Chapter 13 bankruptcy is a powerful legal tool. It offers a number of advantages to a debtor, including the opportunity to erase certain debts and to catch up on mortgage arrears, missed car payments, and back taxes. Chapter 13 creases a debt repayment plan that lasts three to five years depending on your specific situation.
However, to obtain the benefits of Chapter 13 there are a number of things you must do during the course of your bankruptcy. For various reasons, not all Chapter 13 Bankruptcy plans are successful. In the event Chapter, 13 does fail, many filers have the option to convert their case to a Chapter 7 bankruptcy.
Why Some Chapter 13 Bankruptcy Plans Fail
When you file for Chapter 13 bankruptcy, you are in bankruptcy for three to five years. That is a significant commitment. Many Chapter 13 cases are successful, but before filing it is important to understand why some are not.
Missing Plan Payments
Since Chapter 13 requires monthly plan payments to be made for three to five years, it is not uncommon for debtors to miss making their plan payment. When this happens, it is possible to ask the court for a modification to the plan – but there is no guarantee that the plan can or will be modified.
Many people file Chapter 13 bankruptcy to save their house. Unfortunately, if your monthly mortgage payment, plus paying back the amount necessary to become current, is too large for you to reasonably handle, then Chapter 13 cannot help you save your house.
Changes in Circumstances
Given the length of Chapter 13 plans, for some people, their lives or financial circumstances change significantly enough that Chapter 13 is no longer necessary or no longer feasible.
For example, some people enter into Chapter 13 to save a house or other expensive asset, but ultimately realize that letting the house or asset go is the better choice. In such cases, it is important to explore if converting the Chapter 13 case to a Chapter 7 case is the right course of action.
Again, Chapter 13 bankruptcy offers a number of advantages and may be the right solution for you. Prior to filing any bankruptcy chapter, it is important for you to fully understand how filing will affect you and what steps you can take to ensure your case is successful.
Free Bankruptcy Consultation
Here at the Law Office of Barbara B. Braziel, we offer free consultations to anyone in Savannah, GA and the surrounding area. We are knowledgeable and experienced attorneys who specialize in bankruptcy and debt relief. We have over 37 years of experience. We’ve helped thousands of people get out of debt and have the fresh financial start they deserve.
Find out more about Bankruptcy in our guide: All About Bankruptcy.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.