Chapter 13 bankruptcy is available for filers who earn regular income. As noted by the Administrative Office of the U.S. Courts, if you qualify, a Maryland bankruptcy court may work with you to create a payment plan that typically lasts between three and five years.
The payment-plan timeline generally depends on how much income you earn each month. If you receive less than the average monthly income of a Maryland resident, a payment plan may last three years. If your monthly income is higher than the state’s average, a plan can last no more than five years.
Documents needed to determine a payment plan
When preparing your bankruptcy petition, your filing needs to include documents verifying your income, debts and expenses. Tax returns, recent paycheck stubs and other sources of income show your ability to enter into a payment plan.
The total amount of your Chapter 13 monthly payments must still allow you to cover your basic living costs, which the court also needs to know. Copies of your utility statements, leases and day-to-day expenses, such as groceries, medicines and transportation, provide the court-appointed trustee with a picture of how much you could reasonably afford.
Chapter 13 bankruptcy and mortgage payments
One of the benefits of Chapter 13 is that it generally allows petitioners to keep their primary residence home. The court reviews a schedule of all your assets and your liabilities, such as your residence and a mortgage note, before approving a workable arrangement.
If you find yourself struggling with your mortgage payments, you may find that a three-to-five-year payment arrangement works to your advantage. While you may not have the same amount of discretionary spending available, relief may come from knowing that the court could discharge the remaining debt balances after you complete your payment plan.