Many people refer to Chapter 13 bankruptcy as a wage earner’s plan. The person filing for bankruptcy is not subject to the same strict income limits as people pursuing Chapter 7 bankruptcy. Filers also do not risk the liquidation of their property as part of the bankruptcy process, making it an option for successful professionals.
However, the trade-off is the obligation to make payments toward their debts before the courts discharge their debts. Repayment plans often require that people commit the vast majority of their disposable income to monthly payments that the court-appointed trustee then distributes to creditors in accordance with the approved plan.
How long do people have to carefully manage their finances to complete a Chapter 13 bankruptcy and discharge whatever balance remains on their eligible debts?
Every payment plan is different
Creating a Chapter 13 repayment plan requires a thorough review of financial records. Various factors, including the type of debt owed and the total balance due, as well as the overall income of the filer, influence the amount paid and the duration of the plan.
The shortest repayment plan timeline is three years, but some people may have to make payments for up to five years. They may need to modify the plan if their financial circumstances change substantially during the bankruptcy. Only those who make all of their required payments eventually qualify for a discharge of their remaining debts.
Reviewing current financial circumstances with a bankruptcy attorney can help people prepare for the negotiation of a Chapter 13 repayment plan. Filers with support and an understanding of the law are in the best position possible to negotiate for favorable payment plan terms.
