Chapter 13 bankruptcy is a very common option selected by those with high levels of debt and concerns about their finances. During Chapter 13 proceedings, people can potentially eliminate some of their financial responsibilities after making payments toward certain eligible debts. The repayment process is one of the reasons why those pursuing Chapter 13 bankruptcy do not have to worry about asset liquidation.
The repayment plan required in a Chapter 13 bankruptcy significantly increases how long it takes to go from initial filing of paperwork to the final discharge of eligible debts. Filers have to consistently make monthly payments or run the risk of the courts dismissing their pending cases. How long does the repayment plan typically last during Chapter 13 proceedings?
Three years is the minimum duration
Every repayment plan created for Chapter 13 bankruptcy is inherently unique. The courts look at the extent of an individual’s debts, the situation that pushed them into bankruptcy and their current income to establish what might be reasonable. The negotiation of the repayment plan takes place during a creditor meeting also attended by the court-appointed bankruptcy trustee.
There is an expectation that the filer should commit the vast majority of their disposable income toward their monthly payments. They send one payment to the trustee who then distributes those funds in accordance with the plan to various creditors.
For most people, 36 monthly payments over the course of three years are the bare minimum required for a Chapter 13 repayment plan. The court can order up to 60 payments over the course of five years depending on the circumstances.
If the filer’s financial circumstances change while they are in the midst of repaying their debts, then they may need to notify the courts and negotiate an adjustment to their initial arrangements. It is only after completing all of the court-ordered payments that the filer becomes eligible for the discharge of the remaining amount due on eligible debts.
Understanding and preparing for repayment plan obligations can help people navigate the Chapter 13 bankruptcy process. Those who fulfill their repayment plan and follow the appropriate procedures afterward can eliminate some of their debt and regain control over their finances.