If the debtor's current monthly income is less than the applicable state median, the plan will be for three years unless the court approves a longer period "for cause." If the debtor's current monthly income is greater than the applicable state median, the plan generally must be for five years. In no case may a plan provide for payments over a period longer than five years.
During this time the law forbids creditors from starting or continuing collection efforts.
Features of Chapter 13
Chapter 13 offers individuals a number of advantages over liquidation under chapter 7. Perhaps most significantly, chapter 13 offers individuals an opportunity to save their homes from foreclosure. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time.
Another advantage of chapter 13 is that it allows individuals to reschedule secured debts (other than a mortgage for their primary residence) and extend them over the life of the chapter 13 plan. Doing this may lower the payments. Chapter 13 also has a special provision that protects third parties who are liable with the debtor on "consumer debts." This provision may protect co-signers.
Finally, chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection.
Filing and Fees
Similar to chapter 7, the courts will need all the required documents such as bank statements, holding, property rights, etc.. Again, a lawyer or someone proficient in the details of this process is well worth their fee.
The courts must charge a $235 case filing fee and a $39 miscellaneous administrative fee. Normally the fees must be paid to the clerk of the court upon filing. With the court's permission, however, they may be paid in installments.
From the time you file till the time the judge approves your petition; this process can take 4 to 6 months. This is if all your paperwork is complete and the trustee doesn't require any other documentation.
Discharge
Unlike chapter 7, your fulfillment to this plan will last anywhere from 3 to 5 years determined by the courts. After that any unpaid balances will be discharged. If your circumstances change in the interim you may request a change of status to a chapter 7. Finding a good attorney who will give you the right advice for your situation is paramount for a successful filing.
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