Skip to content
We Are Open During the Covid-19 Crisis

What Determines the Length of a Chapter 13 Bankruptcy?

Bankruptcy

Bankruptcy

A chapter 13 bankruptcy, or “wage-earner’s” bankruptcy, lasts between 3 and 5 years.  But what determines this length? Several factors consider the length of a chapter 13 bankruptcy.  This article addresses some of the most prominent factors.

1.  Applicable Commitment Period:  The applicable commitment period is either 3 years or 5 years for a chapter 13 bankruptcy, based on whether the consumer is above-median income or below-median income.  If the consumer is below median-income, the commitment period will be a minimum of 3 years; if the consumer is above-median income, the commitment period will automatically be 5 years.  What is median-income and how do you determine this number?  Median-income is based on the U.S. Census Bureau’s calculation for each state and updates every 6 months; theoretically, half of households are below this dollar number in income, and half the households are above.  To determine if you are above or below median-income, you must look at both your household size and income.

Currently, the breakdown for median-income and household size follows:

Oregon:   Household of 1: $44,779; Household of 2: $55,568; Household of 3: $60,693; Household of 4: $70,812.  For each member of the household above 4, and additional $8,100 must be added.

Therefore, if you have a household of 2 (Husband and Wife with no kids), the median-income is $55,568.  If your household income is $40,000, then your applicable commitment period in a chapter 13 bankruptcy is 3 years; if you make $95,000, then your applicable commitment period is 5 years.

Household income is based on the prior six months of income multiplied by 2 for an annualized income.

2.  Below Median-Income with Three Year Commitment Period with Extenuating Circumstances:  If you are a below median-income consumer and qualify for a 3-year commitment period for a chapter 13 bankruptcy, you may want to extend the 3 years to up to 5 years, depending on your circumstances.  For example, if you filed a chapter 13 to stop a foreclosure and you are in arrears by $20,000 on the mortgage, if you agreed on a 3 year chapter 13 bankruptcy, the average payment on the mortgage arrears amounts to $556 per month.  However, even though your minimum applicable commitment period is 3 years, you can extend the bankruptcy out to 5 years to render a lower monthly payment to catch up on the arrears, or $20,000/5 years = $334 per month.

Above are some of the main factors that help determine the length of a chapter 13 plan.  Below median-income households must be in the chapter 13 bankruptcy for 3 years but can extend this period out to 5 years; and above-median income households must automatically be in the plan for 5 years.

If you are interested in learning more about chapter 13 bankruptcy, please call for a free in-office bankruptcy consultation.

Posted in
Tom Butcher

Tom Butcher

Tom Butcher is the owner and attorney at Butcher Law Office, LLC. He represents clients in financial distress in Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. Tom offers a friendly, respectful, and compassionate experience for clients who are in financial and legal distress. Rather than taking a mechanical approach to filing bankruptcy for clients, like other bankruptcy firms, Tom strives to offer a personal, one-on-one experience, where the client’s situation is of utmost importance. Tom believes this personal attention keeps him connected to the community, and serves his clients best during their bankruptcy.
Call Now Button