Chapter 13 failure rates

[Llelxon]

I don't know a great deal about chapter 13's or bankruptcy in general, but am learning everyday on here..lol. I am wondering, well seems actually that there is something wrong with the chapter 13 system, since their are so many failures. I know posts on here said when in a 13 you need to suck it up and no vacation, etc, but I think that is what is wrong. People just can't live with absolutely no pampering or luxuries for years at a time. I know my family needs to get out and shop for a few things every 3-4 months or we feel suffocated and start to bicker. Probably why I find my self on this forum though too!

Anyway I think it would be overall more successful if people were able to budget say $100-250/month for vacation depending on family size.

Just a thought.

[justbroke]

Anyway I think it would be overall more successful if people were able to budget say $100-250/month for vacation depending on family size.

But you can! I not only do this (taking short trips even to DisneyWorld, Universal and SeaWorld Orlando), I even have emergency funds. I had to pay out almost $1,000 weeks ago due to a broken septic line.

A good number of Chapter 13s fail due to job loss, underemployment, and medical reasons. The rest of the Chapter 13s fail due to budgeting (period). Either the attorney didn't get the debtor a good budget, or the debtor refuses to stay on budget. it's usually the latter. You absolutely must save during a Chapter 13.

Let me tell you, as a 17 month Chapter 13 individual, it's difficult to not want to go out and spend like you used to spend. That's the key issue.

I would bet you my monthly payment to the Trustee, that even if hte UST allowed $100-200/month for "vacations"... Chapter 13s would still fail at the same rate.

[woeisme]

I also have saved for vacations, small luxuries, etc. Actually, now that we're not paying outrageous amounts to creditors, actually have MORE flexibility in discretionary spending than I did prior to filing! Not to say that I waste a lot, I've gotten to the mentality that I'd rather have the peace of mind that I have when there is $ tucked away for a rainy day then to have more junk cluttering up the house, but I have found some creative ways to enjoy life while in my CH 13. Not that I'm not still counting down, 28 months done, 32 to go!

[Flamingo]

Most plans fail because the filers just cannot make the lifestyle changes necessary for a successful plan and/or refuse to learn how to budget and then budget some more. If one is used to living off of credit cards for extra cash, it's a big crash and burn scenario in a Chapter 13 and a huge eye opener. I have always stated on here that going through a Chapter 13 plan is the best budget teaching tool ever.

[holding on]

"Let me tell you, as a 17 month Chapter 13 individual, it's difficult to not want to go out and spend like you used to spend. That's the key issue."

You hit it right on the head! I too was worried like crazy when I realized how much I had to pay monthly for the CH13. But as I've gone along I realize I can live within my means and save at the same time. Still go to the movies, still eat out. Rent a car and travel to different states and stay in hotels. But this time, I make sure its within a budget!

[browneyes]

Oh my goodness!

I was just coming over to the chapter 13 section to find out more about it. We are all ready to go ahead and file 7, but our mortgage company seems unwiliing to do a modificaiton for us (long story but we were "promised" one back when only 2 pmts behind...NEVER again!!!)

Anyhoo, the thing that scared me was not having a "life" during a 13. We have not used credit cards in 2 years now and it feels good.

I want to be able to go camping, have dinner out once a week, go to Disney again, have money set aside for repairs, actually buy some new clothes (not in a long time), etc.

Pinch me, but you can include those things in your budget in a 13??

[justbroke]

Pinch me, but you can include those things in your budget in a 13??

You can't "include" them in your Chapter 13 Plan of Reorganization. For example, you can't have a line item that reads "Monthly trip(s) to Walt Disney World".

However, you can budget for this. But this means cutting out the traditional "discretionary" money that you used to have. You may have to cut back on your shopping (or where you shop)... e.g. no more premium cut steaks from the butcher every night. Perhaps only going to the movies once or twice a month, instead of once or twice a weekend. It does require a change in your lifestyle. Many people can't deal with that.

[oldhack]

I had more money during my Chapter 13 than ever before -- or since, for that matter, since I've taken on a new mortgage, and related house expenses, since discharge (still paying less for the house payment, however, than my rent+plan payment).
By the time of my discharge, I was saving c. 1/3 of my take-home pay, and I vacationed 2-3 times a year. That's how I managed a 'stake' with which to buy a home.
It's important to pinch every penny for the first few months of a Chapter 13 plan, until eventually you have a 'nest egg' which allows you to pay upfront (without interest!) for everything you used to buy now and pay for later (plus interest!). Duh! -- The former is a whole lot cheaper.
A good many of the folks who fail to complete their plans either didn't have sense enough to figure that out, and/or just can't break that instant-gratification habit of purchasing.

[klandsb]

I am only 2 pmts in and I have my fingers crossed that nothing breaks down on me.
Car, Furnace (its so very cold &windy here today) and things like that. I realize now that a mistake I made before I filed was not having a little extra money somewhere . But then again that was the reason I filed ..I HAVE NO MONEY...Then with having to come up with $750..00 lawyer retainer ...ughhh...I know everything will be fine once I am on track its just that fear of please dont let anything break down on me right now !!!

[browneyes]

You can't "include" them in your Chapter 13 Plan of Reorganization. For example, you can't have a line item that reads "Monthly trip(s) to Walt Disney World".

However, you can budget for this. But this means cutting out the traditional "discretionary" money that you used to have. You may have to cut back on your shopping (or where you shop)... e.g. no more premium cut steaks from the butcher every night. Perhaps only going to the movies once or twice a month, instead of once or twice a weekend. It does require a change in your lifestyle. Many people can't deal with that.

LOL Okay, I think I know what you mean.

We went to Disney once three years ago. I would like to go again in a year or two.

We like to go camping for a week and then maybe 3 or 4 other weekends.

We eat steak maybe twice a month, and it's the cheap cut ;)

I don't even remember the last time we went to the movies.

It's okay though, we have learned to live on cash, at first it was very hard, but we were enrolled in a DMP program for a year and since dropping out of it (and not paying) it has been another year. It is truly liberating to be cash only but on the other side of it I am trying to play catch-up with the other payments and the lenders aren't so nice.

But seriously, can you include $400 ($100 per person) of recreation in your budget? That would take care of most of it!!

How often does the trustee update their records and adjust the payment?

[Jammed]

I was worried that 5 years of ch 13 would feel like being a prisoner at home without being able to afford even a happy meal for my kids. Its good to see that some people have been able to survive it and still save money for emergencies and some fun stuff once in a while. It sounds like getting a good lawyer to fight for the lowest possible plan payment plus learning how to budget is the key.

[aa06a47]

I think the key is a good lawyer and a good trustee and being good at budgeting. Having read some of the post about income/payments, I cannot imagine some people being able to make it 5 years without going out and getting a second job for under the table money. Then I see some approved plans where I think, that should be easy.

I think the hardest thing for most chapter 13 people is the emergency items that come up.

When people ask if they should buy a new car before filing, I say YES, by all means. If you can get approved, go for it. Auto's are probably one of the most expensive items to repair and why not go into a chapter 13 with a little insurance (warranty) under your belt.

My advice, before filing, do some pre=bk planning. Lawyers can't tell you to go and spend a bunch of money before filing, but I'm sure there are alot of places that can give you some advice.

[ELBKnow]

I sort f look at it this way: Our payment is gonna be around $300. So I have my bills and now, an additional $300 a month loan payment. Whatever I have left after that I can budget how I choose.

Does this make any sense?

[browneyes]

That seems simple enough!!

Do they always take your tax refund? What about overtime?

[justbroke]

But seriously, can you include $400 ($100 per person) of recreation in your budget? That would take care of most of it!!

I actually put $400 on my Schedule J for entertainment. However, I have a family of 4, and I'm in a Chapter 13. That amount, $400, would certainly be scrutinized in a Chapter 7. Probably half of that amount would be acceptable. They do understand that "all work and no play" makes debtors...edgy.