Only 35% of Ch 13 replayment plans are successful--why?

I read that only 35% of repayment plans are successful (according to the new Nolo bk book).

Why are so many unsuccessful?

Did the new Nolo bk book have any ideas on why the fail. I suspect they fail because the whole premise in the chapter 13 is that for the next 60 months (5 years), your going to give every spare nickle you have to the trustee. There is little or no wiggle room in a chapter 13. Saving money will be extremely difficult if not impossible. Yes, you can cut here and there, but in reality, you won't have much left over at the end of the month.

That is alot of time to go without any money set aside for the emergency. What happens when the refridgerator goes bad, the washer and dryer goes out, the furnace doesn't work...ect. Sorry, but the system was designed to fail. It is almost as flawed as the credit card industry boosting your rate to 30% for being a day late on a payment.

That said, I'm now in that system. I plan to dig in and make it work.

Give me a break, Why do they fail? This whole Bankruptcy System as a whole is corrupt, and old fashioned, The laws were revamped? Sure, for the CREDITORS. Joe and Jane Blue collar got it shoved right up their asses by a hack group of political and business bloodsuckers. There's NO ROOM to wiggle. Oh sure I can go and ask to stop a few payments if there is an emergency, but how bout a year off? I have a roof that needs replacing, chimney is literally falling off the house, a shit pickup truck getting beaten to death on the streets of Brooklyn & Manhattan, leaks fuel by the gallon, tie rods, oh boy! 4 wheel drive, what a strange noise that makes when we got 3 feet of snow a few months ago. AND, 4 teenage daughters who have to wear the hottest new outfits, and must be the hippest teens in all of the 5 boroughs. Think MBNA and AMEX would pitch a beef if I asked for 6 months off? I work full time for the City, plus dozens of side jobs (shhhhh.) My wife is a vet tech, and at the end of each and every month when I look at the budget I prepare weekly in a notebook and calandar, I am amazed that we paid every bill, on time, and had just enough to get food for my girls. I don't know If I can stand 4 more years of generic Wal Greens Froot Loops. Hey, i've been around the block a few times, and I've seen some stuff that that's had me on Lithium & Prozac, but this bankruptcy has me right on the edge, and I shudder at the thought of the day when things just don't add up and I see myself without the dough for the monthly mortgage payment. Cause all in all, they have this entire process worded and written up to make us as criminals stealing from the system. How dare we. They got half of America thinking that the credit card companies and banks are losing money beacuse of us. Are you kidding me? I mean really, Are you kidding me? Let me check my pants, cause I just shit myself laughing at that. That's almost as funny as EXXON losing money due to the hurricanes. I put out fires for a living, and drive a dump truck on the side, so i'm not a smart man, but I think they might be lying to us there.
I don't worry about the washer, dryer or dishwasker, they are all less then 2 years old, but the furnace is halfway shot, the fridge is 22 years old. I suppose I could get premmission to use my Sears card if they let me.
Should I even touch on the price of Gas? Or My KeySpan Natural Gas bill from the winter, I think we are all on the same page. With the exception of pure shit birds like Lightning, we are ALL struggling, and I for one tip my hat to everyone who reads this and sees themselves and their families in this post
Good Luck, and God Bless
The Tonka Truck

I think we are saying the same thing, except the data for failure is the old law. The new law will probably have a bigger failure. I was reading about it last night. It said many of the failed chapter 13 plans were conversions to chapter 7 after they got all the secured debt payments caught up. It also said, many used chapter 13 in an attempt to buy some more time with no real intention of going to discharge. I just hope I can make it 60 months. Payment 1 goes in the mail April 30.

I think the reason so many fail is just like was mentioned, its just too easy on a tight budget to get messed up, even for reasons beyond your control.

I will say, however, that the success rate for those paid through payroll deduction is much higher, according to a book I read on BK.
Also, our attorney told us out of all the ones she had done, which I am sure are in the hundreds, only 3 had failed. So thats not too bad I guess.

Besides the "fraud thing", this is why a lot of my feedback is geared towards waiting as long as you can to file a chapter 13 and forget about credit scores and those things. Collection calls do not get me quaking in my boots! Thier only weapon is intimidation. Waiting as long as possible (if possible) before legal action is better (I think) because if you can hang on for at least 6 more months then the payments that will be mailed to the 13 trustee can fund things that may go wrong before the filing. If you had to pay $350 a month or so in a plan, 6 months would give you $2100. With that you can buy a used 2nd fridge and put extra food in it for a month. You can bring the car in for a checkup and have the mechanic repair anything that he thinks may be on it's way out. Get new tires. You know you will need these before 5 years are up. Buy the kids school clothes before summer and take advantage of sales. Buy a $100 pre paid gas card just to keep in your wallet. Go to the dentist and get the families cavities filled. Fill up the propane or oil tanks. If your car won't be in the plan pay 1 month early. This pre-bankruptcy planning is not at all fraud and it may help cushion you when some stupid shit happens as it always does. The system and creditors can't possibly disagree with this since proper planning will save their butts too, because the plan may have a better chance in succeeding. Just my opinion. Anyone agree?

I think as long as you are using the money for necessities, and that can be documented, and you are not at risk of losing your home, then that might not be a bad idea. I guess the main thing it to be careful where the money goes,
and obviously using your monthly income to pay these expenses, not taking out further debt to do so.

I think as long as you are using the money for necessities, and that can be documented, and you are not at risk of losing your home, then that might not be a bad idea. I guess the main thing it to be careful where the money goes,
and obviously using your monthly income to pay these expenses, not taking out further debt to do so.


That's correct! Congress and the courts all allow pre-bankruptcy planning for the above things that I mention and even buying new tools for your trade. If you pissed this money away on a fur coat or trip to Disneyland then they would probably dismiss your case on the spot. The courts also don't like when you put large amounts of money in any retirement, 401k, etc. just before filing.

Yeah, I wish I would have done the pre-bk planning a little more. If I had an emergency right now, I would be SOL. Hope that an emergency doesn't come up.

I'm sorry if I ruffled any feathers in the post. I'm just trying to see what issues happen that cause failure in re-payment plans so that I can try to be prepared to be one of the success cases.

anonymuse, regarding this statement "Made decision between Ch 7 or 13: Not yet" do you even have a choice? Unless you pass the median or means test the decision isn't yours to make unfortunatly. Are you under the median with non exempt property you would like to keep? If so then the choice is yours. Otherwise a chapter 7 is the preferred choice.

Best of luck on this difficult decision.:)

anonymuse, regarding this statement "Made decision between Ch 7 or 13: Not yet" do you even have a choice? Unless you pass the median or means test the decision isn't yours to make unfortunatly. Are you under the median with non exempt property you would like to keep? If so then the choice is yours. Otherwise a chapter 7 is the preferred choice.

Best of luck on this difficult decision.:)

I make less than the median income, but I might have too much equity in my house by a few thousand dollars. I killed myself to put down 20% so I didn't have to pay PMI and ironically, it's kind of biting me in the butt. ;)

duplicate post

I'm sure you checked your states exemptions, ect. Yes, if you want to keep your house, your more than likey going to be in a 13. You will have to pay at least as much into the plan as they would get under a total liquidation. That might find a little difficult to do depending on a person's situation.

The big question is the value of my home. It is appraised at about 155K and I have researched the county's records and identical townhomes have gone for 92-94% of their appraised value in the past year. So, right now I'm using the appraised value, 155K in my figures--plus there are some significant things that would need to be done to the house to get 100% value due to previous flooding. That's pretty much where the whole ch 13 vs 7 issue lies on whether they accept that value.

155 K = Value of Home

Deductions
15.5 = Cost of selling (10%)
80.0 = Owed on mortgages
2.5 = Liens
13.0 = Home Equity Loan

111 = Total Deductions

Equity = Value - Deductions = 44 K

Homestead exemption in Colorado = 45 K

If they accept the appraised value, then I could breathe a sigh of relief and basically go back to mortgage and student loan payments.

I don't think you get to deduct the costs to sell if you plan on keeping the house. But I'm not real sure on that issue. So hopefully someone else with better knowledge will chime in.

In our case, we're giving up the house in BK. Attnys have all asked if we have any equity. Between what we owe, the Realtors' fees, associated doc fees and closing costs, with the current offer we have, we woulda cleared $5K. But now we have all kinds of late fees, etc, piling up eating away at the $5K. So the attnys say, "OK. No equity." Because by the time the Lender gets the house back and pays to sell it, they'll be in the same position as us. Maybe clear the mortgage and selling costs.

But just because you have some excess equity doesn't mean you'll have to go Ch 13.

Trustees cut deals all the time.

Say you do have $15K in excess equity. The Trustee could agree to settle with you for $5K cash, as an example, and even take the payments in installments interest free.

You really need to chat with several attnys in Consults and get their take on your particular situation. They know the Trustees and what the Trustees will and won't go for. You'll get a real good idea from chatting with attnys what you will need to do about your house.

I'm not sure where it was posted, but Minny made a suggestion on how to reframe this whole Chapter 13 thing--like a 60 month car payment (one HUGE car payment!!!).

Although I hate any of us ever got here in the first place, I am sleeping at night, and I know that my bills are being paid. It is comforting to know that the attorney is held even more accountable now.

I wish we could've done a 7, but this is much better than the enormous amount of juggling each week just to scrape by. We are actually saving a little bit of money. It has been easier since my husband got a raise and we are also being so much more careful.

I think it all comes down to money. My wife and I are raising our two kids and are in Month 16 of a 48 month Chapter 13. Our house and cars and debt are all included in the Chapter 13. But once the Chapter 13 is paid, we only have around $600 left a month. After gas, food, clothes for the kids, holidays, birthdays....we have nothing left.

If anything major happens in the next two years, I am screwed. I am just hoping all the appliances keep working and nobody gets hurt.

I think they fail because it is virtually impossible to raise a family when the court takes every single dime of disposable income.