You are considering a Chapter 13 bankruptcy, and want to understand Chapter 13 bankruptcy horror stories. Can Chapter 13 bankruptcy ruin your life? You are not alone. It's a big step to file Chapter 13 bankruptcy and takes 3 to 5 years often to finish, so it's helpful to understand what may happen. I speak with many people about Chapter 13 bankruptcy. While many people have success with Chapter 13 bankruptcy, you may also want to consider the pros and cons to avoid Chapter 13 dismissal.
The purpose of this article is to:
1) Share anonymous Chapter 13 bankruptcy horror stories
2) Share 5 steps how to avoid a Chapter 13 bankruptcy horror story.
Let's get started.
Also, it's good to understand WHY you are considering Chapter 13 bankruptcy, and not a Chapter 7 bankruptcy. Chapter 7 bankruptcy is often MUCH cheaper (potentially 1/3 the price) and MUCH faster (~3 months vs 3 to 5 years).
Now, Chapter 13 bankruptcy does have pros and cons, but if you meet with a bankruptcy attorney that just talks about Chapter 13 bankruptcy, it could be helpful to ask about Chapter 7 bankruptcy as well. Many people keep all assets and file a Chapter 7 bankruptcy.
That said, for Chapter 7 bankruptcy, you have to qualify often by being under the bankruptcy limits. For this, you can take the free Chapter 7 bankruptcy calculator below to estimate whether you qualify.
The Chapter 13 Horror Stories
Let’s go through a few different stories to give you a sense of what could happen.
Story #1: Increase Income Making Plan Payment Unaffordable.
One of the biggest horror stories I hear the most often here is when the Chapter 13 bankruptcy plan payment goes up due to extra income or another circumstance. In one instance, the individual paid off his vehicle, and he mentioned that his Chapter 13 plan payment increased to a point that was too much for him to handle.
Story #2: “Chapter 13 Ruined My Life”
I spoke with another individual recently who mentioned that each year her Chapter 13 bankruptcy attorney would modify her plan payment, and charge her an additional ~$1,000 dollars for the plan modification.
She couldn’t afford the additional plan modification, but she mentioned that she had no choice because she didn’t understand how things worked in the legal system.
One of the challenges is that the attorney may receive their entire Chapter 13 attorney fee before you reach discharge.
Story #3: “Property Left Off The Case”
This individual had 60% of their take home pay taken each month because of an examination that left $2,000 in property off their case. Essentially, the case was potentially going to be dismissed, but they were able to convert from a Chapter 7 to Chapter 13 case.
Unfortunately, this individual took out high interest rate loans, so they could make the monthly payments, but that left them penniless.
What made matters worse is that this individual didn't seem like they were able to get in touch with their attorney and come in for an appointment.
What were they looking to do? They were looking into converting from a Chapter 13 to Chapter 7 bankruptcy.
Story #4: “Trustee Motion to Raise Payment By 50%!"
This lady had changed companies after being laid off, which resulted in insurance premiums that quadrupled. Her family also had out of pocket costs increasing. She mentioned that the trustee would also want to take the $197 monthly car payment that ended, meaning that after you pay off your car, the trustee may want to take those additional funds for the unsecured creditors.
Story #5: Notice of Dismissal 30 Days Before a 5 Year Chapter 13 Plan Completion.
In this story, Lesa was almost done with a 5 year old bankruptcy, but received a motion to dismiss due to lack of feasibility with a hearing date. What the individual believed is that some creditors were still wanting to get paid such as a payday loan company and Credit One. One individual stated that if the plan base of creditors was wrong from the start, then someone should have corrected it.
While it seems like they may be able to piece everything together, you probably don't want to get to a place where you are facing a dismissal 30 days before bankruptcy discharge.
5 Steps To Avoid a Chapter 13 Horror Story
There are specific steps that you can take to help you avoid Chapter 13 ruining your life.
- Your payment plan is very important, and Ascend has one of the most comprehensive, free Chapter 13 Calculator that emulates the Chapter 13 bankruptcy forms to help you estimate your Chapter 13 plan payment and compare your options. They also provide these free, detailed reviews of your reviews that people seem to enjoy based on it's 5.0 Google rating based on over 100 reviews.
- Understand 10 bankruptcy alternatives including credit counseling, payoff planning, debt negotiation, and home equity co-investment (a newer opportunity).
- Perform a thorough analysis between Chapter 13 bankruptcy vs Debt Negotiation. If you choose debt negotiation, just be careful which company you select. It may be a great option, but many companies are not upfront about fees charged in initial calls.
- Ask your attorney whether there are any additional fees that you would incur if you decided to file Chapter 13 bankruptcy. You can ask for that in writing. Look up Google Ratings and Reviews of your attorney to confirm that the individual has strong customer experience, regardless of when the challenges occur in the Chapter 13 plan.
- Create a Budget Of Different Things That Could Happen in the Next 3 or 5 Years. Do you pay off a car that may increase your plan payment? Will you get a bonus or your income will increase?
Other Chapter 13 Bankruptcy Stories:
Let’s cover a few more Chapter 13 bankruptcy stories that I found on the web that you may consider before filing Chapter 13 bankruptcy.
Is Chapter 13 Bankruptcy All Bad?
Absolutely Not. Chapter 13 bankruptcy does not ruin many people’s lives, and many individual have received relief from their debt in the form of a Chapter 13 bankruptcy. In fact, 38.8% of individuals have received Chapter 13 bankruptcy discharge from a recent study. Using these tips and tricks may help on your Chapter 13 bankruptcy journey.
That said, many individuals decide to go with a Chapter 13 bankruptcy attorney. In fact, the discharge rate for those who filed pro se was only 2.3% of Chapter 13 bankruptcies filed without an attorney.
Hopefully, these Chapter 13 bankruptcy horror stories provide some helpful information to understand whether Chapter 13 bankruptcy is right for you. If you decide Chapter 13 bankruptcy is not right for you, you can research debt settlement and Chapter 7 bankruptcy, which are common alternatives.