Legal Advice During Challenging Times

How long does a Chapter 13 repayment plan last?

On Behalf of | Nov 1, 2022 | Bankruptcy |

Chapter 13 bankruptcy may be the best solution for people in certain situations. Those who earn too much money to qualify for Chapter 7 may be grateful that Chapter 13 bankruptcy is an option. The same will be true for those who have more assets than they can exempt from liquidation if they were to file a Chapter 7 bankruptcy.

Regardless of why you find yourself considering a Chapter 13 bankruptcy filing as an individual, you likely have some questions about what the process entails. The repayment plan is one of the biggest concerns for many people contemplating chapter 13 bankruptcy. You won’t receive your discharge until after you make a specific number of monthly payments through the courts.

How many payments will your case require?

The minimum duration of an individual Chapter 13 bankruptcy repayment plan is usually three years. In some scenarios involving extraordinary amounts of debt and higher-income individuals, the plan may require more than 36 monthly payments.

How much will the payments be?

There is no fixed amount that an individual filer will pay to their creditors. Instead, the amount paid each month during your repayment plan is a result of negotiations involving the court-appointed trustee and representatives from affected creditors.

Typically, the person filing has to present information about their income and household budget. Almost all of their disposable income will have to go toward making payments each month. The exact amount of the payment and how much goes to each creditor will depend on what occurs at the creditor meeting.

How do you make the payments?

Instead of sending payments to each of your creditors every month and then needing documentation related to each account, you only have to send one payment directly to the trustee for your case. They will record the payments and then distribute the funds among your creditors according to the negotiated plan.

Occasionally, someone in the midst of a Chapter 13 bankruptcy will lose their job or otherwise see a drop in income. When household revenue changes, those subject to a payment plan may need to notify the courts and request changes so that they can remain in compliance and secure their discharge.

Understanding what steps to take can make it easier to fulfill the repayment plan obligations of a Chapter 13 individual bankruptcy.