People often wonder why a Chapter 13 bankruptcy takes longer than a Chapter 7. Typically, a person filing for Chapter 7 can receive a debt discharge within 6 months; whereas a person in Chapter 13 may take up to five years for to have their debts discharged.
Waiting For Relief
Why does Chapter 13 take longer than Chapter 7? The short answer is that debt repayment takes longer than debt elimination. In a Chapter 7 case, filers debts are eliminated through debt write offs or liquidation of assets. The time it takes to satisfy creditors when the debtor cannot afford to repay the debts is only as long as it takes for the court to negotiate with creditors and complete the paperwork, usually within a matter of months.
A Chapter 13 case is a bit more complicated than a Chapter 7 case because it involves a debtor’s plan, or plan of creditor repayment. After the time of filing, a repayment plan is developed based on the disposable income level of the debtor. The plan outlines how much will be repaid to creditors and the payments are spread out over a period of three to five years, whichever best fits the budget of the debtor. Because Chapter 13 requires repayment the process is extended in order to allow smaller payments to prevent the debtor from suffering further financial insolvency, which is especially helpful for dealing with secured debts like a mortgage or car loan.