The duration of a Chapter 13 bankruptcy case depends on the debtor’s income and how much debt is being included in the plan. Debtors who have below median income based upon their household size and where they live can file plans that allow them to receive a discharge after 36 months. Debtors with above median income have to make payments to a trustee for 60 months before receiving a discharge.
That seems like a simple enough answer, but there is a little more to it. Just because a below median debtor is allowed to propose a bankruptcy plan that lasts 36 months doesn’t mean she should. Shorter plans may mean higher monthly payments. For example, if the only debt being paid in a Chapter 13 plan is a car claim for $10,000, the payment will be approximately $303 in a 36 month plan as opposed to $183 a month in a 60 month Chapter 13 plan. If you did the math and it didn’t add up, you may not have taken into account the trustee’s administrative fees. If the debtor has a tight budget then it may be a good idea to stretch out the duration of the plan to reduce the payment. This may make it more likely that the debtor will be successful in the bankruptcy case.
Sometimes bankruptcy cases end before the 36 to 60 month time period as described above. In cases where all allowed creditors listed in the plan are paid in full early, the plan is completed and the debtor receives her discharge. Plans cannot continue if there is no one else to pay. This can happen for several reasons. First, the debtor may have substantial monthly income and wishes to make higher payments to finish the bankruptcy case early. Second, the debtor may receive income tax refunds that are taken by the trustee and paid to the creditors. These funds may allow the debtor to pay off the creditors early. Third, the claims filed in the case may end up being less that the debtor estimated in the original plan, due to understating the amounts owed or because a creditor failed to file a claim.