Do Chapter 13 Bankruptcy Plans Have to Last For Five Years

 Prior to the bankruptcy law overhaul in 2005 most individuals filing a Chapter 13 Bankruptcy  were only required to make plan payments for 36 months to receive the discharge. The 2005 law however added a requirement that debtors with above medium incomes had to enter a plan where the payments continue for 60 months, and only those debtors, who had below medium incomes can still file 36 month plans.  The medium income is based on the state the debtor resides in.  In Illinois the medium income for a family of four as of August 2013 is $6,731.00 a month or $80,776.00 a year (this is gross income not net income.)

Of course both before and after the law change debtors, who were eligible for the 36 month plan, often elected a longer plan period, because they could not afford to make large enough payments in 36 months to achieve their goals.  This could apply for example, if an individual was trying to stop a mortgage foreclosure through a chapter 13 plan, and the arrearage on the mortgage was too large to pay off in less than 60 months.

There is also an exception to the rule allowing debtors to shorten their plan term to whatever period it takes to pay off 100% of their debts; however, it is an unusual case for an individual, who is filing bankruptcy, to be able to pay off all of his or her debts in a shorter period than the law requires.