Chapter 13 bankruptcy repayment plans can run anywhere from three years to five years, depending on the debtor's circumstances. Some plans can be shorter if unsecured creditors are paid in full. Not every debtor will qualify for a three-year plan, however. Generally, your income determines your plan length.
The Means Test
The Bankruptcy Code requires that each Chapter 13 debtor complete Form B22C, which is also known as the means test. The means test form requires you to calculate the average of your monthly income for the six-month period prior to the month in which you filed your bankruptcy. The figures on the means test are used not only to determine how much you need to pay into your Chapter 13 plan, but also to determine your applicable commitment period.
The Applicable Commitment Period
The applicable commitment period is the length of time your plan is required to last. The applicable commitment period will either be three years or five years. The means test calculations determine the applicable commitment period. If your current monthly income as calculated on the means test is lower than the median income for a household of your size based on IRS standards, the court considers you to be below median. If you are below median, your applicable commitment period will be three years. If your current monthly income as calculated on the means test is higher than the median income for your household size, the court considers you to be above median, and your applicable commitment period is five years.
Longer Plan Period for Below-Median Debtors
If you are below median, your Chapter 13 plan must last only three years. You can increase your plan to a five-year plan, however, if you lack the disposable income to pay what you need to pay over three years and if the court grants you permission to have a longer plan.
Shorter Plan Period for Above-Median Debtors
If you are above median, your plan must be five years long; however, your plan can be shorter if you pay 100 percent of the balances due to your general unsecured creditors in addition to what you pay to your other creditors. General unsecured creditors include credit cards, student loans, personal loans, medical bills and utilities. If you pay all of your secured and priority creditors in full, pursuant to the plan, and pay your general unsecured creditors 100 percent in less than five years, your plan will end early.