Filing for bankruptcy is often someone’s last option when they’re dealing with financial struggles. Most people don’t want to default on their debts or have a blemish on their credit report that could drastically affect their eligibility for financial and employment opportunities for multiple years.
However, individuals in a variety of situations may eventually come to realize that filing for personal bankruptcy could be the best solution available to them. Those who decide to file for bankruptcy have to decide what type of bankruptcy to pursue, as there are multiple options available.
Those with above-average income or assets beyond what they can exempt from liquidation may choose a Chapter 13 bankruptcy. Unlike Chapter 7 bankruptcy, which someone can complete in a matter of months, Chapter 13 bankruptcy is usually a multi-year process. How long does it take for a filer to obtain a discharge with a Chapter 13 bankruptcy case?
The repayment plan determines the timeline
One of the factors that set a Chapter 13 bankruptcy apart from a Chapter 7 filing is the need to negotiate a structured repayment plan. The filer attends a meeting with the trustee appointed by the courts and the representatives of the creditors affected by the bankruptcy filing. They then negotiate a repayment plan based on the proposal of the filer and the financial disclosures they make.
A repayment plan typically requires that someone commit the majority of their disposable income toward their monthly payments. Once they complete the repayment plan as negotiated, they may receive a discharge for the remaining balance on their eligible debts. Depending on the amount of debt someone carries, the type of debt they charge and other factors, a repayment plan could last from three to five years.
The final discharge isn’t automatic. It may take months after initially filing to arrange a meeting and negotiate a plan. It can also take time to secure a hearing after the completion of the plan to secure a discharge.
Although Chapter 13 bankruptcy takes much longer to complete than a Chapter 7 filing, it offers many benefits. It remains on someone’s credit report for fewer years and is accessible to more people than Chapter 7 proceedings. Understanding the rules that govern different types of bankruptcy may benefit those preparing to seek a discharge through the courts.