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Three to Five Years: Living with Chapter 13 Bankruptcy

On Behalf of | Dec 21, 2017 | Chapter 13 Bankruptcy

If you are considering filing for bankruptcy, whether Chapter 7 or Chapter 13, you may have countless questions. You are probably concerned about impending sacrifices, whether you must give up all or most of your assets and how long will the entire process will last. Many debtors hope to file Chapter 7 bankruptcy as nearly all debts are discharged within a 3 to 6 months period. This is not always feasible though, due to income qualifications (see our recent blog, ‘What is the Means Test–And What if I Don’t Pass?’). In that case, or for other reasons such as wanting to save a home from foreclosure, you may end up filing for Chapter 13, and wondering what happens in the three- to five-year timeframe.

While Chapter 7 is often known as the liquidation bankruptcy, Chapter 13 is known as a wage-earner bankruptcy which revolves around a payment plan for creditors which uses your disposable income. How long the Chapter 13 bankruptcy lasts depends on your monthly income. If it is below your state’s median income, you will probably spend less time in Chapter 13, from 36 months on. If your income is above the median household income, your Chapter 13 will likely last 60 months. During this time, you will have to keep up with all required paperwork and stay in touch with your bankruptcy attorney.

Payment details vary by case. For those who are delinquent on their mortgage payments, (some individuals enter Chapter 13 mainly to stop foreclosure) these delinquent payments can be rolled into the repayment plan. Additionally, the normal monthly payments must be kept current or the lender may be able to move ahead with foreclosure. The same goes for cars on the verge of repossession.

Over the three- to five-year period, you may find yourself living on a much tighter budget as all of your disposable income goes toward your Chapter 13 bankruptcy payments. While it may be difficult, living under such limitations, it is good practice for the future as you exit bankruptcy with your debts paid off and the opportunity to thrive financially going forward. For your Chapter 13 to succeed, you must commit to a budget plan that is realistic and sustainable over the period required for your bankruptcy.

Because you will be working toward completing your bankruptcy for at least several years, it is to your benefit to find an attorney you feel comfortable communicating with, as well as someone whom you trust. They should be able to form a plan specific to your financial situation and answer all the many questions you will inevitably have.

Because Levitt & Slafkes, P.C. has already helped thousands of clients through the bankruptcy process, we understand exactly what you are going through, and we are here to answer all your questions. Call us at 973-323-2953, or contact us online to schedule a free consultation.

We are proudly designated as a debt relief agency by an act of Congress.