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.

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.

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.

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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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Provisions of Chapter 13 of the Federal Bankruptcy Laws

Chapter 13 bankruptcy is a form of personal bankruptcy that allows an individual’s debt to be adjusted if he has a regular income. Unlike Chapter 7 bankruptcy, a Chapter 13 proceeding allows the debtor to keep property and pay debts over time rather than liquidating assets to pay creditors. One advantage of Chapter 13 bankruptcy is the opportunity for the debtor to save his home from foreclosure and even stop a foreclosure already in progress.

What Happens to Chapter 13 During a Divorce?

A Chapter 13 bankruptcy filing isn’t a quick or simple procedure. You’re not eliminating your debts as you would in a Chapter 7 proceeding. Instead, you enter into a court-supervised plan to pay your creditors at least a portion of what you owe them. Chapter 13 repayment plans usually last three to five years. If your marriage is in trouble, that could be a very long time. If you and your spouse have filed jointly for Chapter 13 protection, bankruptcy law can lock you together post-divorce, but you have some options.

Modification of a Chapter 13 Plan

Your financial situation may change after you file for Chapter 13 bankruptcy, making it necessary to modify your Chapter 13 repayment plan. If modification of your plan is not feasible, you may be eligible to receive a hardship discharge or convert your Chapter 13 to a Chapter 7 bankruptcy. If you are having difficulty affording your Chapter 13 monthly payments, it is important to communicate this information to your Chapter 13 bankruptcy trustee.

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