Factors Affecting The Length of

Chapter 13 Bankruptcy Plans

When your Chapter 13 Bankruptcy Case is initially filed, the amount of the Plan payment and the projected length of your Plan is calculated based on a number of factors including: (1) your current Income and Expenses; (2) the Estimated Amounts of Creditor Claims; and (3) the amount of the Trustee Fee and other Administrative Expenses. All of these things can change over the life of your Chapter 13 Plan which, in turn, can effect the length of your Plan and the amount of your Plan payment.

1. The Chapter 13 Bankruptcy Applicable Commitment Period:

The Bankruptcy Code provides that a Chapter 13 Bankruptcy Case must last, at a minimum, 36 months or 60 months depending on whether a Debtor's income is above or below median income for the district in which their case is filed. If the Debtor's income is Above Median Income, the case must last a minimum of 60 months. If the Debtor's income is Below Median Income, their case must last a minimum of 36 months but is permitted to last up to 60 months.

The Chapter 13 Trustee Websites, list the "Length of Plan" as either 36 months or 60 months based on whether the Debtor's income is Above Median Income or Below Median Income. Unfortunately, the length of the Plan, as stated on the Trustees' Websites, does not determine the actual length of your Chapter 13 Plan.

2. Actual Length of Chapter 13 Bankruptcy Plans:

Most people wonder why a Debtor would stay in a Chapter 13 Bankruptcy for 60 months if they are below Median Income and permitted to conclude their case in just 36 months. The reason is very simple: The debtor cannot afford the Plan Payment required to complete their Chapter 13 Case in just 36 months.

3. Calculating the Amount of the Chapter 13 Bankruptcy Plan Payment:

A Chapter 13 Plan Payment is determined by calculating the amount of money a Debtor can afford to pay based on their budget and the length of the Chapter 13 Plan is determined based on the amount of the claims being paid through the Plan. The clams paid through a Chapter 13 Plan can include, among other things: (1) mortgage payments, (2) mortgage arrearages; (3) car payments; (4) tax obligations and (5) other secured and priority claims such as furniture loans and child support obligations. So, for example, if a Debtor is seriously delinquent on their house payment, they can keep the house but their Chapter 13 Plan must provide for catching up the delinquent mortgage payments over the life of the Plan. Although the Debtor may be eligible to do that over 36 months, it is going to cost a great deal more to catch up the arrearage in 36 months than if it is spread over 60 months. So, if the Debtors wants to keep their home, but cannot afford to cure the arrearage on their mortgage in 36 months, their Chapter 13 Plan Payment will be calculated based on the amount necessary to cure the mortgage default over a period longer than 36 months but no longer than 60 months.

4. Length of Chapter 13 Bankruptcy Plans & Changes in Income and Expenses:

The Length of a Chapter 13 Plan can change if a Debtor's Income and Expenses change during the course of their Chapter 13 Bankruptcy Case. All Debtors are required to commit all of their disposable income to funding their Chapter 13 Plan during their Applicable Commitment Period of 36 months or 60 months. An increase in income or a decrease in expenses can lead to a higher or lower Chapter 13 Plan Payment. If the Debtor is above Median Income they must fund their case for a minimum of 60 months and any increase or decrease in their Plan payment will frequently increase or decrease the amount paid to unsecured creditors. In Below Median Cases, a change in a Debtor's budget frequently results in a decrease in the length of their Plan or an increase in the length of their Plan depending or whether their disposable income increased or decreased.

5. Chapter 13 Estimated Claims vs. Actual Claims and Changes in Payments:

When a Chapter 13 Bankruptcy Case is filed, your Bankruptcy Attorney calculates you Plan payment based on estimates of certain claims and certain fixed payments as they exist at the time your case is filed. These estimates can be inaccurate and fixed payments can change over time. For example, if a Debtor is severely delinquent in mortgage payments, the mortgage arrearage must be estimated by the Bankruptcy Attorney and, if the actual arrearage, which includes principal and interest charges as well a late fees and foreclosure costs, comes in higher than estimated, this will increase then length of the Debtor's Chapter 13 Plan. Likewise, mortgage payments, which are paid through the Plan if a pre-petition arrearage exists, usually go up over the life of a Chapter 13 Plan. If the mortgage payment goes up during the course of the Chapter 13 Plan, and the amount of the Plan Payment isn't increased, the length of the Plan is going to be longer to accommodate the larger mortgage payment.

6. Changes in Chapter 13 Bankruptcy Trustee Fees:

Chapter 13 Trustees are appointed to administer Chapter 13 Cases. Trustees are the people who collect your monthly Plan Payments and distribute the proceeds to the people entitled to receive those funds according to the terms of your confirmed Chapter 13 Plan. In return for the Chapter 13 Trustee's services, she is a paid a fee which is a percentage of the monthly payment she receives from Debtors. The Trustee Fee usually ranges between 5% and 10% of each monthly Plan payment. So, if the Trustee percentage is 5% and the Plan payment is $1,000.00, the Trustee Fee will be $50.00 per month. If, on the other hand, the Trustee percentage is 10%, the Trustee Fee will be $100.00 base on the same $1,000.00 Plan payment.

The specific percentage of the Trustee Fee is based on the number of case filings and the amount of revenue generated by those cases. The Trustee percentage is established by the U.S. Trustee's Office and is set at a level deemed necessary to adequately fund the Chapter 13 Trustee's operations and maintain her office. When case filings increase or decrease, or the amount of revenue generated by those cases increases or decreases, the Trustee Fee increases or decreases accordingly. If the Trustee fee increases during the life of a Chapter 13 Plan, the amount of the Plan payment must increase or the length of the Plan will be longer unless the Plan is modified and/or the Plan Payment increased.

7. Chapter 13 Bankruptcy Attorney Fees:

When Bankruptcy Attorneys perform additional work on a case after it is confirmed, the Bankruptcy Court allows them fees for performing that work. Depending on the amount and complexity of the worked performed by the Bankruptcy Lawyer, these fees can be substantial. Post-Petition issues that require the involvement of your Bankruptcy Attorney can include, but are not limited to, (1) Objecting to Improper Claims Filed By Creditors; (2) Prosecuting or Defending an Adversary Proceeding to Determine the Dischargeability of a Debt or the Validity of a Lien; (3) Defending Motions to Dismiss a Case; (4) Modifying a Plan or Amending Schedules; (5) Reporting Information to the Court or Trustee as required by the terms of a confirmed Chapter 13 Plan; and (6) dealing with a wide array of post-confirmation issues that frequently arise in Chapter 13 Bankruptcy Cases.

Bankruptcy Attorney Fees are usually paid through the Chapter 13 Plan. As with increases in Trustee Fees, additional attorney fees can, in some circumstances, increase the amount of the Plan payment or make the Plan last longer unless the Chapter 13 Plan is modified to reduce the amount paid to unsecured creditors.

8. The Original Length of a Chapter 13 Bankruptcy Plan is Almost Never Accurate:

As you can see from this discussion, there are many, many things which affect the length of a Chapter 13 Plan and those things frequently change over the life of the Chapter 13 Plan. For these reasons, the original length of a Chapter 13 Plan is almost never accurate and changes with time and circumstances. Therefore, you should NEVER assume your case will complete at a specific time because, in all likelihood, it will take longer than originally estimated or the Plan payment will change in order to accommodate changes that occur during the pendency of your case.