Chapter 13 Bankruptcy

Chapter 13 Bankruptcy

This article will give you Chapter 13 Bankruptcy in a nutshell. It does not cover all aspects of a Chapter 13 but I’d love to speak with you, in person, about your particular case and go over all the details as well as your options. If you have questions or need help figuring out if a Chapter 13 Bankruptcy is right for you please call my office to set up your free consultation today- 858-549-8600 or use the web form to request an appointment online.

A Chapter 13 can resolve IRS and State problems, while dealing with other creditors, secured and unsecured, and providing protection from the Court.

How it Works


 1. File a petition

When the petition asking the court to allow the debt to go in to Chapter 13 Bankruptcy is filed in Federal court, all creditors including the IRS must stop all collection activity and release wage garnishments and bank levies. Creditors are not allowed to foreclose on real estate, obtain possession of property, or commence or continue any proceedings against the debtors once the Chapter 13 bankruptcy is filed.

2. Enter into a “Plan”

Under Chapter 13 bankruptcy a Petitioner (the person owing the money) enters into a “Plan” approved by the Court to be administered by a Trustee (a trusted 3rd party). The “plan” sets it up so that tax and non tax debts are paid back over a period of three to five years.

Once the petition (asking to allow for a chapter 13 bankruptcy) and plan (to pay off debts over 3-5 years) are filed, all interest and penalties end as long as the Petitioner completes the “Plan” as approved by the Court in less than five years. If the Petitioner does not complete the “Plan”, the IRS can go back and add the the interest and penalties retroactively from the date of filing the Petition and once again begin collection activity.

Who can file?

Individuals (and their spouses) who have regular income are eligible. Sole proprietors are also eligible and can continue their business without direct court supervision.

How much is paid to the Trustee?

We determine the amount to be paid to the trustee as follows:

gross monthly income – standard withholdings – reasonable living expenses = disposable income

Gross monthly income = Starting pay before anything is taken out

Standard withholdings = Federal tax, FICA, State tax, etc.

Reasonable living expenses = rent/mortgage, gas, electric, telephone, food, child care, entertainment, car, etc.

The disposable income is paid monthly to the Chapter 13 trustee who pays creditors according to the “Plan”. If the projected payments, based on the calculation you see above, is enough to complete the plan/pay off the debt within the 3-5 year period, the court will approve it. If not, the plan is rejected and the court does not offer the protection of Chapter 13 bankruptcy.

There are limits to a Chapter 13.

The amount of unsecured and secured debts allowed under the “plan” are limited to approximately $350,000 and $1,000,000 respectively.

The filing of the Petition does not stop fraud or criminal investigation.

Set up a free consultation with Gary to find out how a Chapter 13 bankruptcy can help your tax situation. Gary is a Chapter 13 expert. He’s been helping people like you since 1988 . Call today 858-549-8600

For additional information on Chapter 13 see the IRS Bankruptcy Tax guide.

By: Gary A. Quackenbush



This article provides general information about California law. The laws are constantly changing and this article is not intended to provide legal advice about your specific situation. Seek competent legal counsel. Let me advise you about your particular situation.

Gary A. Quackenbush, Esq.