The plan's length is not a choice, and the test that sets it is the same median-income comparison Chapter 7 uses. Under 11 USC 1325(b)(4) the "applicable commitment period" is three years, or "not less than 5 years" where the current monthly income of the debtor and spouse combined, annualized, is not less than the applicable state median for the household size. It may be shorter than three or five years "only if the plan provides for payment in full of all allowed unsecured claims over a shorter period." Section 1322(d) then caps the plan itself: above the median it may not run longer than five years, and below the median it may not run longer than three unless the court for cause approves a longer period, which it may not extend past five.
The commitment period matters because of what has to be committed to it. Where the trustee or an unsecured creditor objects to confirmation, 1325(b)(1) requires either that the claim be paid in full or that the plan apply all of the debtor's projected disposable income for the applicable commitment period to unsecured creditors. Above the median, the amounts reasonably necessary to be expended are determined using the same prescribed standards as the Chapter 7 means test, with an express allowance for charitable contributions up to 15 percent of gross income.
The best-interests test is the floor under every plan. Section 1325(a)(4) requires that the value of property distributed on account of each allowed unsecured claim be not less than the amount that claim would have received if the estate had been liquidated under chapter 7 on the effective date of the plan. So Chapter 13 cannot be used to pay unsecured creditors less than a Chapter 7 would have produced. Alongside it, 1325(a)(6) requires the court to find the debtor will be able to make the payments, and 1325(a)(3) and (a)(7) require good faith in both the plan and the filing.
Curing arrears while keeping the property is the reason most people are in this chapter, and the mechanism is two provisions working together. Section 1322(b)(3) lets a plan provide for curing or waiving any default. Section 1322(b)(5) is the more important one: notwithstanding the anti-modification rule below, a plan may provide for "the curing of any default within a reasonable time and maintenance of payments while the case is pending" on any claim whose last payment falls due after the plan's final payment. That is the long-term-debt provision, and it is how a household behind on a mortgage pays the arrears through the plan while making the ordinary monthly payment. Section 1322(c)(1) sets the outer limit on when that becomes available: a default giving rise to a lien on the debtor's principal residence "may be cured ... until such residence is sold at a foreclosure sale" conducted under applicable non-bankruptcy law. Filing after the sale is too late.
Two limits on rewriting secured debts, and both are easy to miss. Section 1322(b)(2) permits a plan to modify the rights of holders of secured claims "other than a claim secured only by a security interest in real property that is the debtor's principal residence." So the mortgage on the home cannot be rewritten in the plan, only cured and maintained. And the hanging paragraph after 1325(a) removes the ordinary valuation rule for a purchase-money security interest in a motor vehicle acquired for the debtor's personal use where the debt was incurred within 910 days before filing, or in any other thing of value where the debt was incurred within a year. In those cases the claim is not split into a secured part worth the collateral and an unsecured remainder, which is what a debtor who bought a car recently would otherwise hope for.
The codebtor stay exists in no other chapter. Under 11 USC 1301(a), after the order for relief a creditor "may not act, or commence or continue any civil action, to collect all or any part of a consumer debt of the debtor from any individual that is liable on such debt with the debtor, or that secured such debt." It applies to consumer debts, meaning debts incurred primarily for a personal, family or household purpose, and not to a codebtor who became liable in the ordinary course of their own business. It ends if the case is closed, dismissed, or converted to chapter 7 or 11.
Its limits are as important as its existence, because the creditor keeps the benefit of its bargain. Under 1301(c) the court shall grant relief from the stay to the extent the codebtor actually received the consideration for the claim, or the plan proposes not to pay the claim, or the creditor's interest would be irreparably harmed. And under 1301(d), twenty days after a creditor requests relief on the ground that the plan does not propose to pay the claim, the stay terminates automatically as to that creditor unless the debtor or the codebtor files and serves a written objection. So the protection is real, temporary, and lost by inaction.
Two discharges, and the hardship one is narrower than the full one. Section 1328(a) grants a discharge after completion of all plan payments, and after the debtor certifies that any required domestic support obligations then due have been paid. It is broader than a Chapter 7 discharge, because its list of exceptions is a subset of section 523(a): debts for willful and malicious injury to property rather than to a person, debts incurred to pay a nondischargeable tax, and debts arising from a property settlement in a divorce or separation are dischargeable here and not in Chapter 7. Note also 1328(a)(1): debts provided for under 1322(b)(5), meaning the long-term debts being cured and maintained, are not discharged, so the mortgage continues after the case.
Section 1328(b) is the hardship discharge, available after confirmation to a debtor who has not completed the payments, and only if the failure is due to circumstances for which the debtor "should not justly be held accountable," the unsecured creditors have already received at least what a Chapter 7 liquidation would have given them, and modifying the plan under 1329 is not practicable. It comes with a cost that is easy to miss: under 1328(c)(2) a hardship discharge excepts every debt of a kind specified in section 523(a), not the narrower list. So the three extra categories that a completed plan would have discharged survive a hardship discharge.
The timeline in outline. The plan is filed with or shortly after the petition, and payments to the trustee begin before confirmation. Where secured loan or lease payments come due before confirmation, typically home and car payments, the debtor makes adequate protection payments directly to that creditor and deducts them from what goes to the trustee. No later than 45 days after the meeting of creditors the court must hold a confirmation hearing and decide whether the plan is feasible and meets the Code's standards, with creditors receiving 28 days' notice and able to object. Court fees are set by the Judicial Conference under 28 USC 1930(a) and change, so current amounts are worth reading on uscourts.gov.
