One Year Short Chapter 13 Plans
One-Year Short Chapter 13 Plans
Shorter one-year Chapter 13 plans can take care of debts more quickly in certain, limited circumstances. Usually Chapter 13 cases will take three to five years to complete due to bankruptcy code requirements. However, if you choose to repay all your debts, you can pay them back much more quickly such as in a one-year plan.
Short, One Year Plans Must Pay Creditors in Full
The bankruptcy code requires that repayment plans be three to five years long. Five year plans are required for the higher-income filers. Yet, if you choose to pay back your debts 100% through the plan, there are no month requirements. You can choose any reasonable plan length including a one-year Chapter 13 plan. These 1-year or other shorter plan durations can be much more effective in certain situations.
Shorter plans such as one-year Chapter 13 plans are clearly legal under the bankruptcy code. It’s all about paying all creditors in full. Plans can be less than the applicable commitment period (three or five years) if unsecured debt is paid in full over a shorter time. It’s that simple: you must pay all your creditors to get a shorter plan. See Chapter 13 Plan Basics- U.S. Courts
Who Would Benefit from One-Year Short Chapter 13 Plans?
Only a limited amount of debtors may benefit from a 1 year plan. In fact, longer plans are better for most people. Longer plans allow for lower monthly payments. Still, there are some cases where a shorter plan could be more effective. Let’s go through a few examples.
Sometimes Chapter 13 filers have secured creditors where they want to surrender the collateral. This can be a circumstance where a 1-year plan may be very effective. For instance, sometimes it takes quite a long time for a creditor to convert their secured claim to an unsecured claim so that it can get paid in a bankruptcy. In such a case, it may be possible to surrender a house (for instance) but have the creditor never file a deficiency claim in the bankruptcy.
Beyond secured debt situations, sometimes unwanted contracts can be rejected during a short Chapter 13. If a lease or contract is rejected in a Chapter 13 case, there will only be a short, limited time to have any damages resolved. The potential creditor may not file an unsecured claim in the case. In other situations, claims can be negotiated through the Chapter 13 case. If a large claim or objection is filed, it can be dealt with swiftly through the court or negotiation. The short Chapter 13 plan greatly accelerates the time table for getting out of debt. It is also a great negotiation tool.
Timeshare Holders Can Benefit Greatly
Another very effective use of 1-year Chapter 13 plans may be where a debtor has several timeshares. Oddly, timeshare companies usually just let the timeshares be deeded back right after the Chapter 13 is filed. After that, they rarely take any more action. Usually the timeshare companies do not file unsecured claims at all. Then, a debtor could just pay off a vehicle or a few credit cards through the 1-year plan to get debt free. But, more importantly, then debtor would be free of any unwanted timeshare contracts. Timeshares and Bankruptcy – Another good read on his Subject
One year plans are usually only better for people that have higher income and limited styles of debt. They are a powerful way to get out of bad situations. Shorter plans are a great arsenal in a bankruptcy attorney’s set of tools. For some reason, this option is frequently overlooked. It is extremely powerful when used in the right type of situation.
