Chapter 13 Bankruptcy Guide 2026 | Stop Foreclosure & Protect Assets

This Chapter 13 guide for 2026 provides guidance on how reorganization works. I have designed this analysis to help you better understand Chapter 13 bankruptcy, including the court-ordered repayment plans, ensuring you can protect your home from foreclosure, as well as other non-exempt assets.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Key Takeaways: The Chapter 13 Guide for 2026

• Protect Your Home & Equity: Chapter 13 bankruptcy remains the only option to permanently stop a foreclosure if you intend to keep the property. In 2026, Chapter 13 bankruptcy allows you to “cure” mortgage arrears (missed payments) over a 3-to-5-year plan.
• New Bankruptcy Rule 3002.1: On December 1, 2025, Rule 3002.1 was updated to protect debtors, forcing mortgage servicers to be more transparent. This includes the right at any time to request a case audit to ensure your mortgage payments are being applied correctly to your principal and escrow.
• Using the “Cram Downs” and Lien Stripping a Mortgage: With Chapter 13 bankruptcy, debtors can reduce car loan balances to the vehicle’s actual 2026 market value or “strip” a second mortgage if your home’s value is less than what you owe.

2026 Chapter 13 Guide: The Wage Earner’s Plan for Asset Protection

Chapter 7 bankruptcy is commonly referred to as a “Fresh Start,” while Chapter 13 is known as a “reorganization.” Since income is required to qualify for Chapter 13, the Bankruptcy Code refers to it as a “wage earner’s plan.”

In 2026, as bankruptcy filings continue to surge for large and small corporations, including individuals, Chapter 13 can be the financial lifeline needed to protect your home and assets.

Why File Chapter 13 Bankruptcy? Your Financial Guide for 2026

Unlike the liquidation process of Chapter 7 for non-exempt assets, Chapter 13 allows you to keep your property while paying off debts over a three-to-five-year period. In 2026, you can use Chapter 13 bankruptcy for:

Curing Mortgage Arrears: Stopping foreclosure and catching up on missed payments. Catching up on secured debt payments is not an option with Chapter 7 bankruptcy.

Protecting Non-Exempt Assets: Keeping equity that exceeds state or federal exemption limits.

Lien Stripping: Potentially reducing or removing a second mortgage or HELOC (Home Equity Line of Credit) if your home’s value is less than what you owe. Commonly referred to as an “underwater mortgage.” With foreclosure rates rising, this could be a key 2026 strategy to save tens of thousands of dollars.

Cram Downs: Reducing the balance of a car loan to the actual value of the vehicle.

Eligibility for Chapter 13 Bankruptcy & 2026 Debt Limits

To file for Chapter 13 bankruptcy, you must have a regular source of income (wage earner’s plan) and fall within the federal debt limits. As of 2026, generally, you must owe less than $2.75 million in total debt to qualify for Chapter 13; otherwise, you can file Chapter 11.

The 2026 Requirements Under the New Bankruptcy Rule 3002.1

A significant change took place on December 1, 2025, that involves the Federal Rule of Bankruptcy Procedure 3002.1.

No More Surprise Fees: Mortgage servicers are now under stricter requirements to provide transparent notices of payment changes and escrow adjustments.

Mid-Case Verification: Chapter 13 debtors have the right to request a “Status of Claim” at any time, ensuring that their payments are being applied correctly.

Notice of the Final Cure Payment: New procedures require that when you make your final payment, the court verifies you are 100% current on the mortgage, preventing lenders from claiming “hidden defaults” and charging hidden fees post-discharge.

The Chapter 13 Bankruptcy Timeline

The timeline for Chapter 7 versus Chapter 13 is significantly different. Here’s what you need to know:

Filing the Bankruptcy Petition: Once the petition is filed, this triggers the Automatic Stay, immediately halting foreclosures, repossessions, and garnishments. Note that because there’s a lag between filing and notifying creditors, especially in collection lawsuits and foreclosures, I recommend that a Suggestion of Bankruptcy also be filed in the state court action.

Submitting the Plan: The “plan,” which is how your payments will be structured, must be submitted within 14 days of filing the bankruptcy petition.

The First Plan Payment: You must begin making your plan payments to the Standing Trustee, even before the judge approves the plan at the Confirmation Hearing. So, depending on when the bankruptcy petition was filed, it’s possible that the 341 meeting won’t take place until after thirty days. If that first payment hasn’t been made by the time of the 341 Meeting of Creditors, the trustee will announce that they are seeking a dismissal.

The 341 Meeting of Creditors: The 341 Meeting of Creditors, or the Creditors’ Meeting, is when you meet with the Trustee to verify your bankruptcy petition. If you hired a bankruptcy attorney, your attorney will also be present. You can learn more about the 341 Meeting in this short video.

The Confirmation Hearing: At the Confirmation Hearing, the judge officially approves your plan. However, note that it is common to have multiple Confirmation Hearings because creditors object to the plan amount, so plans may be adjusted several times. However, throughout this time, you are still required to continue to make payments.

The Professor’s Conclusion

Chapter 13 bankruptcy is a marathon, not a sprint, but it is a powerful tool when it comes to saving your home, especially when you have not been able to reach an agreement with a lender to catch up on arrears.

You can read about the Chapter 7 guide in this prior article.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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Please note that the information on this site does not constitute legal advice and should be considered for informational purposes only.