How Much Time Does It Take To File Chapter 13 Bankruptcy?
Depending on how fast you handle the Chapter 13 filing stages, the process can take a couple of days or even some weeks. Nevertheless, completing Chapter 13 varies in duration from case to case. The repayment plan you choose will influence the time it takes to complete the Chapter 13 case. Different aspects determine the duration of a Chapter 13 payment arrangement. If Chapter 13 is not something that looks to be in your future, understanding converting Chapter 13 to Chapter 7 is very important. If this is the case researching the cheapest ways to file for bankruptcy is key.
What is in a Chapter 13 Plan?
By embracing a Chapter 13 bankruptcy plan, your debts will be organized into monthly payments that you can easily afford. Your Chapter 13 arrangement incorporates the majority of debts, except future domestic support obligations (child support and alimony), plus continuing mortgage payments. Categories of debt include:
- Secured Debts – Creditors having a lien on collateral. Such collateral includes car title loans and mortgages. Your Chapter 13 plan will fully cater for all back mortgage amounts and the majority of car loans.
- Priority Unsecured Debts – Money owed to creditors has to be remitted in full via the bankruptcy arrangement, including pending domestic support payments and back taxes.
- General Unsecured Debts – Creditors get a part of the owed money via the bankruptcy plan. Once your case is dismissed, the court forgives your debt. Usually, general unsecured debts that qualify for discharge are credit card debts, medical bills, old utility and rent bills, and personal loans.
How Much Time Does a Chapter 13 Bankruptcy Plan Last For?
Typical Chapter 13 plans run for three or five years. What influences the duration of your Chapter 13 plan? Your disposable monthly earnings, and in case your disposable monthly earnings are lower than the state’s average income for your household size; then you might go with a 3-year plan.
But in the event your disposable monthly earnings surpass the average state income amount for a family of your size, you have to do with a five-year Chapter 13 plan. Note that the maximum repayment limit for Chapter 13 is five years.
Keep in mind that although you might qualify for a 3-year Chapter 13 plan, you can still stretch the payments to a five-year plan. The best thing about this alternative is that your Chapter 13 payments will be lower.
But remember that in case your disposable earnings are higher than the average amount for your state, you can only file for a five-year Chapter 13 arrangement.
How can you calculate your disposable income? Take your average monthly earnings for six months prior to filing for bankruptcy and subtract allowable monthly expenses. You can calculate your disposable monthly earnings through the Chapter 13 Means Test.
You’ll find certain limitations in a variety of expenses used in the calculation of disposable income. For more information about the Means Test, check out this blog, ‘What is the Bankruptcy Means Test?’ Apart from looking deeper at Chapter 7 bankruptcy, this blog also offers a description of the Means Test Calculations.
The Means Test involves complex bankruptcy forms; thus, it is in your best interest to seek the services of a bankruptcy lawyer when filing for Chapter 13. Legal assistance will ensure that your Chapter 13 plan doesn’t exceed the duration set by bankruptcy regulators.
Is it Possible for a Chapter 13 Plan to Run for Less Than Three Years?
Yes, it can. In some instances, you can be done with a Chapter 13 plan before three years are over. Still, such an action requires that you repay 100% of a creditor’s debts. However, such a situation is rare because people file for bankruptcy in the first place as they can’t afford to settle their debts.
What Are Somethings to Factor in Before Filing Chapter 13 Bankruptcy?
Before you can file for Chapter 13 bankruptcy, there are some considerations. For instance, the majority of the cases run for five years. In these five years, lots of things can change, and that can influence your Chapter 13 arrangement.
Another thing to factor in before filing for Chapter 13 is where you are. Filing for bankruptcy is dependent on your location for instance, filing for Chapter 13 in Colorado.
Case in point; your earnings might increase in the course of Chapter 13. In such a case, it might be necessary to add to your Chapter 13 payment amount to increase your payments to the general unsecured creditors you owe.
Any changes in earnings should be reported to the Chapter 13 bankruptcy trustee, and it can lead to an altered Chapter 13 plan to raise the payments.
What happens when you lose your source of income or your earnings go down? Typically, Chapter 13 plan payments are not amended due to a temporary decrease in income. This also goes for a hardship that can lead to a short-lived financial crisis, except in selected cases.
Some debtors might be eligible for Chapter 13 hardship discharge. But you have to prove to the court that you’re unable to complete the Chapter 13 payments, for instance, permanent disability.
The fact that you cannot pay the bankruptcy payments is beyond your control and so changing the bankruptcy arrangement is needless.
If bankruptcy and foreclosure or understanding Chapter 13 dismissal refund options is something you’re curious about, dive into articles about these things. They can be very beneficial if any of these unknowns come up in your life.
Besides, at least your creditors received as much as you could give in case you had filed for Chapter 7 in the first place.