chapter 13

Chapter 13 Bankruptcy Minnesota: Your Repayment Plan to a Fresh Start

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 homeStop 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.

schedule a consult with todd

The Minnesota Guide to Chapter 13 Bankruptcy: Part 4—The Process

Part 1—Chapter 13 Basics
Part 2—Benefits of Chapter 13
Part 3—How Your Plan Payment is Calculated

HOW DO I GET STARTED?

The Chapter 13 process starts when you hire a lawyer. We offer consultations by phone or video for your convenience. Once you decide it’s time to move forward, we’ll send you a services agreement to review and sign electronically. We also accept electronic payments. Our online questionnaire is easy to use and can be completed at your convenience.

What Does Chapter 13 cost?

In Chapter 13, you pay a flat fee out-of-pocket. When you're in financial trouble, you want predictability. You don't want your lawyer to run up the bill on you. That's why we quote you a flat fee at the beginning of the process, and that's what you pay. We agree on it at the start so you can plan for the expense.

Unlike Chapter 7, you don't need to pay your whole fee upfront in Chapter 13. In fact, in many cases Chapter 13 costs less up front than Chapter 7. We generally require a minimum of $1,000 before filing in a Chapter 13, but this can depend on your case.

What happens after you file your case?

As soon as the case is filed with the court, your bankruptcy protection begins. No creditors can call, write, or sue you, and any pending foreclosures, repossessions, or garnishments must stop immediately. After that, you’ll get a date for your bankruptcy meeting of creditors.

What is the meeting of creditors?

A meeting of creditors is a short interview that happens in person, or by phone/video. The bankruptcy trustee will go over your assets, debts, income, and expenses with you, and make sure you’re paying an appropriate amount to your creditors. Once we get the trustee and your creditors to agree to the plan, your case will be on track to get confirmed.

What happens after the plan is confirmed?

Once your case is confirmed, there’s not usually much to do in your case other than make your plan payments. We’ll generally check in every year around tax time, and you’ll have to let your lawyer know if you are having trouble making your payments so you can get some help. Because of your bankruptcy protection, your creditors will be breaking the law if they contact you after you file Chapter 13, so you should let your bankruptcy lawyer know right away if a collector is calling. We can put a stop to the calls and may even be able to get them to pay you for breaking the law.

Part 1—Chapter 13 Basics
Part 2—Benefits of Chapter 13
Part 3—How Your Plan Payment is Calculated

The Minnesota Guide to Chapter 13 Bankruptcy: Part 3—How Your Plan Payment is Calculated

Part 1—Chapter 13 Basics
Part 2—Benefits of Chapter 13
Part 4—The Chapter 13 Process

Chapter 13 involves paying your disposable income to creditors over a three or five-year period. Whatever isn't paid during that period is wiped out. But to figure out whether Chapter 13 is a good option, you need to know exactly how much your monthly payment will be. Here’s how we figure that out.

First, We predict your future income

To figure out your Chapter 13 payment, we need to predict your future income. We start by averaging out your income over the past six months. This amount can then be adjusted to account for changing circumstances, for example if you have just taken a pay cut or you know you won't be receiving the same amount of overtime.

Next, we predict your future expenses

Next, we figure out your expenses. We look at all the expenses that are necessary to take care of your family's needs: food, rent/mortgage, car payment, utilities, etc. We also look at things that you know you’ll be spending, like car repairs, home maintenance or dental work. Then we look at things you should be spending on, but haven't because you've been in financial trouble. This can include health insurance and other medical expenses, sometimes a 401(k) or life insurance, etc. If there's something that's not on our list of ordinary expenses, that doesn't mean we can't deduct it, as long as we can explain why it’s reasonable and necessary.

Once we count all these expenses, we subtract them from income and we get an idea of your disposable income.

Your attorney will help maximize your expenses

As your attorney, it’s our job is to protect the money that’s necessary for you to take care of yourself and your family. So we ask for two things: 1) verification of your expenses, so we can prove that you actually need to spend that money; and 2) information on why your expenses are reasonable and necessary.

For example, one client had an $800 monthly bill for auto fuel. This may seem unreasonably high, until we realized that the client lives 60 miles from where he works. If we can explain to the court why an expense is reasonable, there is a better chance it will be allowed.

THe payment has to be enough to cover required debts

Chapter 13 payments must be large enough to pay certain required debts. For example, if you are trying to get current on a mortgage, your total plan payments must cover the amount of your mortgage arrears. Plan payments also must cover any secured debt (car loans) that end within the plan period. Also, plan payments must cover any priority debt, such as some tax debt or government penalties within the plan period. If the total plan payments are enough to pay all of these required debts over the plan period, then your plan can be approved.

The payment has to treat your creditors fairly

If you have non-exempt property that you’re looking to protect in a Chapter 13, your Chapter 13 payments must be at least the value of your nonexempt property. In other words, in Chapter 13 your unsecured creditors can't receive any less in the plan than they would have received in Chapter 7 if your nonexempt property was liquidated.

Part 1—Chapter 13 Basics
Part 2—Benefits of Chapter 13
Part 4—The Chapter 13 Process

 

The Minnesota Guide to Chapter 13 Bankruptcy: Part 2—Benefits of Chapter 13

Part 1—Chapter 13 Basics
Part 3—How Your Plan Payment is Calculated
Part 4—The Chapter 13 Process

There are many benefits of Chapter 13 bankruptcy versus a Chapter 7. A few of them are obvious, but some are a little more hidden. Here are a few:

You get to keep your stuff

In Chapter 13, you don’t have to worry about losing your car to pay your creditors. Instead of giving up your stuff, Chapter 13 allows you to keep everything as long as you’re paying enough to your creditors.

You can stop foreclosure permanently

Both Chapter 7 and 13 bankruptcy allow you to pause the foreclosure process. In Chapter 7, however, once the bankruptcy is done the mortgage company can go right back to foreclosing. In Chapter 13, you can take mortgage arrears and spread them out over a three to five year period. As long as you can pay your mortgage arrears back over this time, you can stop the foreclosure permanently.

You can deal with tax debt, mortgage debt, and domestic support in flexible ways

Chapter 13 helps people deal with delinquent tax debt, mortgage debt, and past-due child support or alimony by allowing the filer to pay the debt over a longer period of time and get out of default immediately. Once the Chapter 13 is over, those debts will be paid in full.

It hurts your credit score less

Chapter 13 bankruptcy stays on your credit report for seven years, rather than the ten years a Chapter 7 stays on your record. Also, Chapter 13 has less negative impact while it’s on your credit report, because you’re paying part of your debt back instead of wiping it all out.

Attorney fees are more flexible

In Chapter 7, you’ll need to pay the entire attorney fee up front before filing. In Chapter 13, the majority of your attorney fee is taken out of your monthly payment. This means in a lot of cases, you pay very little before filing and the rest of your attorney fees is come out of your creditors’ pockets.

Part 1—Chapter 13 Basics
Part 3—Stopping foreclosure in Chapter 13
Part 4—The Chapter 13 Process