Largely depending on your income, Chapter 13’s protected repayment period usually lasts either three or five years. 

During the PRP, debtors make income-based monthly payments which eliminate secured debt arrearage, like mortgage arrearage, as well as some priority unsecured debts, such as bankruptcy-related attorneys’ fees. Since the Automatic Stay remains in full effect, at least in most cases, creditors must usually accept this payment arrangement and wait for their money like everyone else. So, bankruptcy flips the negotiating leverage. Outside bankruptcy, creditors can demand payment at will. Inside bankruptcy, debtors have most of the power.

A Chapter 13 bankruptcy might seem straightforward, but it is a complex legal process. So, unless you have a good Athens bankruptcy lawyer, you might end up stumbling around in the dark.

The Protected Repayment Period: A Closer Look

At the trustee’s meeting, which usually happens about six weeks after debtors file their voluntary petitions, the trustee sets a monthly debt consolidation payment based on the amount of secured debt arrearage/priority unsecured debts and the income/expense information from Schedules I and J.

Thirty-six or sixty months is a long time. Most debtors experience income increases or decreases during this period. If income goes up, debtors usually have the option to accelerate their payments and possibly emerge from bankruptcy earlier. More on that below.

If income drops, the trustee might agree to a lower monthly debt consolidation payment, as long as the payments are high enough to timely retire all necessary debts. For that reason, Athens bankruptcy attorneys typically have clients initially make higher-than-necessary payments. So, there is some wiggle room later.

Generally, the Automatic Stay remains in effect throughout the entire PRP. Technically, Section 362 of the Bankruptcy Code prohibits communication from creditors to debtors. So, out of an abundance of caution, many creditors stop sending monthly statements and also suspend ACH payment arrangements. An Athens bankruptcy lawyer can help you make alternative arrangements.

PRP Length in Georgia

For bankruptcy purposes, as of May 1, 2020, the average income for a family of four in Georgia is a little over $85,000 per year. If your income is below that level, the PRP lasts three years. If it is above that level, the PRP lasts five years.

However, the average income dividing line is not always the last word. In some cases, debtors have some options, especially if they have an experienced Athens bankruptcy attorney to advocate for them

The bankruptcy judge can move the PRP from three to five years, or vice versa, if the debtor shows cause. Pretty much any reason that passes the straight face test is sufficient for cause. The “straight face test” means an Athens bankruptcy lawyer can make the argument to a judge with a straight face. 

Additionally, some debtors are right at the dividing line. In these situations, local variations sometimes come into play. It’s more expensive to live in Atlanta than in Adrian (population 651). Higher expenses mean lower disposable income, which points toward a three-year term.

Early Bankruptcy Exits and Athens Bankruptcy Attorneys

Do-it-yourself filers are almost always locked into three or five-year terms, even if they make accelerated payments. But an Athens bankruptcy lawyer gives debtors some options.

Bankruptcy creditors and/or bankruptcy trustees almost always strongly object to motions for early exits. Here are the two most common arguments:

• If the debtor received a windfall, like an inheritance, and tries to exit bankruptcy early, creditors usually argue that the extra funds should mean a higher debt consolidation payment and not an early exit. This argument punishes debtors for receiving windfalls and using the money responsibly.
• If the debtor exits bankruptcy early and the debtor’s income goes up later, creditors are unable to get more money. This argument is usually speculative, at best.

Furthermore, if the debtor sustains a permanent financial hardship, an Athens bankruptcy attorney can ask for a hardship discharge. Such a discharge might be available if the debtor is hurt in a serious accident and unable to work, or at least unable to make as much money. Creditors often object to such requests. They recycle the arguments discussed above or claim that the debtor’s hardship does not justify a hardship discharge.

These disputes, and others like them, usually settle out of court. If the dispute is serious enough, the judge usually refers the matter to mediation before it goes to a final hearing.

Essential Tips to Keep in Mind During a PRP in Georgia

It’s critical that you understand that no blog entry or article can tell you everything you need to know about avoiding mistakes during your PRP if you choose to file for bankruptcy. This highlights one of the many reasons it is wise to enlist the help of an attorney in these circumstances. A lawyer will review the specific details of your case and financial situation to provide you with sound advice.

That said, there are some general tips most people who file for bankruptcy should be aware of in regard to how they must behave during a PRP. They include the following:

• Make minimal use of credit. Again, depending on your specific situation, you may not want to avoid using credit entirely, as this could limit your ability to access credit in the future, but it’s important that you only use credit when you’re thoroughly confident you’ll be able to pay off the balance in a timely manner. If there is ever an instance when you’re considering using credit but you’re not totally certain you’ll be able to make a payment by the due date, use cash instead. Yes, this might mean sometimes deciding not to make purchases even when you want to.
• Keep a strict budget. Often, people who file for bankruptcy must learn to develop certain new financial skills and make a range of lifestyle changes. If you don’t currently make a weekly or monthly budget, learn to do so now. A variety of apps and programs have made budgeting easier than ever. Additionally, during a PRP, it’s a good idea to prioritize learning more about personal finance in general. You want to learn how you can minimize your chances of ending up in difficult financial circumstances in the future.
• If you ever have any questions or concerns about issues related to your bankruptcy (for example, if a creditor is still trying to contact you in a manner that you suspect violates the Automatic Stay), reach out to your attorney instead of trying to handle the issue on your own. Although you may understandably not want to overburden a lawyer with questions and tasks, if you try to address an issue when you’re not sure how to properly do so, you may end up making a mistake that could be harmful during your PRP.

An attorney can help you in many ways both before you file for bankruptcy and after. Providing guidance to limit your chances of making certain common errors is simply one of them.

What to Expect During a PRP in Athens, GA

If you’re reading an article about the length of a PRP, it may be because you’re planning on filing for bankruptcy and have questions about what you should expect during the time when you’ll be paying off your debts. Once more, your situation may vary from that of others based on the specific details of the circumstances. Still, there are a number of common experiences many people who file for bankruptcy tend to have during a PRP. They include the following:

• During a PRP, you need to focus on sticking to your payment plan. That means you may not be able to enjoy some of the indulgences you currently enjoy. This might be difficult, but it’s important to remember that if you’re willing to make sacrifices now, in the long run, your chances of enjoying a desirable quality of life will be much greater.
• If you have children or other close loved ones who depend on your income, you may need to explain to them that this will be a sometimes challenging time during which they might also be required to make some sacrifices. It’s a good idea to have these conversations early when filing for bankruptcy, as you don’t want to surprise children with sudden and unexpected lifestyle changes.
• You should expect to actually experience a surprising degree of optimism about your financial future during your PRP if you’re willing to live within your means and make payments consistently. In fact, it’s not uncommon for people who file for bankruptcy to have better credit scores a year after bankruptcy than they had before filing. While there’s no denying that filing for bankruptcy can have an immediate negative impact on your credit, the long-term benefits of leveraging bankruptcy to give yourself a fresh start financially can be noticeable sooner than you might expect. 

Just remember, to experience those benefits, you need to adhere to the terms of your PRP. If you have questions about what doing so may involve or require of you, discuss these issues with an attorney. You’ll be much more likely to enjoy a minimally stressful PRP if you turn to a professional when necessary.

Reach Out to a Skilled Athens Bankruptcy Lawyer Now

Chapter 13 usually lasts three or five years. For a free consultation with an experienced Athens bankruptcy attorney, contact Morgan & Morgan, Attorneys at Law, P.C. at (706) 843-2905. Convenient payment plans are available.

Originally published November 16, 2020 and updated on October9, 2021.

Christopher Ross Morgan

Christopher Ross Morgan

Christopher Ross Morgan focuses on bankruptcy cases, specifically Chapter 7 and Chapter 13 cases. Christopher also takes on Disability and Workers’ Compensation cases. As one of the most accomplished Chapter 7 and Chapter 13 attorneys in Athens, Georgia, he has fought cases through jury trials and argued cases in front of the U.S. District Court, Northern and Middle District of Georgia.