The Chapter 13 Bankruptcy Timeline: It Depends On What You Pay
The Chapter 13 Bankruptcy Timeline: 3-5 Years From Filing-to-Discharge Depending Upon the Means Test
The Chapter 13 bankruptcy timeline is a lengthier one than that of a Chapter 7 "liquidation" bankruptcy. A Chapter 7 bankruptcy is a full discharge of debt (those that are not classified as "non-dischargeable" by the US Bankruptcy Code, such as child support deficiencies, etc.) and is typically over in about 4 months, provided the Chapter 7 Trustee assigned to the case is not spending more time seizing and liquidating assets of the person filing the Chapter 7. A Chapter 13 bankruptcy is a "payment plan" or "reorganization" bankruptcy in which you repay some percentage of what you owe to your creditors over a period of time no less than 36 months long and no longer (with one exception, see below) than 60 months by making a monthly payment to the Chapter 13 Trustee assigned to your case, who then pays your creditors the percentage required by the Plan you have filed. Thus, the Chapter 13 bankruptcy timeline is 3-5 years from filing to discharge. The exception to the "no longer than 60 months" rule for Chapter 13 bankruptcies is one that is applicable to the Eastern District of Michigan bankruptcy court, if not others. If needed, the Chapter 13 Trustee may extend the plan an additional 6 months to finalize payments to creditors in the amounts required to be provided to them by the Chapter 13 payment plan—but no longer. Whether you may file a 3-year Chapter 13 plan or must file 5-year Chapter 13 plan is dependent upon the "Means Test." The means test is a mathematical test that is better known as the test determining whether or not you are eligible for a Chapter 7 bankruptcy. If the means test, which examines the gross income of all wage earners in your household regardless of whether they are part of your bankruptcy filing or not over a 6-month period of time prior to the month in you file your bankruptcy, determines that your household has an aggregate income above the median-income in Michigan for a family of your size, you are not eligible for Chapter 7 bankruptcy. (There are nuances to this test, of course, which are one of the primary reasons to hire an experienced bankruptcy attorney rather than attempting to "go it alone" without an attorney in bankruptcy.) The same mathematical test also determines whether, in a Chapter 13 bankruptcy, you are eligible for a 36-month Chapter 13 bankruptcy, or if you must complete a 60-month Chapter 13 bankruptcy. The simple rule governing the required Chapter 13 bankruptcy timeline is this: if you are an above-median debtor (as just described), you must do a 60-month Chapter 13 bankruptcy unless you are able to pay 100% of your debts in fewer months than 60. Your proposed plan cannot be for less 36 months, however. But it is possible, therefore, to have, say, a 44-month or 50-month Chapter 13. Most filers of Chapter 13 bankruptcies, however, do not repay 100% of what they owe through the Chapter 13 plan. Thus, the Means Test is a vital calculation and must be completed properly.
The Chapter 13 Bankruptcy Timeline: Breaking It Down
Either a Chapter 7 or a Chapter 13 bankruptcy begins with a process of documentation and information-gathering by you and your Michigan bankruptcy attorney. Your attorney will rely greatly upon you to gather the necessary information for the drafting of an accurate and fully disclosing bankruptcy petition and, in a Chapter 13, a Chapter 13 payment plan. The period of time required for this pre-filing process can be very quick or it can take months, depending upon how efficient, motivated, and organized you are in gathering the required materials. The Hilla Law Firm, PLLC can get you filed and get you under the protection of the Bankruptcy Court very quickly if you are being sued or garnished or working to prevent some other collections-related harm from occurring (the mere filing of the bankruptcy petition will stop all of these things)—but it will depend upon your ability to work quickly as well. Once filed, however, you enter a period of the Chapter 13 bankruptcy timeline called the pre-confirmation period. "Confirmation" is the result you are working with your bankruptcy lawyer to achieve: approval of your Plan by the Bankruptcy Court. The pre-confirmation period is usually around 5-6 months long, and it will generally require that you attend 2 hearings: the 341 Meeting of Creditors and a Confirmation Hearing. During the pre-confirmation period, you will, through your bankruptcy attorney, provide information in great volume to the Chapter 13 Trustee, and you will work to resolve any objections filed by either your Chapter 13 Trustee or by any of your creditors. As in a Chapter 7, a 341 Meeting of Creditors occurs 20-40 days after the filing of the petition. The Chapter 13 341 can last anywhere from 10-60 minutes (that outside timeframe being very much a rarity), and it generally involves answering a series of questions posed by the Trustee that roughly will frame the Objections to Confirmation that, at least here in the Eastern District of Michigan, are inevitably filed between the 341 Meeting and the second hearing that the filing debtor must attend: the Confirmation Hearing. The 341 Meeting, depending on your Trustee, may also involve mandatory attendance at a 1-hour pre-341 "orientation" in which your Trustee's staff will discuss some of the requirements upon you as you proceed through your Chapter 13 over the next few years. 2 of the 3 Chapter 13 Trustees in the Detroit Bankruptcy Court require this orientation; the third does not. The Flint and Saginaw and Bay City Chapter 13 Trustees do not. Prior to your 341, there are 2 further requirements that your attorney will remind you of: a 2nd credit counseling course (the first one you will have taken prior to filing) must be completed, and your first monthly Chapter 13 plan payment will be due in to the Trustee within 30 days of your filing-date. Eventually, you will pay via automatic wage or bank account deduction (required of all Eastern District of Michigan Chapter 13 bankruptcies), but this will not be set up in time for your first required plan payment. A few weeks after your 341, the Detroit Trustees will file their objections to your confirmation, along with any objecting creditors. In Detroit, there are always objections. Maybe 2 or 3 or 4, maybe 24, depending upon which Trustee you've drawn and depending upon the complexities of your Chapter 13 payment plan. In other areas of Michigan, objections from the Trustee are not always a certainty, but, in Detroit, they are. Your bankruptcy attorney will work with you, then, over the next few weeks to resolve these objections so that your case can be confirmed by the court either at your Confirmation Hearing, or prior to the hearing, in which case you may not have to attend the hearing at all. (This is known as a "fast-tracking" of your Chapter 13. The Hilla Law Firm, PLLC has a very good record of getting its Chapter 13 cases "fast-tracked" so that the 341 Meeting ends up being the only hearing you need to attend in the pre-confirmation portion of your Chapter 13 bankruptcy timeline. Other area bankruptcy "mill" law firms, which operate on assembly line basis and do not put personal service first in priority over profit may not have the personnel available to clear up your objections early enough for a fast-tracking. Always shop for service when retaining a bankruptcy attorney, not merely price or office-location!) Either way, it is essential that you respond quickly to any request for further documentation or other information required by your bankruptcy attorney to resolve objections if you would like to avoid attending a confirmation hearing. There is not a lot of time to work, here, and you play a vital role. The Confirmation Hearing occurs 4-6 weeks after the 341 Meeting, and it is a sort of pow-wow between the debtor’s attorney and the Trustee’s attorneys, as well as the attorneys of any creditors who have filed objections to the confirmation of the debtor’s Plan. All of the parties negotiate resolutions to any objections outstanding by this time, and, if successful, the Plan is agreed to be confirmed and the debtor’s attorney may file an Order Confirming the Plan with the Bankruptcy Court to be signed by the judge. Once confirmed, the Plan is off and running into the post-confirmation period of the Chapter 13 bankruptcy timeline. Post-confirmation, you and your income and your expenses will no longer be scrutinized quite so closely by the Chapter 13 Trustee. If you are making your monthly payments on time and in the right amounts, your plan should proceed like clockwork toward your eventual discharge. If your income or expenses change for the worse (or better), you will need to contact your bankruptcy attorney to discuss a potential modification of your Plan to adjust your monthly plan payments accordingly. You will need to provide your tax returns and perhaps refunds, depending, to the Chapter 13 Trustee every year that you are in the bankruptcy. You will not be able to incur new debt of $2,000 or more without first filing a motion with the Bankruptcy Court through your bankruptcy attorney for a court order allowing it. And you will need to abide by other rules and requirements as well (note that these are particular to the Eastern District of Michigan), but, on the whole, once you are confirmed, the heat is off. Make your payments, stay current, and you will complete your Chapter 13 and obtain the fresh start that you were looking for. If you are a Michigan resident and are considering filing for bankruptcy, please contact us at (866) 674-2317 or click the button below to schedule a free, initial consultation.