How Long Will Chapter 13 Bankruptcy Take?

If you file for Chapter 13 bankruptcy, your case will most likely last between three and five years, depending on the length of your repayment plan. But there are some instances when your Chapter 13 case will fall outside this standard three to five year period.

How Does Chapter 13 Bankruptcy Work?

In Chapter 13 bankruptcy you repay some or all of your debts through a repayment plan that lasts from three to five years. You make monthly payments to a Chapter 13 trustee, who distributes the money to your creditors according to your repayment plan. (To learn more, see The Chapter 13 Repayment Plan.)

The Length of Your Case Depends on Your Plan Length

For the most part, your Chapter 13 case will last about as long as your repayment plan length. Usually when you complete your plan, you get your discharge soon thereafter.

Your annual income determines whether your Chapter 13 plan will last three or five years. If your gross household income is below your home state's median income for your household's size, then you are only required to have a three year plan. However, if your gross income is above the state's median income, then you are required to propose a five year repayment plan.

One exception to the required minimum is if you are paying your creditors back in full. In that instance, your case can be shorter than the required time length, because once the creditors are paid in full, there is no one left to pay, and therefore your case is complete.

When You Might Choose to Stay in Chapter 13 Longer Than Three Years

Many debtors who file Chapter 13 qualify for a three year plan, but choose to use a five year plan instead. The reason is that there are required payments you must make in a Chapter 13 bankruptcy. By opting for a five year plan, you can spread those payments out over an additional two years, which will make your monthly plan payments lower.

• Best interest of creditors test. In order for the court to confirm your Chapter 13 plan, you must pay your unsecured creditors at least as much as they would receive if you filed a Chapter 7 bankruptcy. This is called the best interest of creditors test. (To learn more, see Unsecured Debt in Chapter 13 Bankruptcy: How Much Must You Pay?) If that amount would make your plan payments too high for you to afford, you may spread the payments over a longer period of time, up to five years.

• Disposable monthly income test. In addition, the court will confirm your plan only if you contribute all of your "disposable monthly income" to your plan. You calculate your disposable monthly income by comparing your income to your expenses. You take the amount left over and multiply by 36 months to come up with the minimum total amount you must pay through your plan. If you want to lower your monthly payment, you have the option to pay that amount over a longer period of time, up to five years. (To learn more, see Chapter 13 Requirements)

• Paying back arrears on secured loans. You must pay off secured debts, such as car loans, in full through your Chapter 13 plan. In addition, you must catch up on back payments of secured debts, such as your mortgage, by the end of your plan. (This is only true if you want to keep the property that secured the loan, such as your car or home.) If you want to lower you monthly payment, you can spread these amounts over five years.

When Your Case Might End Early

There are some instances when you can end your bankruptcy case earlier than the confirmed plan length.

• Hardship discharge. Chapter 13 specifically allows for an early discharge if you have fallen on a recent hardship that out of no fault of your own, makes it impossible to continue the repayment plan. (To learn more, see Hardship Discharge.)

• Early payoff. As stated above, there are minimum amounts you must pay in your bankruptcy. However, if you pay off these amounts earlier than originally planned, your case will end early. (For details on when you can and cannot pay your plan off early, see Can I Pay Off My Chapter 13 Plan Early?)

Litigation Can Increase Plan Length

If you dispute a creditor's claim (for example, you disagree that you owe the debt, or disagree on the amount the creditor says you owe) you will litigate the dispute in bankruptcy court. A lawsuit in bankruptcy court is known as an adversary proceeding. An adversary proceeding, like any lawsuit, may go on for years, especially if the matter is appealed. If the litigation takes longer than your plan length, you will likely have to continue to make payments to the trustee for the amount in dispute only. The plan will continue so that you can make these payments and the trustee will hold the money until the court resolves the dispute. This means that your Chapter 13 bankruptcy case can last longer than five years

When Your Case Lasts Longer Than Your Plan

There are other factors that can extend the length of your case, but not your plan. Examples include:

Trustee's final report and accounting. Once you complete the plan, the trustee must file a final report and accounting of all the money you paid and how the trustee distributed that money. The trustee's audit may take a couple of months to complete and file.

Certificate regarding domestic support. Before you can receive your discharge, you must file a certificate stating that you either do not owe any domestic support or are current on your domestic support obligations. If you complete your plan payments, but fail to file the certificate, then your case will continue until you file it.