lets you pick between the federal exemption package and the state’s own list, and that choice has real dollar consequences depending on what you own.

Who Qualifies

Chapter 13 is open to any individual with regular income, including sole proprietors and freelancers who run unincorporated businesses.² The debt ceilings above took effect April 1, 2025, and they count only debts that are fixed in amount and not subject to dispute. Married couples filing jointly must keep the combined household debts under those thresholds. For the self-employed, business and personal debts are added together, since bankruptcy captures everything you owe as an individual.

Before you file, you have to complete a credit counseling course through a federally approved agency, and it must be finished within 180 days before the petition date.³ Skipping it gives the court grounds to dismiss the case.

Choosing Between State and Federal Exemptions

New York is a “choice” state: you can use the federal exemptions under 11 U.S.C. § 522(d) or the state exemption system, but not both. You pick one system for the whole case, and joint filers must agree.⁴

The Homestead by County

Under CPLR § 5206, New York’s homestead exemption protects equity in your principal residence at three different levels based on where you live:

$150,000 in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam counties
$125,000 in Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster counties
$75,000 in every other county

The exemption covers a house, a co-op, a condo, or a mobile home that you own and occupy as your primary residence.⁵ Equity above the cap is not protected.

Personal Property

CPLR § 5205 protects, among other things, one motor vehicle with up to $4,000 in equity above liens (or $10,000 if equipped for a disabled owner), tools of the trade up to $3,000, a wedding ring, and watches or jewelry up to $1,000.⁶ If you don’t claim a homestead, you can shield an extra $1,000 in personal property, bank deposits, or cash.

New York’s Debtor and Creditor Law §§ 282 through 285 layers additional bankruptcy-specific protections on top: Social Security, veterans’ benefits, unemployment compensation, public assistance, disability payments, and pension and retirement distributions are all shielded.⁷ Rent-stabilized leases are protected too, which matters most in New York City.

Which system wins depends on what you own. The federal list includes a broad wildcard exemption useful for filers without much home equity. The state list tends to work harder for homeowners, retirees, and tradespeople.

Plan Length and the Means Test

Your household income sets how long you’ll be in the plan. You’ll report current monthly income on Official Form 122C-1, which the court compares against New York’s median for your household size.⁸ For cases filed on or after April 1, 2026, New York’s medians are:

1 person: $73,272
2 people: $92,902
3 people: $115,579
4 people: $139,040
Each additional person: add $11,100

⁹

Below-median filers can propose a plan as short as three years. At or above the median, the law requires a commitment period of at least five years.¹⁰ Either way, if you can pay unsecured creditors in full sooner, the court can approve a shorter plan.

Form 122C-2 then calculates disposable income by subtracting standardized living expenses, including IRS-published housing allowances specific to your New York county, from monthly income. That number sets the floor for your monthly plan payment. Social Security benefits are excluded from the means test itself, though you still disclose them on Schedule I, and some courts compare Schedule I income to Schedule J expenses to test whether more is available than the means test suggests.

What Goes Into the Plan

Every debt sits in one of three buckets, and each is treated differently.

Priority debts generally must be paid in full. Domestic support obligations sit at the top of the priority ladder, followed by certain tax debts such as recent income and employment taxes.¹¹ Secured debts, like your mortgage or car loan, involve keeping current on ongoing payments and curing any arrears through the plan. General unsecured debts, such as credit cards and medical bills, receive whatever’s left.

The plan must satisfy the best-interests-of-creditors test: unsecured creditors have to get at least what they would have received if you’d filed Chapter 7 and your non-exempt property had been sold.¹⁰ This is where your exemption choice reaches your wallet. More non-exempt equity means a higher required payout to unsecured creditors.

Build the standing trustee’s fee into your budget. Federal law caps it at 10 percent of plan payments, but the actual rates in New York’s four judicial districts are lower. As of the most recent published rates: Eastern District 5.5 percent, Northern District 8.7 percent, Southern District 7.9 percent, and Western District 9.2 percent.¹² Each district uses its own local plan form.

Lien Stripping and Vehicle Cramdowns

Two tools exist only in Chapter 13, and they’re often the reason people choose it over Chapter 7.

If your home is worth less than the balance on your first mortgage, a second mortgage or home equity line is fully unsecured. Chapter 13 lets you strip that junior lien and reclassify the debt as general unsecured, meaning it collects only the same percentage as your other unsecured creditors. Complete the plan and the lien is permanently gone.¹³ The lien has to be wholly unsecured, though. A single dollar of equity supporting the second mortgage defeats the strip, and lenders often push back with their own appraisals.

For a car loan where the balance exceeds the vehicle’s value, a cramdown splits the loan into a secured portion equal to the car’s replacement value and an unsecured portion for the rest. You pay the secured piece at a court-set interest rate; the unsecured piece joins the general pool. There’s a limit: if you bought the vehicle within 910 days (about two and a half years) before filing, the cramdown is blocked.¹⁰ Loans secured by a vehicle you already owned, like a title loan, don’t have this waiting period.

Filing and the Automatic Stay

The filing fee is $313, combining the case fee and the administrative fee.¹⁴ The court can allow four installments over 120 days if paying in full upfront is a hardship. Attorney fees in Chapter 13 are typically paid through the plan, so you don’t need the full legal fee before filing.

The moment your petition is docketed, the automatic stay takes effect. It halts nearly all collection activity: foreclosures, wage garnishments, lawsuits, repossessions, and collection calls.¹⁵ It does not stop criminal proceedings, domestic support collection from property outside the bankruptcy estate, custody or visitation matters, or domestic violence actions. Violating the stay exposes creditors to sanctions, and most stop contact immediately once notified.

A standing trustee is assigned to your case, receives your monthly payments, and pays creditors according to the plan. Your first payment is due within 30 days of filing, before the plan is even confirmed, so be ready to pay right away.

Meeting of Creditors, Debtor Education, and Confirmation

Between 20 and 40 days after filing, the court holds the Meeting of Creditors required by 11 U.S.C. § 341.¹⁶ Creditors rarely appear in consumer cases. The trustee runs the meeting under oath and asks about income, expenses, assets, and whether the plan can actually work. Bring photo ID and proof of your Social Security number. If your paperwork is clean, expect 10 to 15 minutes.

Within 45 days of that meeting, you have to complete a personal financial management course from a federally approved provider. This is separate from the pre-filing credit counseling. It runs at least two hours, can be done online or by phone, and you file Form 23 to certify completion. No certificate, no discharge.¹⁷

A confirmation hearing follows. The judge checks that the plan was proposed in good faith, passes the best-interests test, devotes all disposable income (for above-median filers), and is feasible on your budget. The trustee or a creditor can object. Once the judge confirms it, you and your creditors are bound by its terms.

When Circumstances Change

Three to five years is long enough that most filers hit a bump. Losing a job, getting hours cut, or facing a medical bill can all justify a motion to modify. The court can approve a temporary reduction, a permanent lower payment, a short suspension while you look for work, or an extension of the plan’s length. Document the change with a termination letter, updated pay records, and a revised expense schedule. The trustee and creditors get a chance to weigh in before the judge rules.

Watch the 180-day rule. Property you inherit, receive in a divorce settlement, or collect as a life insurance beneficiary within 180 days after filing becomes part of the bankruptcy estate.¹⁸ A windfall inside that window can raise your plan payments. After 180 days, inherited property generally stays outside the estate.

Hardship Discharge

If completing the plan becomes impossible and no modification will fix it, you can ask for a hardship discharge under 11 U.S.C. § 1328(b). The court grants one only when all three conditions are met:

The failure to finish payments is due to circumstances you shouldn’t justly be held accountable for, such as a permanent disability.
Unsecured creditors have already received at least what they would have gotten in Chapter 7.
Modifying the plan is not a realistic option.

A hardship discharge is narrower than a completion discharge and leaves more categories of debt in place, so it’s a last resort.¹⁷

Debts That Survive the Discharge

Finishing the plan wipes out most remaining unsecured balances, but certain debts cannot be discharged: domestic support obligations, most student loans (absent a separate adversary proceeding proving undue hardship), debts from fraud or misrepresentation, criminal restitution and fines, and personal injury claims from willful or malicious conduct.¹⁷ Long-term obligations like a mortgage that runs past the plan also survive, though the plan should have brought you current on any arrears.

Income taxes split by age. Recent taxes that still qualify as priority claims under 11 U.S.C. § 507(a)(8) must be paid in full through the plan.¹¹ Older income taxes may be dischargeable if the return was due more than three years before filing, was actually filed more than two years before filing, and the tax was assessed at least 240 days before filing. Taxes tied to fraud or unfiled returns are never dischargeable.

Student loans remain due after Chapter 13 unless you bring a separate lawsuit within the bankruptcy case and prove undue hardship. Some courts allow student loans to be classified separately from other unsecured debts, which lets you direct more of the plan payments toward them, though courts are split on whether that unfairly discriminates against other unsecured creditors. If your plan groups student loans with the rest, whatever balance remains at discharge is still owed.

Credit Report Impact

A Chapter 13 filing stays on your credit report for seven years from the petition date, shorter than the 10-year Chapter 7 window. While the plan is active, taking on new credit generally requires trustee approval. After discharge, rebuilding takes deliberate work, but many filers see meaningful score improvement within one to two years. The discharge ends the ongoing delinquencies that were pulling your score down, which gives you a cleaner starting point than continuing to miss payments outside bankruptcy.

1
Office of the Law Revision Counsel. 11 USC 109 – Who May Be a Debtor
2
United States Courts. Chapter 13 Bankruptcy Basics
3
United States Department of Justice. Credit Counseling and Debtor Education Information
4
United States Bankruptcy Court Eastern District of New York. A Guide to Schedule C and Exemptions
5
New York State Senate. New York Civil Practice Law and Rules 5206 – Real Property Exempt From Application to the Satisfaction of Money Judgments
6
New York State Senate. New York Civil Practice Law and Rules 5205 – Personal Property Exempt From Application to the Satisfaction of Money Judgments
7
FindLaw. New York Code DCD 282 – Permissible Exemptions in Bankruptcy
8
United States Department of Justice. Means Testing
9
U.S. Trustee Program. Census Bureau Median Family Income by Family Size
10
Office of the Law Revision Counsel. 11 USC 1325 – Confirmation of Plan
11
Office of the Law Revision Counsel. 11 USC 507 – Priorities
12
U.S. Trustee Program. Administrative Expenses Multiplier
13
Office of the Law Revision Counsel. 11 USC 506 – Determination of Secured Status
14
United States Bankruptcy Court Eastern District of New York. Fee Schedule
15
Office of the Law Revision Counsel. 11 USC 362 – Automatic Stay
16
Office of the Law Revision Counsel. 11 USC 341 – Meetings of Creditors and Equity Security Holders
17
Office of the Law Revision Counsel. 11 USC 1328 – Discharge
18
Office of the Law Revision Counsel. 11 USC 541 – Property of the Estate