Certain bankruptcy protections go into effect upon filing paperwork with the court. For example, the automatic stay that pauses collection activity takes effect the same day that someone files their initial case. However, a discharge of their unsecured debts won’t occur until they complete the bankruptcy process.
For Chapter 7 filers, a discharge is generally ordered within a few months of initiation of the automatic stay. However, it takes longer to complete a Chapter 13 bankruptcy case than a Chapter 7 bankruptcy case.
A Chapter 13 discharge takes years to obtain
One of the biggest differences between a Chapter 13 bankruptcy and a Chapter 7 bankruptcy is the repayment plan involved in a Chapter 13 filing. You don’t have to sell off or liquidate your assets in a Chapter 13 case because you, instead, have to make several years of payments to your unsecured creditors before a discharge will be granted.
The way you structure your repayment plan will be the deciding factor in how long it takes to secure your discharge. Many people filing will need to make three years of payments on their unsecured debts. However, the courts may require up to five years of payments prior to discharge in some cases. During those years, you will have to commit nearly all of your disposable income to payments on your debts before the court will discharge the remaining balance.
Although you may wait longer for your discharge, you may maintain a more amicable relationship with the creditors involved because you’ll be making payments on the debts prior to discharge. You may also be able to preserve more of your personal property than you might in a Chapter 7 filing. For many people worried about preserving their property or balancing their budgets, a Chapter 13 filing is the best option even if they qualify for Chapter 7 relief.
While you may need to wait several years for your discharge, the collection activity you’re facing will halt after you file, provided that you remain in compliance with the repayment plan. Educating yourself about the rules that apply to Chapter 13 bankruptcies can help you determine the best solution for your current financial struggles.