A Chapter 13 bankruptcy case is a court-supervised repayment plan. Filing Chapter 13 does not necessarily mean that you repay all your debts. Some creditors might receive a percentage of the money you owe them instead of the total amount. Finishing Chapter 13 plan payments does not end your bankruptcy case. So, how do you know when your Chapter 13 bankruptcy is over?
How Long Does Chapter 13 Last?
A Chapter 13 bankruptcy lasts 3 or 5 years unless you are on a 100% Chapter 13 plan where you pay back 100% of your unsecured debt. In those cases, your plan may be less time.
Individuals whose income is below the Means Test have a 36-month commitment period. However, they can propose a bankruptcy plan for a longer term. Proposing a 60-month Chapter 13 payment plan reduces the amount of the monthly payments. Lower monthly payments can give debtors a better chance of finishing Chapter 13.
Estimate your Chapter 13 payment with our free Chapter 13 calculator.
The minimum term for a Chapter 13 plan is 36 months or until you pay your unsecured debts in full. Therefore, you could finish Chapter 13 sooner than 36 months if you pay 100% of your unsecured debt. However, you only need to pay the creditors who file a claim in your case.
If your income exceeds the Mean Test, the minimum commitment period is 60 months. However, paying your unsecured creditors who file claims in full could end your Chapter 13 case sooner than 60 months.
When Should I Stop Making My Chapter 13 Payments?
Continue paying your Chapter 13 payments until the Chapter 13 trustee tells you to stop making payments. If you overpay, the trustee refunds the overpayment to you. The Chapter 13 trustee must complete an accounting and audit when you complete your bankruptcy payments.
Therefore, you do not finish Chapter 13 until the trustee completes their work. It could take several months after your last Chapter 13 payment for you to receive a discharge and for the court to close the Chapter 13 case. Finishing Chapter 13 gives you a fresh start.
When you receive the order of discharge and closing case, your Chapter 13 bankruptcy is finished. Any remaining unsecured debts are discharged. The creditors cannot try to collect the debt. However, student loans are typically not dischargeable, so you would still owe the student loans if you did not pay them in full during your Chapter 13 case.
Remember to Complete Your Debtor Education Course
You cannot receive a bankruptcy discharge unless you complete the second bankruptcy course. You must take the debtor education course from an approved provider. Most providers offer the first and second bankruptcy courses. Therefore, you might be able to complete the second course with the same company you used to obtain a credit counseling certificate to file a bankruptcy case.
Because it is easy to forget to take the second bankruptcy course, it is wise to take the debtor education course after filing your bankruptcy case but before the First Meeting of Creditors. Then, you do not need to worry about a problem with your bankruptcy discharge when you finish Chapter 13.
What Is a Chapter 13 Hardship Discharge?
What happens if you cannot afford your Chapter 13 payments? If your circumstances change after your Chapter 13 plan is confirmed, you might qualify for a hardship discharge.
A Chapter 13 hardship discharge is only available if:
- Your failure to complete the Chapter 13 plan was not your fault and was beyond your control;
- Your unsecured creditors received at least as much as they would have received had you filed Chapter 7 liquidation; and,
- Modifying the Chapter 13 plan is not feasible.
There are some debts that a hardship discharge will not discharge. Debts that you would still owe after a Chapter 13 hardship discharge include, but are not limited to:
- Priority unsecured debts, including alimony, child support, and income taxes
- Student loans
- Secured debts, including mortgages and car loans
- Arrearage on secured debts, including past-due mortgage payments
- Most federal, state, and local tax liabilities
- Restitution and fines associated with a criminal proceeding
- Damages caused by a drunk driving accident
- Debts you did not list in your bankruptcy case
Sometimes, a Chapter 13 plan can be modified to lower the monthly payments. In other cases, you might qualify to convert your Chapter 13 case to a Chapter 7 case. If you are struggling to make your Chapter 13 payments, you should talk with your bankruptcy lawyer as soon as possible.
What Is the Chapter 13 Means Test?
The Means Test calculates your average monthly income. It also determines your median income. Your income for the six months before filing bankruptcy is used to calculate your average monthly income. Then, that amount is multiplied by 12 to determine your median income.
For example, let’s assume the gross income for you and your spouse during the past six months equals $48,000. Your average monthly income would equal $8,000 ($48,000 divided by 6). Your median income for the year would total $96,000 ($8,000 multiplied by 12).
If you live in California, the median income for a two-person household is $93,175. Because your median income is above that amount, you must pay at least 60 Chapter 13 payments or pay the payments until 100% of the unsecured creditor claims are paid and priority unsecured creditors are paid in full.
Take our free bankruptcy means test to determine if you qualify for Chapter 7 or Chapter 13 bankruptcy.
Get Help with Debts You Cannot Afford to Pay
Being in debt is stressful. If you had the money, you would pay your creditors, but they don’t believe you. You need to find an affordable way to get out of debt.
Helping you find the best debt relief option for your situation is what we do at Ascend. Text or call us at (833) 272-3631 or contact us online for a free case evaluation.