If you've been turning bankruptcy over in your mind, you're far from alone. Individual Chapter 13 filings across the country climbed from 17,226 cases in August 2025 to 18,335 cases in August 2026, and individual Chapter 7 filings rose even faster, up 10% over the same twelve months, according to data the American Bankruptcy Institute released in September.
We've written before about why more New Jersey households are filing this year. This time we want to slow down and walk through what happens once you choose Chapter 13: how the repayment plan gets built, how long you'll be in it, and what you get at the end. The short version is that Chapter 13 isn't a punishment. It's a structured way to keep what you own, catch up on what you've fallen behind on, and come out the other side with a clean discharge.
What Chapter 13 Actually Does
Chapter 7 bankruptcy wipes out most unsecured debt fairly quickly, but it can require giving up property that isn't protected by an exemption, and it isn't available to everyone. Chapter 13 works differently. Instead of liquidating assets, you propose a repayment plan that stretches your payments to creditors over three to five years, based on what you can realistically afford out of your income.
In NJ, the percentage you pay will depend on two major factors: the amount of money you have in non-exempt assets and your income. Our job as attorneys is to do that analysis for you and try to make sure you are paying the correct percentage, and no more.
That structure is what makes Chapter 13 useful for homeowners behind on their mortgage, drivers behind on a car loan, or anyone with too much income to qualify for Chapter 7 but still drowning in debt. You keep the house or the car, you catch up on the arrears through the plan instead of all at once, and the debts the plan doesn't require you to pay in full are typically discharged when you finish.
Picture a homeowner in Bergen County who's three months behind on a mortgage after a layoff but has since found steady work again. Chapter 7 wouldn't necessarily stop a sheriff's sale that's already scheduled, and it wouldn't spread out those missed payments. A Chapter 13 plan can do both: the automatic stay halts the sale the day the case is filed, and the past-due amount gets folded into monthly plan payments over several years instead of being due all at once.
Who Can File Chapter 13 in New Jersey
The basic requirements are federal, so they apply the same way in Newark, Trenton, or Camden as anywhere else:
- You need regular income, whether from a job, self-employment, benefits, or another steady source, because the whole plan depends on being able to make monthly payments.
- Your secured and unsecured debt each have to fall under limits set by federal law. Those limits have been a moving target recently.
- You generally need to complete a credit counseling briefing from an approved agency in the 180 days before you file.
- You can't file if a prior bankruptcy case of yours was dismissed in the last 180 days for certain reasons, like failing to show up in court or disobeying a court order.
On that second point: Congress has been moving legislation that would raise the dollar limits on who can use Chapter 13, which matters for small business owners and anyone with debt loads near the current ceiling. We covered what that bill could mean for New Jersey filers in an earlier post on the proposed debt limit changes, and it's worth a read if your debt is anywhere close to the line.
The Automatic Stay: Your First Protection
The moment your Chapter 13 petition is filed, an automatic stay goes into effect. It stops a sheriff's sale on your house, halts a repossession, pauses wage garnishments, and generally tells your creditors to stop contacting you directly. That protection is immediate and doesn't wait for a judge to sign anything. It's often the most urgent reason people file when a foreclosure date or a repossession is bearing down on them.
How Long Will You Be in the Plan?
Federal bankruptcy law sets the length of a Chapter 13 plan by comparing your current monthly income, annualized, to the median family income for a household your size in New Jersey. This comparison, sometimes called the applicable commitment period, decides whether your plan runs three years or five years.
If Your Income Is Below New Jersey's Median
Your plan generally runs three years, though a court can approve a longer period, up to five years, for cause if that's what it takes to make the plan work.
If Your Income Is At or Above New Jersey's Median
Your plan has to run a full five years. This isn't optional and it isn't about how much you owe. It's a fixed rule under 11 U.S.C. § 1322(d), and New Jersey's bankruptcy court has treated it as a strict time requirement rather than something that can be shortened just because you've paid your unsecured creditors back in full ahead of schedule.
What Has to Be in the Plan
A Chapter 13 plan isn't just a number you pick. It has to meet several requirements before a judge will confirm it:
- Priority debts, like certain tax obligations and domestic support arrears, generally have to be paid in full through the plan.
- Creditors within the same class have to be treated the same way; you can't favor one credit card over another without a legitimate reason.
- The plan has to be feasible, meaning your proposed payment has to be something your actual income can sustain for the life of the case.
- Any disposable income left over after reasonable living expenses generally has to go toward your creditors.
- Secured debts you want to keep, like a mortgage or car loan, usually get current through the plan while you keep making your regular ongoing payments separately.
Confirmation and New Jersey's Standing Trustees
In the District of New Jersey, a standing Chapter 13 trustee reviews every proposed plan, collects your plan payments, and distributes them to creditors for the life of the case. Shortly after filing, you'll attend a meeting of creditors (often called a 341 meeting), which the court has increasingly scheduled by video or phone rather than in person. The trustee and any creditors who object get a chance to raise issues before a bankruptcy judge holds a confirmation hearing and decides whether to approve the plan.
What Life Looks Like While You're in the Plan
A Chapter 13 case isn't something you file and forget about for years. Many plans are funded through a wage order, meaning your employer sends a set amount directly to the trustee each pay period, which some filers actually find easier than having to remember to make a payment themselves. You'll need to stay current on any ongoing bills the plan doesn't cover, keep the trustee updated if your income changes significantly, and get court approval before taking on new debt like a car loan in most cases. None of that is meant to be punitive. It exists so the plan keeps working the way it was designed to, and so you're not blindsided by a modification or dismissal down the road.
Chapter 13 vs. Chapter 7: Which One Actually Fits
Neither chapter is universally better. The right choice depends on what you own, what you owe, and what you're trying to protect.
- Chapter 7 is usually faster, often reaching discharge in a matter of months, but it requires passing a means test and can mean giving up property that isn't covered by an exemption.
- Chapter 13 takes years to complete, but it lets you keep nonexempt property by paying for it over time, and it's often the only realistic path to stopping a foreclosure or repossession and catching up gradually.
- Some debts that Chapter 7 won't discharge, like certain tax debts or obligations from a divorce decree, can sometimes be managed more favorably inside a Chapter 13 plan.
Getting to Your Discharge
Once you've made every payment the plan requires, the court is supposed to grant your discharge as soon as practicable. Before that happens, federal law requires you to complete an approved personal financial management course after you file (there's a separate credit counseling step required before you file, which is a different requirement). That course requirement, along with the discharge rule itself, comes from 11 U.S.C. § 1328. A handful of debts, such as certain long-term secured obligations, specific tax claims, and debts tied to willful or malicious injury, aren't wiped out even by a completed Chapter 13 plan.
Contact Scura, Wigfield, Heyer, Cammarota & Gonzalez Today
Our firm’s founder served as the Standing Chapter 13 Bankruptcy Trustee for 24 years, helping shape the administration of Chapter 13 cases throughout New Jersey. The systems and procedures he established continue to influence how these cases are administered today. Contact our New Jersey bankruptcy attorneys to discuss your financial circumstances and explore your available options.
Frequently Asked Questions
- How is my monthly Chapter 13 payment calculated?
- It's based on your income after reasonable living expenses, what you owe to secured and priority creditors, and whether your income puts you above or below New Jersey's median for your household size. An attorney or the standing trustee's office can walk through the specific numbers with you.
- Can I still lose my house or car during a Chapter 13 case?
- You can, if you fall behind on the plan payments or on the ongoing mortgage or loan payments you're required to keep making outside the plan. Staying current with both obligations is what keeps the protection in place.
- What happens if I can't keep up with my plan payments?
- You generally have options before losing everything, including asking the court to modify the plan, converting the case to Chapter 7, or in some situations requesting a hardship discharge. What's available depends heavily on your specific circumstances.
- Is Chapter 13 better than Chapter 7 for someone with a steady paycheck?
- Not automatically. It depends on what you're trying to protect. Chapter 13 tends to make sense when you have property to save or debts that Chapter 7 wouldn't erase; otherwise Chapter 7's shorter timeline can be the better fit.
- Do I need a lawyer to file Chapter 13 in New Jersey?
- You're not required to have one, but Chapter 13 plans involve ongoing court supervision for years, and mistakes in how a plan is drafted or administered can be costly. Most people filing Chapter 13 work with a bankruptcy attorney for that reason.
- Will filing Chapter 13 stop a wage garnishment right away?
- Generally, yes. The automatic stay that takes effect when you file applies to most wage garnishments and collection actions, though your attorney still typically needs to notify the garnishing creditor and the court so the garnishment actually gets released in practice.
