How Long Does Bankruptcy Take

I have known bankruptcy cases to take anywhere from 5 months to 24 years!

Most consumer Chapter 7 cases take approximately 5 to 6 months from the date that it is filed until the date that it is closed, unless: (a) the debtor has assets to be liquidated and distributed in the case, (b) when the Chapter 7 trustee is investigating past actions of the debtor, (c) when the Chapter 7 trustee is investigating whether unreported assets exist, or (d) when the Chapter 7 trustee simply forgot to close the case as a matter of oversight.

Most Chapter 13 cases take from 3 to 5 years.

A Chapter 13 case will take 3 years where the debtor’s household income is less than the debtor’s residence state’s median income for a same-sized household or where the debtor has significant income and can pay all his or her debts in 3 years or less.

A Chapter 13 case will take 5 years where the debtor’s household income is more than the debtor’s residence state’s median income for a same-sized household or the debtor simply chooses a 5-year plan term instead of a 3-year term.

A choice of this nature may exist if the debtor is seeking to cure a mortgage arrearage as part of his or her Chapter 13 plan and would prefer a lower monthly payment by spreading out the cure obligation over 60 months (5 years) instead of 36 months (3 years).

A choice of this nature may also exist if the debtor is compelled to file a Chapter 13 case rather than a Chapter 7 case as a result of having non-exempt equity in assets that would have been liquidated in a Chapter 7 case. Thus, a debtor who had $20,000 of non-exempt equity may prefer paying $333.33 to a Chapter 13 trustee over a 60-month period instead of paying $555.55 over a 36-month period.

A debtor will not have the option of a 3-year Chapter 13 plan where the debtor is an “above median debtor,” unless the debtors pays all his or her unsecured debts within the 3-year period in the plan. Simply, an “above median debtor” is required to commit all his or her income to a 5-year plan, unless the debtor has certain, but significant, expenses. However, as stated earlier, if a debtor has significant income and, as a result, can pay all his or her debts in less than 5 years, he or she will conclude his or her case in a shorter period of time.

And now…the case that lasted 24 years…the “Blue Coal” case, here in my home town of Wilkes-Barre, Pennsylvania. The case was filed one year after I graduated from high school. I spent four years in college, three years in law school, two years in grad school, began my career far from home, then moved back home and had the unique experience to participate in the case, more than 12 years after the case was filed.

If you have any questions about this post, please write to me at: davidharrisesq@epix.net or call me at my Wilkes-Barre, Pennsylvania office at (570) 823-9400.

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One Response to “How Long Does Bankruptcy Take”

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