Why do Ch 13's fail? What happens then?

I read here in one of the threads that only 40% of Chapter 13 cases make it to discharge. Not sure I understand...

Why do they fail? Do people end up not being able to make their payments to the trustees?

And what happens when a Chapter 13 fails?

I am working on filing, and admit that the 40% statistic gave me great pause.

Thanks!

Reasons, probably in order of commonness (is that a word :) )

1. Something changes during the plan, loss of job, medical, etc, that leads to a dismissal or conversion to a chapter 7. After all, a chapter 13 is 5 years. Heck, in the last 5 years I have had 3 different addresses, lived in 2 states, and spent a few months overseas.
2. Lack of discipline by the Debtor. Although chapter 13's (at least a properly designed one) is not meant to be difficult, many debtors simply lack the discipline to make the necessary sacrifices to MAKE the chapter 13 work.
3. Poorly designed chapter 13 plans.
4. The plan was designed to fail...this is where the chapter 13 is filed just to buy time.

If a chapter 13 fails, that means it was dismissed. A dismissed chapter 13 puts the debtor back to square one, and all your creditors go back to the date you filed the BK and add back interest, fees, and penalties.

Your success is directly related to your ability to maintain consistent monthly payments over the course of most times 3 to 5 years. A lot can happen in that time that can cause hiccups in steady money coming in, like the loss of a job, or new necessary expense. These things don't allow the payment to change. The payment is based on what the case was at the time of filing and what was proposed to happen.

If the case falls apart, you can always turn around and refile. Now if you file too many times (3) inside the span of 12 months, then there is NO STAY at that point on the third case. That's the only thing to remember. It's kind of a preventative policy in regards to "buying time" like HHM mentioned.

Thank you for the feedback - it is all very helpful.

My attorney explained to me that if I lose my job or change jobs and have a lower income that we can go back to court and have the monthly payment lowered. Didn't make it sound like a big deal.

Is this not the case? Or is it maybe different between jurisdictions?

How can anyone know what their real situation will be in even one or two years, let along 4 or 5???

Is this not the case? Or is it maybe different between jurisdictions?You can modify your confirmed plan at any time. Your lawyer would follow the local rule and process for doing so. (For example, some Districts require the attorney to get a new "spreadsheet" from the Trustee and make the modification based on that.)

How can anyone know what their real situation will be in even one or two years, let along 4 or 5???They don't, and that's why the Plan can by modified. The Trustee will need to agree with the modification or you go before the Judge (well, your lawyer goes before the Judge). Most modifications are approved when the circumstances warrant such... without any fight from the Trustee.