Chapter 13 Timeline

Key facts:

A Chapter 13 case lasts much longer than a Chapter 7 case because under Chapter 13, the petitioner must make payments from his future income to pay creditors over a 3 or 5 year period. Whether it is for 3 or 5 years depends on the petitioner's income. If income is greater than the state median, then the petitioner must pay all of his disposable income to creditors over 5 years, but no longer. If his income is less than the state median, then payments are made over 3 years.

The whole process begins when the debtor files the bankruptcy petition in the court that serves his district. The bankruptcy petition includes all information about the petitioner's financial affairs, including income and expenses, property, executory contracts, and creditors. Only the debtor can file a petition, since involuntary petitions are prohibited for Chapter 13.

The petitioner has 15 days to file a payment plan that describes how much he will pay his creditors during his bankruptcy. In most cases, the payment plan is filed with the petition, since not filing the plan on time could result in the dismissal of the case, unless the court grants an extension, which it will only for cause.

A notice and the plan, or a summary, will be sent to all creditors listed in the bankruptcy petition and to the trustee assigned to the case at least 25 days before the confirmation hearing. The notice will also set the time for filing objections to the confirmation. In most districts, a standing trustee serves all Chapter 13 petitioners.

Within 30 days of the filing date, the petitioner must start making payments to the trustee and directly to any lessors of personal property and to secured creditors for any amounts due postpetition (arrearages can be paid over time). The trustee will hold the payments until confirmation. If the debtor's payment plan is confirmed, then the trustee will disburse the money to the creditors according to the plan. If the plan is rejected, then the trustee will return the money to the debtor after subtracting administrative costs. The petitioner must also supply evidence, within 60 days of the filing date, to the lessors and secured creditors that their property is covered by insurance.

The petitioner must file all tax returns before the date that the creditors meeting is first scheduled that were not filed previously but were due to be filed within 4 years of the bankruptcy filing date. The trustee can extend the time, if necessary, and the court can extend the time for cause, but if the returns have not all been filed by the required time, then the court will either dismiss the case or convert it to Chapter 7.

The petitioner must attend the meeting of creditors (aka 341 meeting) where the petitioner will be interviewed under oath by the trustee and by any creditors who are present at the meeting. The meeting must be scheduled at least 20 days after the filing date, but no later than 50 days.

Before the confirmation hearing, creditors can object to the confirmation of the plan if the plan fails to conform to §1325 of the Bankruptcy Code. Unlike Chapter 11, creditors do not vote for the plan nor can they propose one. Secured creditors, however, are permitted to accept the plan.

Plan modification. The petitioner can modify the plan at any time before the confirmation hearing without court approval. Secured creditors do not have to be notified of changes unless the new plan changes their payment.

Confirmation hearing. The court must hold a hearing to confirm a plan, even if no objections have been filed. The hearing must be scheduled between 20 and 45 days after the creditors meeting, although the court could schedule it sooner if it would be in the best interests of the creditors. The main purpose of this hearing is to determine that the plan conforms to statutory requirements of §1325 and that it is feasible, that it was filed in good faith, and to address any objections. If the plan conforms to §1325 and is feasible, meaning that the debtor has a good chance of making the payments, then the court must confirm the plan.

After the plan is confirmed, the trustee begins making payments to the petitioner's creditors according to the plan. Generally, the petitioner must make payments to the trustee every month and to creditors that are being paid directly. The trustee subtracts administrative expenses, including her commission that is typically 10% of the payments, from the money received from the petitioner before paying creditors.

Discharge. If the debtor completes the plan, then he will receive a so-called super-discharge, which includes some debts that are excluded by §523(a). However, if the petitioner is unable to complete the plan because of circumstances beyond his control and which cannot be remedied, such as an extended medical illness or injury, then he can apply for a hardship discharge, which discharges the same debts that would have been discharged under Chapter 7. However, the creditors must have already been paid at least as much as they would have received under a Chapter 7 liquidation.

The petitioner must make payments over a 3 or 5 year period, depending on income, but the petitioner can receive a discharge sooner if he is able to pay his creditors 100% of their debt before the end of the plan period.