A very important part of building a Chapter 13 Plan is figuring out the plan length. The length of a Chapter 13 plan determines much of the math in a case. It also is a big part of determining whether Chapter 13 will work for a debtor.
Chapter 13 is a Reorganization
The entire purpose of Chapter 13 is to allow a debtor to reorganize their finances under court supervision. This means repaying certain debts over time. Most Chapter 13 debtors just need some breathing room to get their financial house in order. The court protects the debtor from collection activity such as lawsuits, garnishments, and foreclosures during the pendency of the Chapter 13.
The bottom line in Chapter 13 is simple: debtors are given the chance to get things on track by making monthly payments to a Chapter 13 Trustee.
Picking the Right Chapter 13 Plan Length is Critical
After 2005, the rules are simple. If the debtor earns more than median household income for their area, they will be in a 60-month Chapter 13 plan. If the debtor earns less than median household income, they can be in a 36-month Chapter 13 plan.
A person that qualifies for a 36 month plan can extend their plan to 60 months. However, the opposite is not true. In most cases, a person that qualifies for a 60 month plan cannot shorten their plan to 36 months.
A debtor that proposes the wrong plan length risks their case being dismissed by the court. Or, the debtor might pay more into the Chapter 13 plan than they would otherwise be required to pay.
60 Month Plans Can be the Best Option
Five years in bankruptcy may sound like a long time. But 60 months gives a debtor a lot of options when calculating an affordable plan payment. The trick in Chapter 13 is to obtain a good result at the end of the case. Sometimes the payments required in a 36 month plan are unaffordable. This causes the debtors to fail out of bankruptcy. Spreading those same payments out over 60 months can result in a more affordable payment. Remember, slow and steady wins the race. This is true for bankruptcy.
My law firm helps people all over Northern California successfully declare bankruptcy. If you need a fresh start, please call us at (916) 333-2222 to schedule a consultation. Don’t delay!