Chapter 13 bankruptcy allows you to repay your creditors spread out over a 3 to 5 year repayment plan. In a Chapter 13, you can stop a foreclosure, pay back the IRS and stop a tax lien, pay unsecured creditors at 0% interest, and sometimes at less than the full amount, and get a car out of repossession. It has many uses and benefits.
Unlike Chapter 7 bankruptcy, Chapter 13 bankruptcy will last for a duration of time. As mentioned above, a Chapter 13 will last for 3 to 5 years. But what determines exactly how long it is? First, if you are above the means test , which is discussed elsewhere on my website, you are required to be a five-year (60 month) repayment plan. If you can pay all of your creditors in full before that time, the court may allow you to schedule a shorter plan.
If you are below the means test, and you are able to repay all creditors as required, you can schedule a plan to be a short as three years or 36 months. Under no circumstances can you initially at filing schedule plan to be longer than 60 months or shorter than 36 months. The Chapter 13 trustee will sometimes proceed for another month or two beyond the 60 month limit if you were finishing up your payment. But you cannot extend it beyond that length.
In some cases, if all creditors are paid as required, a plan may end before the 36 months. However, you cannot schedule the plan to be shorter than 36 months at the filing. It only happens when the payments have actually been made. You are not required to continue a plan once everything is paid in full.
For the most part, the Court and the Chapter 13 trustee are pretty flexible in accommodating plans within the 36 to 60 month window. Your bankruptcy attorney should discuss what will work best for you. In some cases, a longer plan is better because it will make your payment lower. For some filers, a shorter plan is preferable because it allows them to wrap it up quicker and get on with their lives. Calculating your payment and determining the duration is an important part of the process.
Speaking with an experienced bankruptcy attorney can make sure that it is done right. If you would like to discuss Chapter 13 bankruptcy, or you have any questions about the process, feel free to call 412-414-9366 and set up a free consultation. I would be happy to look at your situation, see if you qualify, and answer your questions.