Every different type of bankruptcy offers special benefits and certain drawbacks. A Chapter 13 bankruptcy is beneficial for filers who have enjoyed success previously but have overwhelming debt to address. Unlike Chapter 7 bankruptcy, Chapter 13 proceedings do not require the liquidation of assets for the filer to be eligible for a discharge. Instead, they must negotiate a repayment plan and then pay down their debts before they are eligible for a discharge.
How long do payment plans last in a Chapter 13 case?
Each plan is unique
The filer and their attorney must attend a meeting with the court-appointed bankruptcy trustee and representatives from their creditors. During that meeting, they review their assets, income and debts.
From there, they seek to establish a reasonable repayment plan. There is usually an expectation that the filer should commit the vast majority of their disposable income toward monthly payments. The amount of the payments, how much each creditor receives and the duration of the repayment plan are all unpredictable variables.
However, the plan does have to align with current bankruptcy statutes. Three years is typically the minimum duration for a repayment plan, while five years is typically the maximum length of the plan.
The filer makes monthly payments to the courts, and the trustee distributes funds to each individual creditor. Those who complete their repayment plan can request that the courts discharge the remaining balances due on their eligible debts.
Retaining the support of an attorney can make it easier for people to manage Chapter 13 bankruptcy proceedings. Those who have support when negotiating repayment plans can push for terms that are reasonable and sustainable given their current financial circumstances.