Chapter 13 is the chapter of the Bankruptcy Code dedicated to people with regular income who are able to repay their debts – or a portion of them – over time. People who file for Chapter 13 bankruptcy can keep their property and pay debts over a designated period of time, typically between three and five years.
Why Are Debts Repaid In Three Years?
If your monthly income is less than the applicable state median, you will repay your debts for a period of three years. The court can extend the time for a long period of time “for cause”. Whether you have more than three years to repay debts is at the Court’s discretion.
Why Are Debts Repaid In Five Years?
If your monthly income is greater than the determined state median, the repayment plan is typically for five years. Whether the repayment period is three years or five years, creditors are forbidden from starting or continuing collection efforts.
How Long Does It Take To File Bankruptcy?
In order to file for bankruptcy your lawyer will need to draft the bankruptcy petition, schedules, Statement of Financial Affairs and, in the case of a Chapter 13 bankruptcy, the Chapter 13 Plan. It’s your responsibility to provide your lawyer with information so that the documents can be drafted. Those documents include, but are not limited to, the following:
- a list of all creditors including amount and nature of claims;
- a list of all debtor’s property;
- the amount, frequency and source of the debtor’s income; and
- a detailed list of the monthly living expenses including shelter, clothing, utilities, taxes and food.
Does The Repayment Plan Take Additional Time?
Your Chapter 13 Plan must be filed within 15 days of filing the case with the court, but most lawyers will insist that it be filed at the same time as the case filing.
When Do Repayments Begin?
Payments under your Chapter 13 Plan must start 30 days after filing for bankruptcy. Even if the plan is not yet approved by the court, payments must be made to the trustee. The trustee will hold the payments until the Plan is confirmed by the bankruptcy judge, which is usually within 45 days after the meeting of creditors.
If the plan is not confirmed, you can file a modified plan or file for Chapter 7 bankruptcy – it all depends on your case, and the best way to proceed.
When you’re ready to get out of debt and get a fresh financial start, all you need to do is contact me or click at the top of this page to set up a free, no-obligation phone consultation.