Maximum Time for a Chapter 13 Bankruptcy

By Beverly Bird

The amount of your income is a qualifying factor for both Chapter 7 and Chapter 13 bankruptcies. For Chapter 7, it determines whether you're eligible, and with Chapter 13, it affects the length of your repayment plan -- the maximum time is five years. During this period in a Chapter 13 bankruptcy, you must provide the trustee with your disposable income each month, and the trustee uses this money to pay down your debts.

The amount of your income is a qualifying factor for both Chapter 7 and Chapter 13 bankruptcies. For Chapter 7, it determines whether you're eligible, and with Chapter 13, it affects the length of your repayment plan -- the maximum time is five years. During this period in a Chapter 13 bankruptcy, you must provide the trustee with your disposable income each month, and the trustee uses this money to pay down your debts.

Five-Year Plans

For you to be eligible for the longer, five-year plan, your income must exceed the median income for your state for a family of your size. Depending on the size of your debts and available income, this may lower your payments – your debts are divided into 60 installments rather than 36 – but the downside is that your financial life will be governed by the court for a longer period of time. For example, you can't take on any new debt during your Chapter 13 plan without special permission from the court.

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Three-Year Plans

If your income is less than the median income for your state and your family size, you qualify for a three-year plan. If you would prefer a longer time, you can request an extension from the court, but you'll have to present the judge with a good reason. Generally, simply wanting to lower your payments isn't enough.

When Payments Start

Your first payment is due within 30 days after you file for bankruptcy, even if your Chapter 13 plan hasn't yet been approved by the court. The trustee will hold your money until your plan is confirmed, and then she will turn it over to your creditors.

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How to Reduce the Payments to the Court Trustee in a Bankruptcy

References

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Chapter 13 Bankruptcy Procedures

Compared to Chapter 7, Chapter 13 is the kinder bankruptcy. You don't lose your assets; the trustee doesn't seize them and sell them to pay off your creditors, as he does when you file for Chapter 7. Instead, you fund a repayment plan with your extra income each month, which is what you have left over after paying your necessary living expenses. Chapter 13 requires that you have a regular source of income to provide for this, but you can generally save your home, automobiles and other property that acts as collateral for loans.

When Does a Payment Plan Start on Chapter 13?

Having the option of filing for Chapter 13 bankruptcy instead of Chapter 7 can be a real blessing if you're worried about retaining certain assets, such as your home or car. A Chapter 13 plan allows you to repay your debts over three to five years in regular installments based on your disposable income. In exchange, the trustee does not liquidate your property to satisfy your debts. But you have to make your payments to the trustee -- and you must do so on time.

Qualifications for Federal Bankruptcy

Federal bankruptcy is the only kind of bankruptcy there is, and it involves surprisingly few requirements considering the relief it can offer consumers. This isn't to say that every individual can qualify for every chapter, but overall, the bankruptcy code offers many debtors a fresh start.

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