Chapter 13 is a type of bankruptcy that can only be filed by individuals seeking to reorganize their debts. In addition to being able to discharge unsecured debt such as credit cards and medical bills, Chapter 13 offers individuals the ability to get current on past due secured debts such as mortgages and car loans – many times saving homes from foreclosure. Bankruptcy attorney Robert Stiberman discusses how long is chapter 13 bankruptcy and related issues.
A chapter 13 bankruptcy starts with the filing of the voluntary petition and typically takes three to five years to complete. The duration of the chapter 13 depends on the length of the chapter 13 plan filed by the debtor. In accordance with the bankruptcy code, Chapter 13 plans have a duration of either 36 or 60 months. A chapter 13 debtor will make monthly payments to the Chapter 13 Trustee during the duration of the Chapter 13 plan.
In accordance with bankruptcy law, a chapter 13 bankruptcy requires the debtor, the individual or married couple that filed for bankruptcy, to make monthly payments in the amounts specified in the chapter 13 plan for 36 or 60 months. As per federal rules, a chapter 13 can end early and result in a dismissal if the debtor fails to make timely payments to the bankruptcy trustee.
An order of bankruptcy dismissal can be entered by a bankruptcy judge for many reasons including:
A chapter 13 bankruptcy debtor can also choose to voluntary dismiss his or her bankruptcy case by filing a Notice of Dismissal with the bankruptcy court.
A Chapter 13 bankruptcy lasts between three and five years. Absent limited exceptions, the bankruptcy court is not likely to allow a debtor to finish the chapter 13 plan period early and will require you to stick to the repayment plan length. The court may consider an early payoff if the following conditions are met:
From our experience, where a debtor is seeking an early payoff of the chapter 13 plan, the funds required to payoff the plan cannot come from the debtor but from another source. See 11 U.S. Code § 1328.
There may be situations where the debtor cannot keep up with plan payments and may choose to convert the case to a chapter 13 bankruptcy. Addtionaly, a debtor may choose to seek to convert the case to a chapter 11 bankruptcy for reasons such as not being eligible to remain in a chapter 13 due to debts exceeding the chapter 13 limits as set forth in the bankruptcy code.
The purpose of bankruptcy is to offer the debtor a fresh start. Many people recover from bankruptcy once they receive the order of discharge which releases them from any personal responsibility from the debts paid though the chapter 13 plan. In many cases, since your disposable income is applied towards the debt repayment plan, you end up paying only a fraction of your unsecured debts while discharging 100% of them.
There are instances where a chapter 13 repayment plan can last longer than 5 years. During the COVID pandemic, legislation was passed that allows a debtor to extend the chapter 13 plan period to 84 months for COVID related reasons.
You can request to change the length of your chapter 13 repayment from a three-year repayment plan to a five-year repayment plan for reasons which may include making smaller plan payments over 60 months vs higher payments over 36 months. You can request to shorten you chapter 13 plan from 60 to 36 months if your average 6 month monthly income at the time of filing your case was below the average median income for a household of your size in your state.
A chapter 13 bankruptcy filing will appear on your credit report for 7 years. This is better than a chapter 7 where it remains for 10 years. Although a bankruptcy will appear on your credit report, we found that many people start receiving credit offers within months after receiving their discharge. We have also seen cases where the credit score is higher after filing for bankruptcy.
As part of the chapter 13 closing process, the Chapter 13 Trustee will file a Notice of Plan completion which will be followed by the entry of an Order discharging Trustee and Bankruptcy Case closed.
Referrals from friends are usually the best way to find attorneys followed by online searches for reputable and experienced bankruptcy attorneys . It may also be a good idea to contact the local bankruptcy bar for referrals.
In summary, a chapter 13 bankruptcy is three to five years long where debtors make a monthly plan payment to the bankruptcy Trustee.
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