How long does a chapter 13 plan last?
A Chapter 13 plan must last for three years (this will increase to five years after October 16th, 2005), unless all debts can be paid off in less time. However, a Chapter 13 plan may last for as long as five years (seven on after October 16th, 2005), if necessary. The length of your plan will be determined by what kind of debts you have, the amount of your debts and your budget. All of this information will be reviewed by the attorney in order to advise you about what length of plan will be best for your situation.
Typically, a Chapter 13 plan lasts from between 36 months to 60 months. The length of the plan depends on several factors: the amount of your average monthly gross income calculated over the six month period prior to the month of filing, the monthly amount of your disposable income, the amount and kind of debt that you have, and the value of your nonexempt property. If the historical average monthly gross income is over the state median you will be forced into a 60 month plan, unless you can pay 100% of your unsecured debt within a shorter period of time. Beyond this, let me give you some examples: • Assume you are facing a foreclosure of your home, and the amount necessary to reinstate the mortgage (the total of the past due amounts, plus attorney’s fees, court costs, etc.) is $5,000. The interest rate on your loan is 8%. You have a recent car loan, and you are two payments ($720) behind. The interest rate on this loan is 12%.
The required length of a Chapter 13 plan depends on the debtor’s income. If the debtor’s annual income is less than the median family income for the debtor’s state and family size, the length of the plan must be 3 years, unless the debtor can justify a longer period, which may not exceed 5 years. If the debtor’s annual income exceeds the median family income, the length of the plan must be 5 years unless all unsecured claims can be paid off in a shorter period. The debtor’s annual income is his or her current monthly income multiplied by 12.
