Chapter 13 Bankruptcy in Miami | Law Offices of Albert Goodwin, PA

Chapter 13 bankruptcy is a court-supervised repayment plan that lasts three to five years. It is the right tool when you need to keep property that is not fully covered by exemptions, when you need to stop a foreclosure sale and catch up on a mortgage, when your income exceeds the Chapter 7 means-test threshold, or when you want to pay non-dischargeable debt over time without interest and penalties continuing to accrue. At the end of a successful Chapter 13 plan, the court enters a discharge that eliminates whatever unsecured debt was not paid through the plan.

Why People File Chapter 13 Instead of Chapter 7

Common reasons our Miami clients choose Chapter 13:

To stop a foreclosure and save the house. Chapter 13 lets you cure the entire mortgage arrearage over up to 60 months, with no interest on the arrears, while you make ongoing post-petition mortgage payments. As long as you keep the plan current and the post-petition mortgage current, the foreclosure cannot proceed.
To strip a wholly unsecured second mortgage or HELOC. If your first mortgage balance exceeds the home's fair market value, the second mortgage is treated as unsecured debt, paid pennies on the dollar (or zero) through the plan, and the lien is removed when the plan completes.
To cram down a car loan. For vehicles purchased more than 910 days before filing, the loan principal is reduced to the car's fair market value, the interest rate is reduced to the Till rate (currently around prime + 1-3%), and the lender is paid the new amount over the life of the plan.
To pay non-dischargeable income tax over time. Recent income tax debt is non-dischargeable but must be paid in full as a priority claim through the Chapter 13 plan, with no further interest or penalties accruing.
Because income exceeds the Chapter 7 means-test limit. Above-median earners can usually only file Chapter 13.
To protect a co-signer. Chapter 13 includes a co-debtor stay that protects guarantors and co-signers on consumer debts.
Because there are non-exempt assets the filer wants to keep. In Chapter 13, you keep your property regardless of exemptions, as long as unsecured creditors receive at least as much through the plan as they would have received in a Chapter 7 liquidation.

How a Chapter 13 Plan Is Structured

The Chapter 13 plan is a written document filed with the court that proposes how the filer will pay creditors over three to five years. Below-median income filers typically file 36-month plans; above-median filers must file 60-month plans unless they pay all allowed claims in full.

The plan must do at least the following:

Pay all administrative expenses (filing fee, attorney's fees not collected up front, trustee's percentage fee) in full
Pay all priority claims (recent taxes, domestic support, certain other categories) in full
Pay secured claims at least the value of the collateral, plus interest, unless the debtor surrenders the collateral
Pay unsecured creditors at least as much as they would have received in a Chapter 7 case (the "best interest of creditors" test)
Devote all the debtor's projected disposable income to the plan if any unsecured creditor objects (the "disposable income" test, applicable mainly to above-median filers)

Plan payments are made monthly to the standing Chapter 13 trustee, who distributes the funds to creditors according to the plan.

Eligibility and the Chapter 13 Debt Limits

To file Chapter 13, an individual must:

Have regular income sufficient to fund a feasible plan
Have non-contingent, liquidated debts within the statutory ceiling
Complete pre-filing credit counseling from an approved provider within the 180 days before filing
Not have had a prior bankruptcy dismissed within 180 days for specific procedural reasons (such as willful failure to comply with court orders or voluntary dismissal after a creditor sought stay relief)

The Chapter 13 debt limit has changed in recent years. Under the Bankruptcy Threshold Adjustment and Technical Corrections Act, Congress created a unified combined debt limit of approximately $2.75 million for individuals filing Chapter 13. That replaced the earlier split system (around $465,275 unsecured and $1,395,875 secured under the figures most attorneys learned). The unified ceiling is large enough that almost no consumer case is now blocked by eligibility, and many small-business owners who previously had to file Chapter 11 can now use Chapter 13. The figures are adjusted from time to time, and the temporary increase is subject to reauthorization – we confirm the current ceiling at the time of every filing.

Only individuals (and sole proprietors) can file Chapter 13. Corporations and LLCs file Chapter 11 instead. See our business bankruptcy page.

The Commitment Period and the Means Test in Chapter 13

Chapter 13 uses the same means test as Chapter 7, but it serves a different purpose. In Chapter 7, the means test decides whether you qualify to file at all. In Chapter 13, the means test decides how long the plan must last and how much disposable income must go to unsecured creditors.

Filers whose current monthly income (the six-month average leading up to filing, annualized) is at or below the Florida median for their household size are below-median. They must propose plans of at least 36 months and can use a more flexible budget test. Filers whose CMI is above the Florida median are above-median; they must propose 60-month plans (unless they pay all allowed unsecured claims in full sooner) and must use the IRS Local and National Standards for their allowable expenses on Form 122C-2. The disposable income calculation drives the minimum payment to general unsecured creditors over the life of the plan. See our means test page.

Key Chapter 13 Tools Under § 1322

The plan provisions allowed under 11 U.S.C. § 1322 are what make Chapter 13 powerful:

Section 1322(b)(5) cure and maintain. The single most important provision for homeowners. The plan cures arrears on the principal residence over up to 60 months while the debtor maintains ongoing post-petition payments. The lender cannot foreclose for as long as the plan stays current. This is how Chapter 13 stops foreclosure.
Section 1322(b)(2) modification of secured claims. The plan can modify the rights of holders of secured claims, with one famous exception – the lender's claim secured only by the debtor's principal residence cannot be modified. That carve-out is why first mortgages on a primary home cannot be crammed down. It is also why a junior mortgage that is wholly unsecured (the senior lien exceeds the home's value) can be stripped: the wholly unsecured junior is treated as unsecured under § 506(a), and § 1322(b)(2)'s anti-modification clause does not apply because the claim is not, in legal effect, secured by the residence.
Section 506(a)/(d) lien valuation. Outside the primary residence, an undersecured creditor's claim is bifurcated into a secured portion (equal to collateral value) and an unsecured portion. The secured portion is paid through the plan with interest at the cramdown rate; the unsecured portion is paid the same percentage as other general unsecured debt.
The 910-day hanging paragraph. Section 1325(a)(*) prevents cramdown on a vehicle purchased for personal use within 910 days of filing. Cars bought more than 910 days before filing can be crammed down to fair market value. Cars bought within the 910-day window must be paid at the full loan principal, though the interest rate can still be reduced.
Co-debtor stay. Section 1301 extends the automatic stay to non-filing co-debtors and guarantors on consumer debts – protecting a parent who co-signed a child's car loan, or a friend who co-signed a personal loan.

The Standing Chapter 13 Trustee

Chapter 13 cases in the Southern District of Florida are administered by standing trustees who are appointed by the United States Trustee. The standing trustees in Miami and Fort Lauderdale review every plan, attend every confirmation hearing, and act as the conduit for plan payments – the debtor pays the trustee monthly, and the trustee pays the creditors according to the plan. The trustee earns a percentage fee from each payment (currently capped at 10%). The trustee will object to a plan that does not pay what the statute requires, that is not feasible on the debtor's actual budget, or that proposes treatment of a particular creditor that the trustee disagrees with. Working with the trustee and her staff – not against them – is a major part of getting a plan confirmed quickly.

Confirmation, Modification, and the Discharge

The plan must be confirmed by the court within roughly 45-90 days of filing. Once confirmed, the plan binds the debtor and the creditors. If the debtor's circumstances change during the plan – a layoff, a medical emergency, a divorce, a windfall – the plan can be modified under § 1329 to adjust the payment amount, reallocate funds among creditors, or extend the term within the statutory maximum. A modification requires a motion, notice to creditors and the trustee, and court approval.

If the debtor cannot continue plan payments and modification will not fix the problem, the case can be converted to Chapter 7 (if the debtor still qualifies) or dismissed. Conversion preserves the discharge of unsecured debt; dismissal does not, and creditors are restored to their pre-petition collection rights. Some Chapter 13 filers also qualify for a hardship discharge under § 1328(b) if circumstances beyond their control make completion impossible – the standard is strict and the debtor must have already paid unsecured creditors at least as much as they would have received in a Chapter 7 liquidation.

At the successful completion of all plan payments, the court enters the Chapter 13 discharge, eliminating whatever unsecured debt was not paid in full.

The Chapter 13 Timeline

Day 0: Petition, schedules, and plan filed; automatic stay invoked
Day 30: First plan payment due to the trustee, even if the plan has not yet been confirmed
Day 21-50: 341 meeting of creditors
Day 45-90: Confirmation hearing on the plan
Months 1-60: Plan payments continue; the trustee distributes funds to creditors
End of plan: Discharge entered, eliminating whatever unsecured debt was not paid in full

What Happens If Things Change

Life happens. If you lose a job, get divorced, become ill, or experience some other significant change in circumstances during the plan, options include modifying the plan, converting to Chapter 7, or dismissing the case. We help clients navigate those decisions when they arise.

Schedule a Consultation

If you are behind on a mortgage, facing foreclosure, dealing with tax debt, or otherwise considering Chapter 13, call 786-522-1411 or email [email protected]. We will run the numbers and tell you honestly whether Chapter 13 makes sense.