Chapter 13 failures?

[rrockinggramma]

most chapter 13's fail because life happens and no one can predict 5 years down the road. The other reason is because once filed, the phone calls stop and some of the stress goes away. After a few months, you begin to relax and see that payments are being made by the trustee. Then after a year or so, you begin to feel pretty confident that you could "just take care it" and be done with the trustee looking over your shoulder, so you start to think about buying out or dismissing. But many do not consider that once dismissed, the penalities and fees can be readded to all accounts that would have been assessed from day one.

Your budget is your key to success in a chapter 13. Although you can't plan for all of life happens stuff, you can at least live within your means at the beginning of the plan. Once your income and outflow match, then you can begin to think about the other stuff that could come along the way.

Some areas that need to be considered:

can my vehicle make it for 5 years (do not file with a car that already has 150,000 miles etc) get a newer one prior to filing

try to get the mechanicals on your house in working order. Things do break down but hopefully with some maintainance you can keep that dog at bay for a while.

Good luck to all of you. I send in my last payment on Friday!!!

[NowImDownInIt]

Question: Have you tried to renegotiate with the CU for the car loans? Try a hardship program. Actually, if the attorney for the CU has written the accleration letters for the cars that is prime time to renegotiate. This will buy you the time you need to get to CH 7.

It has been my experience (as this is exactly what happened with me) that they WON'T negotiate after they have asked for balance in full. They try to negotiate before that point and when they get to this point it basically means they are ready to come seize the vehicle.

[StartingOver08]

Thanks!
our income has been a bit too high over the last 6 months to qualify right now for a 7. Our lawyer wanted us to continue to wait until march/april to file and then we should qualify for a 7, but we need protection NOW. The credit union has called both notes on the cars DUE IN FULL and we are a bit behind on Mortgage payments. We've missed a month here and a month there.
It's scary times.

Question: Have you tried to renegotiate with the CU for the car loans? Try a hardship program. Actually, if the attorney for the CU has written the accleration letters for the cars that is prime time to renegotiate. This will buy you the time you need to get to CH 7.

[NowImDownInIt]

If you are planning to keep the house or cars, you will have to file CH 13 because you need to be up to date with those secured payments to file CH 7. So I think you are doing the right thing filing CH 13 now (if you plan to keep these items) because to file CH 7 you need to get all your payments current first. The CH 13 will give you a little breathing room and time hopefully to get current, once that happens then you could possibly convert to CH 7, but it will take more money for your lawyer to do that unfortunately. Good luck!

To expand on that... The ONLY way you can keep the cars is if you file 13, unless you have enough money to pay the full balance on the loan.. Once they demand that there is no negotiating.

[woeisme]

The credit union has called both notes on the cars DUE IN FULL and we are a bit behind on Mortgage payments. We've missed a month here and a month there.

If you are planning to keep the house or cars, you will have to file CH 13 because you need to be up to date with those secured payments to file CH 7. So I think you are doing the right thing filing CH 13 now (if you plan to keep these items) because to file CH 7 you need to get all your payments current first. The CH 13 will give you a little breathing room and time hopefully to get current, once that happens then you could possibly convert to CH 7, but it will take more money for your lawyer to do that unfortunately. Good luck!

[newbie2]

File a 13 if you absolutely can't wait and then convert to a 7 when his wages go down.
Our 13 has been easy but it's not that way for most. We're lucky and make a lot of extra money online to fill in the gaps. Good luck to you!

Do you have to report your extra income to the trustee?

Won't the trustee find out about it when you file your income taxes?

[Mary Irene]

My Chapter 13 is failing because my lawyer is stupid. When I questioned creditors I didnt recognize she said not to worry about it. Well, turns out Round Up Funding and B-Real are debt buyers who buy bankruptcy debt and attach themselves like leeches. They have no proof of ownership of the debt but I had to find that info myself over the course of a year and a half. My only choice is to voluntarilly dismiss this case and when they call, I will try to negotiate with them. After all, what can I lose? They have me in a 100% repayment thanks to a stupid lawyer and cutthroat trustee. This is not meant to help anyone but the debt buyers. They need regulation and no one is going after them.

[MajorMike]

File a 13 if you absolutely can't wait and then convert to a 7 when his wages go down.
Our 13 has been easy but it's not that way for most. We're lucky and make a lot of extra money online to fill in the gaps. Good luck to you!

[mickeysfriend]

Thanks!
our income has been a bit too high over the last 6 months to qualify right now for a 7. Our lawyer wanted us to continue to wait until march/april to file and then we should qualify for a 7, but we need protection NOW. The credit union has called both notes on the cars DUE IN FULL and we are a bit behind on Mortgage payments. We've missed a month here and a month there.
It's scary times.

It REALLY sucks that with the economy and rising costs of fuel and food have gone UP, but the numbers for BK havent changed. The housing allowance in our area is like $1200 a month for a family our size....the only housing in our town that would cost that much is in an area that I WILL NOT live. grrrrr.

[NowImDownInIt]

I'm with HHM. It's the debtors responsibility to make changes when needed.

So what if the new laws have the creditors at heart. The debtor is the one reaping the majority of the benefit in the long-run. It IS possible to save, you just HAVE to develop new habits or you will fail.

If your circumstances change (i.e. - you lose your job, sales decrease, new dependant) it's time to modify your plan or convert to a 7. I'm not saying either of these are easy, but the process is not really meant to be easy peasy. This is our lesson to learn, and it's those that are fighting the new changes (in spending habits, and lifestyle) that ultimately have more of a chance of failing.

[HHM]

When we say fail, we mean the chapter 13 is not discharged (i.e. it is dismissed).

Some of those failures are due to the debtor converting their case to a chapter 7, so technically, from the debtor's standpoint, that is not a failure.

The failures come down to a few reasons. 1. People are being put into a chapter 13 that really have no reason to be in a chapter 13 (thanks to the 2005 law). 2. The use of unrealistic (i.e. low) living expenses to calculate the payment, and 3. Alot can happen in 5 years...if a chap 13 fails because of changes, it is usually because the debtor doesn't know or doesn't care to go back in and modify their 13, or convert, and 4 lack of discipline on the debtor.

[Runtime Error]

Yes, part of the problem is that the 2005 law was written with the creditors' interests at heart. Many of the companies were getting burned on the old Ch. 7 filings and wanted a way to protect themselves....nevermind that they are partially to blame themselves for extending credit to people who may have been otherwise uncreditworthy...but nonetheless....

From what I can gather, most 13s fail because they are structured to utilize all of your expendable income to pay off creditors. Most of the problem of course lies in what is considered "expendable income." The law itself contains very little wiggle room and it is literally impossible to actually save money for those instances when you might need it (large purchases, emergency, etc.) Five years is a lot of time to not have disposable income and all sorts of things happen. Couple that with a trustee who's out for blood, and you have a recipe for disaster. Any additional money you make will be immediately given to the creditors and so on....

Now, that being said, remember, they are a good number of people who do make it through this. At times it can be tough and at times frustrating, but if you can stick it out, in the end you will have gotten through it and well on your road to financial freedom again.

[krielly]

In addition, if your circumstances change, you also have the right to request a modification of your Chapter 13 plan to lower the payments.

So..........even if your income doesn't drop low enough to allow for a 7. A 13 modification is a possibility.

We are 37 mos into a 60 mos 13. It DOES get better. I think the first couple years was the hardest for us. Keep your chin up, and keep posting!

K

[AngelinaCatHub]

I think the bottom line of the 2005 changes are for the benefit of the Creditors, as well as others using the system just for convenience (abusing it). If your income changes for the less, then you would have right to address the Court for a 7. If you have not filed yet, can you possibly get a 7? I wish you well. ‘Hub

[gymbo]

I read that too - I think in the NOLO book, that most 13's fail. That is so scary. If bankruptcy is meant to help you start fresh, but do they make 13's so hard for so many people???