Chapter 13 Length
As you have probably learned, Chapter 13 functions as a payment plan. Unlike informal payment plans or repayment schedules created by debt reduction companies or even Consumer Credit Counseling, Chapter 13 plans arise from binding orders issued by federal bankruptcy judges. Once a plan is “confirmed” all creditors are bound by its terms whether they agree with the Chapter 13 plan or not.
Chapter 13 takes its name from the federal bankruptcy Code. The part of the Code that sets out the rules for an individual debt reorganization happens to be categorized under Chapter 13 of the Code – thus the name. Click on the link to take a look at the federal bankruptcy Code – you will note that Chapter 13 is called “Adjustment of Debts of an Individual with Regular Income.”
The Bankruptcy Code provides that a Chapter 13 plan must last at least 3 years, but no more than 5 years. The 2005 changes to the Bankruptcy Code make 5 year plans the norm for Chapter 13. So, when you file your Chapter 13, you should assume that you will be subject to the terms of your Chapter 13 plan for five years.
If you fulfill your plan obligations and pay creditors as set forth in your plan, you will, in most cases, be eligible for a “discharge.” A bankruptcy discharge is a special court order that forever protects you from claims of your creditors. For example, if your court approved plan provided that unsecured creditors like credit card lenders only get 5 cents on the dollar, and you make payments as scheduled for five years and receive a discharge, your credit card lenders cannot come back and demand the 95% of debt that was discharged in your Chapter 13.
Clark & Washington works very hard to draft a Chapter 13 plan that you can live with because we want your plans to succeed. Five years is a long time and a plan that does not provide enough money for living expenses will likely fail. You can rely on our experience to guide you when it comes to creating a payment plan that satisfies the requirements of the Bankruptcy Code but also leaves you enough money for food, clothing and other essentials in your budget.