In our last blog we told you how your “income” determines whether your Chapter 13 Plan will be scheduled to last 3 years or 5. You have just a little bit of say about what your “income” is for that purpose, and thus about how long your case will take to finish. However, you and your circumstances have a lot more say about how long your case actually does last, based on how much your budget says you can afford to pay into your Plan, and how successfully you end up making the payments as scheduled.
Your “income”—that is, the very specialized definition of that term that we explained in our last blog—sets the initial ground rules. But if those ground rules say that you may do a 3-year Plan, you are still allowed to set up your Plan to take longer IF it is in your best interest to do so. So, if your budget does not leave you enough money each month to pay into your Plan the amount that you would need to finish in 36-months, you are allowed to lower the Plan payments and stretch them out over a longer period. This doesn’t generally cost you any more or give any more money to the creditors (except maybe a little more interest, and that happens only in certain cases).
This flexible aspect of Chapter 13 also applies if your circumstances change during the course of your case. If your income qualifies you for a 3 -year Plan, and your initial budget shows that you can afford to pay what you need to within the 3 years, a year or two later your circumstances may change so that you cannot pay as much into your Plan. Your Plan payments could then be lowered and stretched longer, as long as a total of 5 years if necessary.
For better or worse this flexibility does not extend beyond a maximum of 5 years. Your Chapter 13 Plan cannot be set up to last more than 5 years, neither at the beginning nor by amendment if circumstances change. That’s why a Plan that starts as a 5-year one cannot be stretched any longer. In some circumstances the payments may be reduced, as long as all the obligations under the Chapter 13 case are accomplished within the original 5 years.
Common sense says that if you do not make all the payments required by the Plan as approved by the bankruptcy judge, your case will not be completed within the time originally expected. As you can imagine, if you miss Plan payments your creditors aren’t getting paid when they thought they would, so they won’t be happy. Those with collateral—vehicles, real estate—may well want to be allowed to repossess or foreclose on the collateral. Your case could go in various unintended directions, including how long it would take to complete, assuming that it could still be completed. If the case does survive, there’s a good chance that this would happen through an “Amended Plan,” which would have a new payment schedule and a new anticipated completion date.