How Long Does Chap 13 Bankruptcy Take?

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A Chapter 13 bankruptcy case will typically take between three and five years to complete. There are many factors that go into this which we will explore in depth below:

  • What is Chapter 13 bankruptcy?

  • What is a Chapter 13 repayment plan?

  • How is the repayment determined?

  • What is confirmation and how long does it take to get there?

  • Can my Chapter 13 bankruptcy end earlier than the plan?

  • What if my circumstances change during my Chapter 13 bankruptcy?

What is a Chapter 13 bankruptcy?

A Chapter 13 bankruptcy case is one of the main types of consumer bankruptcy relief for individual filers. There is also the option of a Chapter 7 case, where you are able to walk away from all of your debt and make a fresh start.

Chapter 7 is what most people think of when considering filing for bankruptcy relief. A Chapter 7 case is usually pretty quick and can be completed within four to six months after filing your case.

Chapter 13, by contrast, will typically last for three to five years and involves a repayment plan, where you pay some or all of the money owed to your creditors over the length of the plan.

When might I choose to file a Chapter 13 instead of a Chapter 7?

Even if you pass the Means Test and are qualified to file a Chapter 7 case there are absolutely circumstances where you might still choose to file a Chapter 13 case instead. This is most common if you are behind on a secured debt, like your house or your car, that you want to keep.

Secured debt (where the debt is tied to a physical asset like a house or car) is treated differently than unsecured debt (like credit cards and medical bills) in a Chapter 13 plan. Perhaps the greatest benefit of a Chapter 13 case is that it gives you a chance to catch up on missed payments (or arrearage) on a house or car over time so that you can avoid foreclosure or a repossession.

A Chapter 13 bankruptcy tends to be more complex than a Chapter 7 and, as such, you may want to consult an attorney or legal aid for assistance.

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What is a Chapter 13 repayment plan?

A Chapter 13 plan is exactly what it sounds like - a plan to repay some or all of your creditors at a rate that you can afford. The plans generally last three to five years.

This means that for the length of your Chapter 13 bankruptcy you will not pay these bills directly - the money will go to your Chapter 13 Trustee (usually through a wage payment order) and the Trustee will take over the payments.

What debts can I include in my Chapter 13 plan?

There are certain expenses that are always included in a Chapter 13 plan. If you are behind on a secured debt like your house or your car, both the ongoing monthly payment and any arrearage will be included.

Finally, your unsecured debts will also be included, and they will receive payments on some, or all of the debts, depending on your ability to pay. You= may end up paying a small percentage of your unsecured debt (maybe 10%) or all the way up to 100%, depending on your disposable income. Even if you are in a 100% Chapter 13 plan you will save in the long run as there will be no more late fees or interest accruing during the plan.

What debts aren’t included in my Chapter 13 plan?

There are some debts that are non-dischargeable (as in they would survive a bankruptcy case) that will be included in a Chapter 13 plan, such as any child support payments. In this instance, the length of the plan can help you catch up over time.

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How is the repayment determined?

Your regular monthly payments will be the same and the overdue balances will be spread over the length of the plan.This is designed to make the plan affordable. So if you have missed three monthly payments you can spread out the missed payments over a longer time period to allow the opportunity to catch up.

Am I able to choose the length of the plan?

In some circumstances you can choose the length of your Chapter 13 plan. This is all dependant on your State’s Median Income.

State Median Income. State Median income refers to the average monthly income in your state. If your CMI (current monthly income) is less than the State Median Income then you are able to choose a three year plan over a five year plan. The benefits here are that you case will end sooner and you may pay less overall, especially to your unsecured creditors.

If your CMI is more than the State Median Income then you will have to file for a five year plan and will not have the option to choose three years instead.

When choosing five years over three makes sense. Just like there are circumstances that would prompt you to file for a Chapter 13 over a Chapter 7, there are reasons why you might choose to file a five year plan over a three year plan even if you can go shorter. The main reason for opting to go longer is to reduce your monthly payment over the plan.

When you are repaying through your plan it might not be affordable to do so in three years. You might need to stretch it out over five years (or sixty months) to be able to afford the payment.

A Chapter 13 bankruptcy is designed to be a remedy to help you catch up. There is no point in entering into a Chapter 13 case plan payment that you will not be able to afford.

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What is confirmation and how long does it take to get there?

A Chapter 13 case will have two required hearings, both a First Meeting of Creditors (or 341 hearing) and a confirmation hearing. If there are no objections during your hearings, the fastest you can go from filing to confirmation would be approximately three to four months.

The length of a Chapter 13 bankruptcy the clock starts on your Chapter 13 plan as of the date of confirmation, not the filing date. So the three to five year plan length is actually a few months longer when we start from your filing date.

The 341 hearing is required in both a Chapter 7 and a Chapter 13 case, where you meet before the Trustee and verify that the information in your bankruptcy documents is all correct. The confirmation hearing is required only in a Chapter 13, and refers to confirming (or approving) your Chapter 13 plan.

You will usually start making your payments into the plan after filing the case and before the confirmation hearing. A good payment history will serve you well in terms of getting your plan confirmed.

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Can my Chapter 13 bankruptcy end earlier than the plan?

It is possible to have your Chapter 13 case end earlier than expected if you are able to pay off all of your creditors earlier than the plan allows. This is usually only in a 100% repayment plan, again that 100% referring to the money going to unsecured creditors. If not all of your creditors file a Proof of Claim before the deadline, there will be more money available to the ones who did and they may then get paid off faster.

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What if my circumstances change during my Chapter 13 bankruptcy?

Three to five years is a long period of time and it is not uncommon to have a change in circumstances that will impact your bankruptcy. The plan is based on your ability to make the payments, so any change to your income, good or bad, could have an impact. This could involve losing your job, getting a raise or a new job, getting a divorce, or adding more children into your home.

If you do have a change in circumstances that impacts your ability to make payments, you can request a change in your plan by filing for a remedy which can include a Chapter 13 Plan Modification, a Motion to Excuse missed payments or other possible motions. In this scenario, it may be helpful to consult and attorney or Legal Aid to find out your options -- as failing to make a payment on your plan could put your entire case at risk of being dismissed.

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A Chapter 13 bankruptcy will generally last from three to five years from the confirmation date.

Not including the pre-confirmation time period (3 to 6 months), you are likely to spend about 3 to 5 years completing your Chapter 13 case.

The Chapter 13 case will end with a discharge if you are able to maintain the terms of your plan for the entirety of the plan. A successful discharge in a Chapter 13 will excuse the rest of any debts included, so if your plan called for 10% to all of your unsecured creditors then the remaining 90% you owed will be discharged and you will no longer have to pay on it.

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