Length of Your Payment Plan
How long does a Chapter 13 bankruptcy payment plan last? This is determined by your income and household size. If you are above-median income based on household size, your plan is five years (60 monthly payments). If you are below median income, your plan is three years (36 monthly payments).
Why do People File Chapter 13?
The most common reason people file Chapter 13 bankruptcy is that they need debt relief and Chapter 13 bankruptcy is the only type of bankruptcy they can qualify for because their income exceeds the limits set by the bankruptcy ‘means test’. The bankruptcy laws require that most people who can afford to pay back some debts do so in Chapter 13. That’s what the bankruptcy ‘means test’ is all about. Most, but not all, people who are above-median income cannot qualify for Chapter 7 and can only qualify for Chapter 13 bankruptcy. In Massachusetts, the median income by family size (for cases filed after Nov. 1, 2017) is:
- Family of one: $61,353
- Family of two: $78,508
- Family of three: $96,698
- Family of four: $121,280
- Add $8,400 for each additional family member.
Another common reason why some people file Chapter 13 instead of Chapter 7 is to keep property they would otherwise lose in a Chapter 7. No one ever loses property in a Chapter 13. Chapter 13 is simply not a liquidation chapter; instead it is a reorganization chapter. Sometimes keeping all their property is very important to people. Many people have a very small amount of property and they would lose none of it in a Chapter 7, but some people do have a significant amount of non-exempt property (such as excess equity in their houses or cars) that would not be protected in Chapter 7. When these people need debt relief, often the best way is through Chapter 13. However, since the modernization of the Massachusetts exemption laws in 2011, fewer people need Chapter 13 because they can now protect the vast majority (usually all) of their property in Chapter 7.
It is usually very quick and easy for us to determine if you have non-exempt property. You can contact us by filling out the Free Evaluation form below, or calling (508) 655-6085 to find out.