Chapter 13 is a type of bankruptcy where the debtor will repay most of his or her debts. The remaining debt will either be discharged or will be repaid through the sale of the debtor’s property. "Discharge" means that the debtor will no longer be legally obligated to pay back the debt.

In order for the debtor to repay the debt, the debtor must propose a repayment plan. The repayment plan must meet a number of requirements before the court will approve the plan. At the end of the plan, the court will discharge the remainder of the debt not paid by the plan.

How Long Is a Chapter 13 Plan?

Chapter 13 plans are either three years long or five years. A court may grant additional time if the debtor cannot complete a three year plan within the allocated time.

How Do I Know If My Chapter 13 Plan Will Be Three or Five Years?

This depends on the means test. If the debtor ‘passed’ the means test, the debtor will have a choice between Chapter 7 and Chapter 13 bankruptcy. If the debtor chooses Chapter 13, the debtor may choose between a three year plan and a five year plan.

If the debtor "failed" the means test, the debtor must file for Chapter 13, meet an exception, or have the case dismissed. If the debtor files for Chapter 13, the plan will be five years long. The debtor must file a five year plan if the debtor does not meet the requirements of the means test.

Will the Judge Confirm My Plan?

The bankruptcy court will confirm the plan if the plan passes the following requirements:

  • Disposable Income – The debtor must contribute all available income to the plan. ‘Income’ does not mean wages. One judge allowed a debtor’s father and girlfriend to pay for the plan.
  • Feasibility – the plan must have some chance of succeeding. Courts are lenient on this requirement, but payments should not exceed income.
  • Best Interest – unsecured creditors like credit card companies cannot be paid less than what they would receive if the case were a Chapter 7 case. If the credit card company would be paid $500 in Chapter 7, the Chapter 13 plan cannot pay that company less than $500.
  • Good Faith – the plan must be proposed in good faith and must not violate laws. If the debtor proposes to pay sports associations before child support, the plan would not be in good faith because the plan would violate bankruptcy law regarding creditor priority.

What Happens If I Can’t Complete My Plan?

There are four options if the debtor is struggling to meet the terms of the plan. The court may:

  • Dismiss the case – this is the worst outcome for the debtor. The debtor will have spent months or years sending income to creditors, but still be liable for the debts.
  • Convert the case into Chapter 7 – The debtor will lose time and property, but the case will end quickly and the debts might still be discharged.
  • Modify the plan – The court may adjust payments owed, time spent on the plan, or the amount each creditor receives under the plan.
  • Discharge the debt – The court can grant the debtor a discharge even if the debtor doesn’t complete the plan. However, the debtor must show that circumstances beyond the debtor’s control prevented the debtor from finishing repayment and that modification of the plan would be impractical.

Do I Need a Lawyer?

Filing for Chapter 13 bankruptcy can be very complicated. Creating a repayment plan that a bankruptcy court would approve can be challenging by itself. An experienced bankruptcy attorney can make all the difference.