Chapter 13 bankruptcy is a legal process that allows individuals with regular income to restructure their debts and pay their creditors off. It is also known as a wage earner’s plan. It’s an old-fashioned name because Chapter 13 does work for more than just wage earners. The title has been interpreted to mean people with regular, reliable income.  Under this chapter, debtors propose a repayment plan to make installments to creditors over time. The plan must be approved by the court and is supervised by a Chapter 13 Trustee. Chapter 13 offers individuals an opportunity to save their homes from foreclosure and reschedule secured debts.



Probably 99% of Chapter 13 cases last between 3 and 5 years. If the debtor’s income falls below the state median, for a family of the debtor’s size, the debtor can normally be in a three-year repayment plan. But most of my clients who are allowed to do a 3-year payment plan, choose to go out 5 years to make the plan payment lower. 

My estimate of 1% of debtors who can finish a chapter 13 in less than 3 years is only when the Chapter 13 Trustee has paid all of the filed an allowed claims and there is nobody left to pay. Ok, ok, there are an extremely small number of Debtors who can finish early if the Judge grants a hardship discharge. The Federal Law has very specific guidelines that the Debtor must meet to get a hardship discharge. It seems like, in my practice, amongst all my colleagues, a hardship discharge only happens about once every 5 years. 

But if the Debtor is above the median, for a family of the Debtor’s size, the debtor must be in a five-year plan.  According to Federal Law, a Chapter 13 plan cannot exceed five years in length. But, little known fact (shh, don’t tell those guys who wrote the 5-year restriction!) Bankruptcy Court is a court of equity, and the Judges that I have had the pleasure to practice before, have actually let hard-working chapter 13 debtors exceed 5 years. If the Debtor is extremely close to the finish line, but have run out of time and are bumping into the end, the wisest Judges do have some discretion to exceed the limit a bit, to reward the Debtor for their lengthy journey.  And after all, everybody is happy. Debtors pay off necessary debt, and Creditors don’t have to spend time and effort with suits and garnishments to get blood out of a turnip. Yeah, that’s right, I just called my clients turnips. I hope they don’t mind. 

Unfortunately, not all debtors who file Chapter 13 make it to the end of their chapter 13 case, then the creditors are hot on the trail to get back to suing debtors, garnishing wages, and repossessing cars. But if a Debtor makes it all the way to the end of a case there is a reward. Debts are not erased, as each creditor will still be showing on a debtor’s credit report.  However, the creditors will usually make a notation on the credit report that it was included in bankruptcy and/or will show a zero balance owed. But best of all, the unsecured creditors that are remaining, will be discharged just like in a chapter 7 case.