How a Chapter 13 Bankruptcy Plan Works in South Carolina
Chapter 13 bankruptcy is one of the most powerful debt-relief tools available to individuals with steady income who need time and structure to get back on track financially. For many South Carolina residents, Chapter 13 bankruptcy provides a way to stop foreclosure, catch up on missed payments, and manage overwhelming debt without giving up important assets. At the Stone Law Firm, we are able to help Debtors draft a Chapter 13 plan to help save a house, car, or both and in many cases propose a plan that pays pennies on the dollar on the Debtor’s unsecured debt.
This comprehensive guide explains who qualifies for Chapter 13, how a Chapter 13 plan works, how it helps debtors, how it differs from Chapter 7, recent updates and SC Bankruptcy Court local rules, and includes a Chapter 13 FAQ section for commonly asked questions.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a form of reorganization under federal bankruptcy law. Instead of liquidating assets, Chapter 13 allows eligible debtors to repay all or a portion of their debts through a court-approved repayment plan lasting three to five years.
Debtors make one monthly payment to a Chapter 13 trustee, who distributes funds to creditors according to bankruptcy law and the confirmed plan. At the end of the plan, most remaining unsecured debt is discharged.
Because it relies on future income, Chapter 13 is often referred to as a “wage earner’s bankruptcy.”
Who Qualifies for Chapter 13 in South Carolina?
To file a Chapter 13 case in South Carolina, you must meet several legal requirements:
Regular Income Requirement
You must have a regular and reliable source of income, such as wages, self-employment income, retirement benefits, Social Security, or other recurring income. The court must be confident you can make monthly plan payments.
Debt Limits
Federal law places limits on how much secured and unsecured debt you may have to qualify for Chapter 13. These limits are adjusted periodically. If your debts exceed these limits, Chapter 11 may be required instead.
Tax Filing Compliance
You must be current on filing required tax returns, or be able to file them shortly after your case begins. Failure to comply can result in dismissal. This is includes the IRS and State level tax returns.
Credit Counseling
Before filing, you must complete an approved credit counseling course within 180 days of filing your case.
Chapter 13 is commonly used by South Carolina residents who are behind on mortgage payments, facing repossession, or earning too much to qualify for Chapter 7 bankruptcy.
How a Chapter 13 Case Starts in South Carolina
A Chapter 13 case begins when you file a petition in the U.S. Bankruptcy Court for the District of South Carolina. Along with the petition, you file:
- Schedules of assets and debts
- Income and expense statements
- A proposed Chapter 13 repayment plan
- Credit counseling certificate
Immediately upon filing, the automatic stay goes into effect. This stops most collection activity, including:
- Foreclosure proceedings
- Repossessions
- Wage garnishments
- Lawsuits and collection calls
The automatic stay is one of the most immediate and valuable protections Chapter 13 provides.
How a Chapter 13 Repayment Plan Works
The repayment plan is the core of a Chapter 13 case. It outlines how debts will be handled over the plan period.
Plan Length: Three vs. Five Years
Plan length depends largely on income:
- Below-median income debtors may qualify for a three-year plan
- Above-median income debtors must commit to a five-year plan
Median income levels are based on South Carolina household data and are updated regularly.
Monthly Plan Payments
You make one monthly payment to the Chapter 13 trustee, often by payroll deduction. The amount is based on:
- Disposable income
- Required payments on secured debts
- Priority debt obligations
- Minimum amounts required for unsecured creditors
The plan must be feasible, meaning you can realistically afford it.
How Chapter 13 Helps a Debtor
Chapter 13 offers several powerful benefits for South Carolina debtors:
Stop Foreclosure and Catch Up on Mortgage Payments
Chapter 13 allows you to save your home by spreading past-due mortgage payments over the plan while continuing regular payments.
Prevent Repossession
Chapter 13 can stop vehicle repossession and allow you to catch up on missed car payments over time.
Consolidate Debt into One Payment
Instead of juggling multiple creditors, you make a single monthly payment to the trustee.
Reduce Unsecured Debt
Credit cards, medical bills, and personal loans often receive only a portion of what is owed. Any remaining balance is typically discharged at the end of the plan. This is a powerful tool in Chapter 13. In most cases, a Debtor is able to propose a plan that pays less than the total unsecured debt owed. Sometimes as low as a penny on the dollar.
Protect Assets
Unlike Chapter 7, Chapter 13 allows you to keep non-exempt property as long as your plan meets legal requirements. This maybe one of Chapter 13 bankruptcy’s most powerful tool in guarantying the Debtor doesn’t lose any asset such as a house or car.
Chapter 13 vs. Chapter 7: Key Differences
Chapter 13
- Repayment plan lasting 3–5 years
- Requires regular income
- Allows debtors to keep property
- Stops foreclosure and allows catch-up payments
- Discharge occurs after plan completion
Chapter 7
- Faster process, usually 3–4 months
- No repayment plan
- Non-exempt assets may be sold
- Does not allow curing mortgage arrears
- Income limits apply through the means test
For many South Carolina homeowners, Chapter 13 is the only option that provides meaningful long-term protection.
Recent Updates Affecting Chapter 13 in South Carolina
Local Rule Changes (Effective December 1, 2025)
- New Trustee’s Notice of Plan Payment Change for conduit payments
- Updated approved non-standard plan language for mortgages
- Revised mediation and plan completion notices
- Expanded CM/ECF docket events for mortgage-related motions
- Pro se filing procedures improved for notice scheduling
Presumptive Interest Rate Update
- Effective December 17, 2025, the new rate is 8.25%, impacting secured claims and cramdown valuations.
Federal Bankruptcy Rule Amendments
- Rule 3002.1: New formal process for mortgage claim disputes and notice of payment changes
- Rule 8006: Clarifies appeal certification to federal appellate courts
Continuing Impact from December 1, 2024 Amendments
- Certification of plan completion now uses provider certification instead of Official Form 423
- Local forms updated for discharge eligibility and plan completion
Completing the Plan and Receiving a Discharge
Once all plan payments are made, you must complete a financial management course. The court then issues a Chapter 13 discharge, eliminating most remaining unsecured debt.
Debts that generally are not discharged include:
- Student loans
- Most domestic support obligations
- Certain recent taxes
FAQ: Chapter 13 Bankruptcy in South Carolina
Q1: How long does a Chapter 13 plan last?
A: Plans typically last three to five years, depending on your income relative to South Carolina median income levels.
Q2: Can Chapter 13 stop foreclosure?
A: Yes. The automatic stay stops foreclosure, and the plan allows you to catch up on missed mortgage payments over time.
Q3: What debts are discharged in Chapter 13?
A: Most unsecured debts, including credit cards and medical bills, are discharged upon completion of the plan. Some debts, like student loans and child support, are not discharged.
Q4: How is Chapter 13 different from Chapter 7?
A: Chapter 7 liquidates non-exempt assets and offers a quick discharge, while Chapter 13 allows you to keep property and repay debts over time under a court-approved plan.
Q5: Who qualifies for Chapter 13 in South Carolina?
A: Individuals with regular income, debt under federal limits, and compliance with credit counseling and tax filing requirements can qualify.
Q6: Are there recent updates South Carolina debtors should know?
A: Yes. Key updates include new local rules for conduit mortgage plans, updated presumptive interest rates (8.25%), and federal rule amendments for mortgage claim notices effective Dec. 1, 2025.
Is Chapter 13 Right for You in South Carolina?
Chapter 13 bankruptcy can provide protection, structure, and a clear path to debt relief while allowing you to keep your home and other assets. Because rules and procedures change frequently, consulting an experienced South Carolina bankruptcy attorney ensures your Chapter 13 plan is properly structured and completed successfully.
Final Thoughts
Understanding how a Chapter 13 plan works in South Carolina empowers you to make informed financial decisions. With the right plan and professional guidance, Chapter 13 offers a fresh start and a stable path toward financial recovery. If you have further questions about Chapter 13, feel free to call us to set up a free phone consult to discuss your options.