The length of a payment plan established by a Chapter 13 bankruptcy typically lasts between three and five years. If you earn less than New Jersey’s average income, you may enter a plan for as little as three years.
A higher-than-average monthly income, however, may require a five-year plan, as noted by Bankrate.com. The court generally works with you when your unsecured debt does not exceed $419,275. You may keep your secured debt, such as a mortgage worth less than $1,257,850, and qualify for Chapter 13.
How soon may I pay off the balance and discharge the remainder?
Eligibility for bankruptcy includes having experienced a significant reduction of income, a job loss or other unforeseen circumstances. Based on your current financial affairs, the court sets a budgeted payment arrangement that you could reasonably afford to pay for three or five years.
If your financial circumstances change substantially, such as by acquiring a higher-paying job or an inheritance, you may make your payments sooner. After completing your plan, the court generally discharges any remaining balances left on your unsecured debts, which may consist of credit cards, medical bills and personal loans.
How may the court handle a case if the financial hardship worsens?
An unexpected and permanent loss of income that makes it difficult to send the court monthly payments may require a hardship application. In some cases, the court-appointed trustee may require your creditors to accept a lesser amount after providing proof that you can no longer afford to maintain the payment arrangement.
When facing financial hardship, you may have an option to protect your assets with a Chapter 13 bankruptcy, which requires you to repay creditors over the next three to five years. If you run into further unforeseen financial challenges, you may request to modify your court-approved plan.