When debt levels reach unsustainable levels, people have to make difficult choices. Sometimes, they need a fresh start, and reducing their current debt levels is the best way to achieve that goal. Bankruptcy is the most effective way to eliminate certain debts and regain control over a household budget.
Individuals in need of bankruptcy relief typically choose between two specific types of bankruptcy. Those with lower-than-average incomes and limited personal resources might pursue a Chapter 7 bankruptcy if they qualify through means testing. Those with more personal holdings or a higher level of income might instead file for a Chapter 13 bankruptcy.
Chapter 13 bankruptcy does not have any income limits that apply, making it accessible to essentially everyone. However, the filer typically needs to propose and then complete a lengthy repayment plan before they can discharge their unsecured debts. How long does it take to go from an initial filing with the courts to the discharge of eligible debts in a Chapter 13 bankruptcy case?
Chapter 13 bankruptcy takes years to complete
Unlike Chapter 7 bankruptcy, which is often over in just a few months, Chapter 13 proceedings take multiple years to complete. Chapter 13 bankruptcy is a longer process because the filer has to make an appropriate effort to repay as much of their dischargeable debts as they can before the courts actually discharge the remaining balance.
Depending on the extent of someone’s debt and other factors, including their income, their repayment plan may last anywhere from a minimum of three years to up to five years in some cases. The repayment plan is the lengthiest element of a Chapter 13 bankruptcy, but it does streamline debt obligations to one payment made directly to the courts each month.
After someone completes that process, they can move forward with their discharge relatively quickly in most cases. Occasionally, people’s financial circumstances change in the middle of a Chapter 13 bankruptcy. They may need to reach out to the courts to adjust their repayment plan if their income drops and they become unable to continue making the payments as previously negotiated.
Those who understand what a Chapter 13 bankruptcy typically entails may feel more confident about their decision to seek bankruptcy relief. Learning about the basics of bankruptcy proceedings can benefit those struggling with high levels of personal debt.