Chapter 13 Bankruptcy

Chapter 13 allows individuals to reorganize their debts through a structured plan lasting 3 to 5 years, while stopping creditor collection actions and protecting important assets.

Protect valuable property

Remove certain second mortgages

Catch up on missed mortgage payments

Stop foreclosure

Most people who file bankruptcy qualify for Chapter 7. However, certain financial situations make Chapter 13 the better option or sometimes the only option available.

When Chapter 13 Bankruptcy May Be the Right Choice

Income Above the Median (Means Test Requirement)

If your household income is above the Massachusetts median income for your household size, you may be required to file under Chapter 13 instead of Chapter 7.

The bankruptcy system uses a formula called the Means Test to determine whether you have disposable income that could be used to repay part of your debts.

If the test shows that repayment is possible, Chapter 7 may not be available.

Massachusetts Median Income (March 2026)

Household of one: $85,941
Family of four: $175,947

Note: These figures are updated twice per year and should always be verified before filing.

If You Filed Chapter 7 Within the Last 8 Years

Bankruptcy law prevents someone from receiving a second Chapter 7 discharge within 8 years of a prior filing.

However, you may qualify for a Chapter 13 discharge after only four years.

In many of these situations, we file three-year plans with payments around $75–$100 per month, which typically covers attorney and trustee fees.

If You Are Behind on Your Mortgage or Car Loan

One of the most common uses of Chapter 13 bankruptcy is stopping foreclosure.

When a Chapter 13 case is filed, the automatic stay immediately stops foreclosure proceedings.

Chapter 13 allows you to:

• Stop foreclosure
• Stop repossession
• Catch up on missed mortgage payments over 3–5 years
• Keep your home while reorganizing debt

As long as plan payments are made, the lender cannot foreclose.

Removing Second Mortgages

If your home has a second mortgage or home equity loan that is no longer supported by the value of the property, Chapter 13 may allow it to be removed.

This is known as mortgage stripping.

The second mortgage becomes unsecured debt and may be eliminated through the bankruptcy plan.

This option does not exist in Chapter 7.

Reducing Certain Secured Debts (Cram Down)

Chapter 13 can sometimes reduce secured debts to the current value of the collateral.

Example:

If an investment property is worth $200,000 but the mortgage balance is $300,000, the secured portion may be reduced to the property value.

This may apply to:

• Investment properties
• Multi-family properties
• Certain secured loans

Protecting Property With Equity

Sometimes people qualify for Chapter 7 but have too much equity in property to fully protect it.

In those cases, Chapter 13 allows you to:

• Keep the property
• Pay creditors the value of non-exempt equity over time
• Avoid forced liquidation

Massachusetts allows a homestead exemption of up to $500,000 and in some cases $1,000,000, protecting significant home equity.

How the Chapter 13 Repayment Plan Works

Most Chapter 13 plans last:

• 3 years
• 5 years

depending on income and financial circumstances.

Schedule a Free Bankruptcy Consultation

Attorney Louis S. Haskell can review your situation and help determine whether Chapter 7 or Chapter 13 bankruptcy is the best option.

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