Bankruptcy ✦ Chapter 13
Keep the House. Keep the Car. Catch Up on Your Terms.
Chapter 13 is a court-supervised repayment plan, three to five years long, that stops a foreclosure or repossession the day it is filed and lets you cure what you are behind on over time. It is also the most underused tax strategy in California. North Star Law Firm handles Chapter 13 in the Riverside Division and throughout the Central District for a flat fee, with plan math computed by a CPA instead of guessed at.
Overview
What is Chapter 13, in plain English?
You propose a plan to pay what you can afford, from your income, for 36 to 60 months. The court confirms it, a Chapter 13 trustee collects the payments and distributes them, and creditors are bound by the plan whether they like it or not. Secured debts you want to keep get paid; priority debts like recent taxes and support get paid in full; and unsecured creditors get whatever your budget leaves over, which is often a small percentage. At the end of the plan the rest is discharged under 11 U.S.C. § 1328. Throughout, the automatic stay keeps every creditor at bay, and for consumer debts the co-debtor stay of § 1301 protects a non-filing co-signer too.
- Foreclosure and repossession stop at filing (11 U.S.C. § 362)
- Mortgage and car arrears cured through the plan while you resume regular payments
- Property you could not protect in Chapter 7 is kept by paying its value over time
- Priority tax paid through the plan without further penalties or interest
- Debt limits: roughly $1.58 million secured and $527,000 unsecured (adjusted April 2025)
- Discharge at completion, including some debts Chapter 7 cannot reach
What It Fixes
What can a Chapter 13 plan actually do?
Chapter 13 has tools Chapter 7 does not. Each one is a specific provision of the Bankruptcy Code with its own conditions, and each one is a calculation before it is a plan term.
| Problem | Chapter 13 tool | How it works |
|---|---|---|
| Behind on the mortgage, sale date set | Cure and maintain (§ 1322(b)(5)) | The stay stops the trustee’s sale. Arrears are spread over the plan; you resume the regular payment directly to the lender. |
| Second mortgage or HELOC, house is underwater | Lien strip (§ 506(a); § 1322(b)(2)) | If the home is worth less than the first mortgage, the wholly unsecured junior lien is reclassified as unsecured and released at discharge. |
| Car loan more than the car is worth | Cramdown (§ 1325(a)(5); the 910-day rule) | If the loan is more than 910 days old, you pay the vehicle’s value, often at a lower rate, and the balance is treated as unsecured. |
| Recent income tax that would survive Chapter 7 | Priority claim paid through the plan (§ 1322(a)(2)) | Paid in full over the plan term, but without penalties accruing and without interest on unsecured priority tax. |
| Too much equity or income for Chapter 7 | Best-interest test (§ 1325(a)(4)) | You keep the property by paying unsecured creditors at least what they would have received in a liquidation. |
| Debts a Chapter 7 cannot discharge | Chapter 13 superdischarge (§ 1328(a)) | Certain debts, including some property settlement obligations from a divorce and willful-but-not-malicious injury claims, are discharged only in Chapter 13. |
How long is the plan, and what do you pay?
The length turns on the same median income figures used in Chapter 7. Below the California median for your household size, the plan can be as short as 36 months; above it, the commitment period is 60 months. The payment is your projected disposable income under 11 U.S.C. § 1325(b), calculated on Form 122C from your income less allowed expenses, plus whatever is needed to pay secured arrears, priority claims, and the trustee’s commission. In the Riverside Division the first payment is due within 30 days of filing, before the plan is even confirmed, and the trustee expects it on time.
Two calculations decide whether the plan works: whether the payment is feasible on your real budget, and whether it satisfies the best-interest test. Both are financial models, and we build them before filing so the plan we propose is one the trustee can confirm rather than one that gets bounced back for amendments.
How does Chapter 13 work in the Central District specifically?
The Central District uses a mandatory local form plan and a mandatory Rights and Responsibilities Agreement between debtor and counsel that sets a fixed attorney fee for a standard case, most of which is paid through the plan rather than up front. That structure is why Chapter 13 is affordable to file: the fee is largely deferred. The Riverside Division has its own standing Chapter 13 trustee, its own confirmation calendar, and its own expectations for how a plan is presented. Hearings and the § 341 meeting are held by video.
California’s exemption choice matters in Chapter 13 as well, because the best-interest test is computed as if you had filed Chapter 7. A homeowner using the § 704 homestead exemption often has a small liquidation value and a correspondingly low unsecured dividend; a renter using § 703.140 with the wildcard is usually in the same position. Either way, the exemption analysis drives the payment.
The quiet power move: Chapter 13 as a tax strategy
If you owe the IRS or the Franchise Tax Board for recent years, a Chapter 13 plan pays that priority tax in full over up to five years with no further penalties and, for unsecured priority tax, no interest, while the automatic stay stops every levy and wage order. Older tax that passes the discharge tests is treated as general unsecured debt and paid the same small percentage as credit cards. Compare that with an IRS installment agreement, which keeps accruing failure-to-pay penalties and interest for the life of the plan, or an FTB installment agreement that must clear the balance in 60 months. For many California taxpayers, Chapter 13 is cheaper than the deal the agency offers. We run both scenarios side by side before recommending either.
The Attorney-CPA Difference
The trustee reads budgets for a living. So do we.
- Plan payment, feasibility, and best-interest calculations built by a CPA before filing
- Tax claims classified from IRS and FTB transcripts so priority and unsecured tax are paid correctly
- Mortgage, cramdown, and lien-strip math checked against real valuations
- Representation in the Riverside Division and throughout the Central District, with fees largely paid through the plan
Questions & Answers
Chapter 13 questions, answered
How fast can Chapter 13 stop a foreclosure?
The same day. The automatic stay takes effect when the petition is filed electronically, and a trustee’s sale scheduled for the next morning cannot go forward. Because California foreclosures are non-judicial and move on a 90-day notice of default plus a 21-day notice of sale, timing is everything; call as soon as the notice of default arrives.
Can I keep paying my mortgage directly?
Yes. In the Central District you continue the regular monthly payment to the lender outside the plan and pay only the arrears through the trustee. Some divisions require conduit payments in certain cases; we will tell you which applies.
What if my income changes during the plan?
Plans can be modified under 11 U.S.C. § 1329 when circumstances change, up or down. If you lose your job, the plan can often be reduced or, in a true hardship, converted to Chapter 7 or ended with a hardship discharge.
I have too much debt for Chapter 13. What then?
If your secured or unsecured debt exceeds the § 109(e) limits, an individual Chapter 11, or Subchapter V if most of the debt is from a business, is the reorganization path. We handle those as well.
Three to five years of protection beats twenty years of minimum payments.
A free plan analysis with an attorney-CPA, and a written fee under the court’s standard agreement before you commit.