Why Chapter 13 Might Be Right for You
If you’re behind on your mortgage, worried about losing your car, or struggling to keep up with multiple debts, you’re not alone. Many Minnesotans who have a steady income but can’t dig out of arrears turn to Chapter 13 bankruptcy in Minnesota.
Unlike Chapter 7, which wipes out most debts in just a few months, Chapter 13 gives you time and structure: a 3–5-year repayment plan that lets you catch up on past-due payments, protect your property, and move forward without the constant fear of foreclosure or repossession.
This guide walks you step by step through everything you need to know about Chapter 13: who qualifies, how it works, what the benefits and drawbacks are, and how we protect your rights before, during, and after the process.
What Is Chapter 13 Bankruptcy?
Chapter 13 is often called a “reorganization bankruptcy.” Instead of wiping out debt all at once, it creates a court-approved repayment plan tailored to your income and debts.
Key features:
You keep your home and car if you stay current under the plan.
You pay back certain debts (like mortgage arrears, car loans, or taxes) over time.
Unsecured debts (like credit cards and medical bills) may be reduced or eliminated at the end of the plan.
The repayment plan lasts 3–5 years, depending on your household income.
Chapter 13 is a powerful tool for people who want to save their home, restructure debt, and get on stable footing.
Who Benefits from Chapter 13 in Minnesota?
Chapter 13 is best suited for Minnesotans who:
Have steady income (W-2, self-employed, Social Security, pension) and can make monthly payments.
Are behind on their mortgage or car loan but want to keep the property.
Don’t qualify for Chapter 7 because of higher income or valuable non-exempt assets.
Have debts that Chapter 7 won’t erase, like certain taxes or divorce-related obligations, but need a structured way to pay them.
Need to protect co-signers from collection activity.
If your goal is to catch up rather than simply wipe out debt, Chapter 13 may be the right fit.
Eligibility Requirements in Minnesota
To qualify for Chapter 13, you must meet certain criteria:
Debt limits: As of 2025, your secured debts must be under about $1.5 million and unsecured debts under about $525,000 (adjusted periodically).
Regular income: You need enough predictable income to make plan payments.
Prior bankruptcies: You can’t file Chapter 13 if you had a Chapter 7 discharge within the last 4 years, or a Chapter 13 discharge within the last 2 years.
Credit counseling: Like Chapter 7, you must complete a credit counseling course before filing.
Step-by-Step: How Chapter 13 Works in Minnesota
Step 1: Preparation
You’ll gather pay stubs, tax returns, mortgage/car loan statements, and other financial records. You’ll also complete a credit counseling course online.
Step 2: Filing the Petition
Once we file your case in Minnesota’s federal bankruptcy court, an automatic stay takes effect. This immediately stops foreclosure, garnishments, repossessions, and creditor lawsuits.
Step 3: Creating Your Repayment Plan
We propose a plan based on your income, expenses, and debts. The plan prioritizes:
Secured debts (mortgage arrears, car loans)
Priority debts (child support, alimony, certain taxes)
Remaining disposable income goes to unsecured creditors (credit cards, medical bills, personal loans, etc.).
Step 4: 341 Meeting of Creditors
About a month after filing, you’ll attend a brief meeting with the trustee. Creditors rarely appear. The trustee asks simple questions about your plan and finances.
Step 5: Plan Confirmation
The bankruptcy judge reviews and approves your repayment plan, usually within 2–3 months.
Step 6: Making Payments
You’ll make monthly payments to the Chapter 13 trustee, who distributes them to creditors. Plans typically last 5 years, although they can be shorter in some cases.
Step 7: Discharge
At the end of the plan, remaining eligible unsecured debts are discharged, or wiped out permanently.
What Payments Look Like
Chapter 13 plans start with your disposable income, that is, what’s left after reasonable living expenses. In addition, you must repay any mortgage or auto loan arrears, as well as child support, alimony, and most tax debts.
Advantages of Chapter 13 Bankruptcy
Keep your home – Stop foreclosure and catch up on missed mortgage payments.
Save your car – Spread out car loan payments or catch up on arrears.
Restructure debts – Combine multiple payments into one manageable plan.
Protect co-signers – In some cases, Chapter 13 shields them from collection.
Expanded discharge – Some debts dischargeable in Chapter 13 are not in Chapter 7.
Peace of mind – Creditors can’t harass you while you’re in the plan.
Drawbacks and Challenges
Length – 5 years requires discipline.
Strict budget – Missing payments can risk dismissal of the case.
Cost – Trustee fees and legal fees are higher than in Chapter 7.
Not instant relief – Unlike Chapter 7, you won’t be debt-free in a few months.
Chapter 13 vs. Chapter 7 in Minnesota
Chapter 7: Quick (3–4 months), discharges unsecured debts, but you must be below certain income levels and you can’t catch up on mortgage arrears over time.
Chapter 13: Longer (3–5 years), repayment-based, protects your home/car if you’re behind, requires regular income.
Many clients who start thinking they need Chapter 7 discover Chapter 13 is a better fit because it allows them to save non-exempt property and restructure debt.
Local Process: Minnesota Bankruptcy Courts
Chapter 13 cases in Minnesota are filed in one of the U.S. Bankruptcy Court – District of Minnesota divisions: Minneapolis, St. Paul, Duluth, or Fergus Falls. Trustees vary by district. Having a lawyer who knows the local trustees and procedures makes the process much smoother.
Common Myths About Chapter 13 Bankruptcy
“I’ll be stuck in this forever.” – No, the maximum plan length is 5 years.
“I’ll lose my house anyway.” – Not if you keep up with your repayment plan.
“I’ll never get credit again.” – False. Many people receive credit offers within a year or two of discharge.
“I can’t ever pay off my debts.” – Chapter 13 consolidates and reduces payments, often leaving unsecured creditors with pennies on the dollar.
Protecting Your Rights During and After Chapter 13
Even after you file Chapter 13, creditors sometimes break the law. That’s where other consumer protections come in:
FDCPA (Fair Debt Collection Practices Act) – If a collector contacts you during your case, it may be illegal harassment.
FCRA (Fair Credit Reporting Act) – If a creditor reports you as “late” on debts that are included in your plan, that may be a violation.
EFTA (Electronic Fund Transfer Act) – If creditors keep auto-debiting after you file, they may be breaking federal law.
At Friedman Murray Law, we don’t just file your case. We defend your rights every step of the way.
FAQs About Chapter 13 Bankruptcy in Minnesota
Q: How long does Chapter 13 take in Minnesota?
A: Most plans are 5 years, though they can be 3 years in some cases.
Q: Can I stop foreclosure with Chapter 13?
A: Yes. Filing immediately stops foreclosure and lets you catch up on arrears through the plan.
Q: What happens if I miss a payment?
A: Missing payments can lead to dismissal, but sometimes plans can be modified if your circumstances change.
Q: Does Chapter 13 cover tax debt?
A: Certain tax debts must be repaid in full, but penalties and interest may stop accruing.
Q: Can I convert my Chapter 13 to a Chapter 7?
A: Yes, if you later qualify, conversion is possible.
In Minnesota and ready to talk to a lawyer about bankruptcy?
Schedule a free consult with bankruptcy lawyer Todd Murray.
Since 2009, Todd has helped hundreds of Minnesotans get out of debt. His work has saved his clients millions of dollars (and many sleepless nights) in the process. Todd’s clients have described him as “very professional and easy to work with.” He lives in Minneapolis with his wife and four children.