How long will I be in Chapter 13 Bankruptcy?

The function of chapter 13 bankruptcy is paying certain debts over time. Examples include catching up a mortgage, paying off a car loan, and taking care of back taxes. But over how much time exactly?

The short answer for most cases is between 3 years and 5 years.

Maximum Chapter 13 Plan Length

Maximum plan length is important for a bankruptcy debtor with a large debt that needs to be repaid, as more time yields a smaller monthly payment. The classic example is a large past due mortgage arrearage that needs to be caught up over time. Under 11 USC 1322(d), the maximum length of a chapter 13 plan is 5 years (60 months). Strictly speaking, if a debtor's income is below the state median, the maximum length is 3 years unless cause is shown why 5 years should be allowed. However, not being able to afford a plan payment that completes the plan in 3 years is cause, and practically speaking, this issue seldom comes up, meaning 5 years is the max for all debtors.

Minimum Chapter 13 Plan Length

Minimum plan length is more important for a bankruptcy debtor with fewer debts being paid in a chapter 13 plan who can afford to pay quickly. Minimum plan length is a product of the requirements for confirmation of the chapter 13 plan by the bankruptcy court. If the chapter 13 plan pays all unsecured claims in full, there is no minimum plan length under 11 USC 1325(b)(a)(A). Practically speaking, even such a 100% plan will have to be open for some period of time to allow claims to be submitted. For example, governmental claims (e.g. tax claims) can be submitted timely for 180 days after filing of the bankruptcy case.

Most chapter 13 plans don't pay 100% to unsecured creditors, and so are subject to other requirements of the bankruptcy code which may impose a minimum plan length. The very simplified version of the requirements are that bankruptcy debtors who have income above the state median income level for their household size will have a plan length of 5 years (60 months) and debtors below that median will have a minimum plan length of 3 years (36 months). Such is known as the applicable commitment period, defined under 1325(b)(4). Passing aside the simplification, two aspects provide more complexity:

1. Lack of objection from chapter 13 trustee and unsecured creditors. Strictly speaking, any requirements for minimum plan length only come into effect if the trustee or an unsecured creditor objects under 1325(b)(1). This seldom comes up in practice, but at least in theory one could negotiate away the minimum plan length - perhaps by proposing a larger payment to unsecured creditors than required by law.
2. Whether a time requirement applies when there is no projected disposal income. The bankruptcy code requires that debtors commit 3 to 5 years of their projected disposable income. But what if there there is no disposable income projected? If the code is read to require merely paying the total projected disposable income over that calculation period, simple math indicates that 60 x 0 = 0. As of December 2012, cases are pending in the Eastern District of North Carolina on the question of whether or not a debtor with no projected disposable income can have a short-length plan confirmed over the objection of the chapter 13 trustee.