Friday, February 21, 2014

How Long does a Chapter 13 Payment Plan Last?

Since a chapter 13 bankruptcy plan is a reorganization with a payment plan involved it is important to understand how long the plan will last if you are considering filing a chapter 13 Bankruptcy plan.

The quick answer is 3-5 years.  Under the bankruptcy code a chapter 13 plan can't run longer than 60 months (5 years). That is the maximum length allowed. If a Debtor proposed a longer plan the Bankruptcy Judge would not be able to confirm (ie: approve) the plan and the Debtor would need to come back with a plan that last 60 months or less.

Usually the plan must run a minimum of 3 years. However, a Debtor may be able to get out of the Chapter 13 earlier. It is not very common to get out of a chapter 13 in less than 3 years but it can happen if the Debtor pays off all of their debt before then, or applies and successfully obtains a hardship discharge before the 3 years is up.

Debtors filing chapter 13 may be in the longer, 5 year plan for a couple of reasons. First, if your income is above the median for your state, normally your plan will last the full 5 years.  Second, to keep the plan at an affordable payment amount a debtor may need to propose a plan that lasts 5 years. For example, if there is $20,000 of tax debt that is required to be paid under the plan, but the debtor can't afford to pay that in 3 years, they could stretch out the plan to 5 years to keep the payment affordable.

If your are considering filing for chapter 13 bankruptcy you should start by consulting with an experienced attorney.  Usually at the initial consultation they can give you an idea of how long a chapter 13 would last for you based on your specific situation.

For more bankruptcy information in Oregon and Washington, visit www.pacificbankruptcy.com. To schedule a free consultation call our office at 503-352-3690.