Are you considering filing for bankruptcy under Chapter 13? One thing that you need to know is that more Chapter 13 bankruptcy filings fail than succeed. Those are the findings of a report published by the American Bankruptcy Institute. Based on figures between 2010 and 2016, it found only 38.8% of people who filed for Chapter 13 completed their repayment plans.
Chapter 13 allows you to reorganize your debts and make reasonable payments to the trustee. In return, you get to keep assets that you would otherwise be forced to sacrifice if you opted for Chapter 7. Yet, many lose those assets anyway when they are forced to convert their Chapter 13 to a Chapter 7.
Why do people fail to complete their Chapter 13 repayments?
While lenders may agree to reduce the total amount you need to pay in return for your Chapter 13 efforts, chances are you still have quite a bit to pay. If it were easy for you to make those repayments, the court would have expected you to pay more.
Unexpected events can derail your Chapter 13 plan
Many things could happen that leave you unable to make the payments you agreed to under Chapter 13. For example:
- You lose your job. The last year has shown that few jobs are as secure as people once thought. If you lose your job, keeping up with your payment schedule may be the least of your concerns.
- You get ill or have an accident. Medical bills are one reason people file for bankruptcy in the first place. Unexpected costs, for treatment to you or your family, could come at any time.
Deciding when and how to file for bankruptcy is a big decision to make. Remember that Chapter 7 has a means test that might render you ineligible at present. If you are unsure whether to choose Chapter 13 or to file for Chapter 7, seek legal advice.