True rate of Chapter 13's that fail...

[TheBajan]

I've read here and on several other places online that the number of chap 13's that fail are somewhere between 40% to 70% (depending on who did what study).

Question - Does that consider the number of 13's that are converted to 7's as having failed? I've seen on this forum that a lot of 13's do get converted and that seems to be preferable when it can be done. Am I misunderstanding that?

Just curious. I have to admit that it's a little scary hearing that the odds of completing our 13 are so far against us. I can't imagine that any of the 40% to 70% who 'failed' went into their plan thinking they would fail so it's a bit un-nerving.

Thanks much!

[Flamingo]

To put it somewhat in a nutshell....the main reason most Chapter 13's "fail" is that those in the Plan just cannot learn to live within a budget and have a hard time changing their former lifestyle. Some people sail right through a Chapter 13 and others just cannot stand having to cut back and learn to live on less, shop discount, etc., etc. Chapter 13's fail when Plan and other payments required under the Plan cannot be paid even though those in the Plan continue to work and have no loss of income or change of circumstances. A Chapter 13 converted to a Chapter 7 could be due to loss of income/wages, major medical issues, etc. - those circumstances are usually beyond the control of those in the Plan.

The odds of you successfully completing a Chapter 13 Plan are what you make them. If you can learn to budget and can change your former lifestyle and learn to live on cash only, your reward is at the end of the Plan.

[TheBajan]

Flamingo,
Thank you for your input. I would tend to believe exactly what you are saying with an exception.... I've been living on a budget since I was nine years old. It's something I know how to do. BK is not something I ever would have believed I'd be in the middle of but here I am! Would it be incorrect to assume that the economy caught many very responsible people off guard? A few days ago I posted a bit of a survey asking people if they had been on a budget prior to filing. I didn't get many responses but of the people who did respond, only one said he/she was using any sort of budget before BK so what you are saying is verified by those responses. If that's truly all there is too it... I can breathe easier. Thanks again for your perspective.

The Bajan

[LadyInTheRed]

My undertanding is that only about 1/3 of Chap 13 plans are completed. The other 2/3 includes conversions to Chap 7 and dismissals. I think a lot of articles turn this around to say that 2/3 of Chap 13 plans fail which is not really the same thing as not being completed. Remember many articles you read about BK are put out by creditors and debt management companies who would like to scare you out of filing BK.

As Flamingo points out, statistics of completion or failure aren't very meaningful to your individual situation.

[MSbklawyer]

My office's rate of 13 failure, counting conversions to another chapter, are only about 1/3. The single best thing you can do to help a 13 succeed is to have payments made by wage order instead of self pay by the debtor. The second best thing is making the plan no more than 3 years when that is an option.

Another thing is to be willing to do the work to get the debtor a temporary suspension of plan payments when they hit a bump in the road such as a temporary unemployment spell or extraordinary expenses. I think one of the reasons so many fail is because a lot of lawyers are unwilling to do this. The courts, here at least, won't let them charge for it if they have agreed to the no-look fee. They let the plan fail and then, when the client is back on his feet, as soon as the creditors start hounding again, the client will file a new 13, or maybe a 7.

[TheBajan]

My offices rate of 13 failure, counting conversions to another chapter, are only about 1/3. The single best thing you can do to help a 13 succeed is to have payments made by wage order instead of self pay by the debtor. The second best thing is making the plan no more than 3 years when that is an option.

Another thing is to be willing to do the work to get the debtor a temporary suspension of plan payments when they hit a bump in the road such as a temporary unemployment spell or extraordinary expenses. I think one of the reasons so many fail is because a lot of lawyers are unwilling to do this. The courts, here at least, won't let them charge for it if they have agreed to the no-look fee. They let the plan fail and then, when the client is back on his feet, as soon as the creditors start hounding again, the client will file a new 13, or maybe a 7.

Thanks for the statistics.... what I really want to say though is that I love your sig

[shark66]

The single best thing you can do to help a 13 succeed is to have payments made by wage order instead of self pay by the debtor. The second best thing is making the plan no more than 3 years when that is an option.

Words of true wisdom here. In plain English.

My hat's off to you. Seriously.

Good luck to us all.

[alorth]

My 13's primed to fail, and I'm not even a month into it.

Our payment is not going to be confirmed.

Had my 341 today and the amount of blood they want to squeeze out of this turnip is a non-starter.

Not to mention the 13 TT as much as said to us today that the Judge in my case will essentially come up with "his own number" of what he thinks we should be able to live on as a family of 3 in the county we live in, and the rest will have to go into the plan, and if that's not agreeable, dismissal is the only option. Negotiations not welcome. So instead of having just the 13 TT as the Creditor's advocate, it appears that the Judge in our case is ALSO the Creditor's advocate, instead of a neutral arbiter. 2 against 1 isn't really fair in my opinion. The game seems rigged.

[shark66]

My 13's primed to fail, and I'm not even a month into it.

Our payment is not going to be confirmed.

Had my 341 today and the amount of blood they want to squeeze out of this turnip is a non-starter.

Not to mention the 13 TT as much as said to us today that the Judge in my case will essentially come up with "his own number" of what he thinks we should be able to live on as a family of 3 in the county we live in, and the rest will have to go into the plan, and if that's not agreeable, dismissal is the only option. Negotiations not welcome. So instead of having just the 13 TT as the Creditor's advocate, it appears that the Judge in our case is ALSO the Creditor's advocate, instead of a neutral arbiter. 2 against 1 isn't really fair in my opinion. The game seems rigged.

OK, first and foremost, do you have an attorney respresenting you?

In my book (and I'm NOT an attorney) it's his/hers responsibility to come up with a *confirmable* plan that is *palatable* to the debtor, and run all facts, figures and numbers as many times as needed BEFORE the plan is even submitted.

Can you give us some info on what you're up against and what your attorney's plan of action (presuming you haven't filed pro se) is?

Good luck to us all.

[alorth]

OK, first and foremost, do you have an attorney respresenting you?

In my book (and I'm NOT an attorney) it's his/hers responsibility to come up with a *confirmable* plan that is *palatable* to the debtor, and run all facts, figures and numbers as many times as needed BEFORE the plan is even submitted.

Can you give us some info on what you're up against and what your attorney's plan of action (presuming you haven't filed pro se) is?

Good luck to us all.

Oh yes...I have an attorney.....not my favorite fellow right now. But I chose him after talking to 3 so its nobody's fault but mine.

We filed originally as a 7 last September and because of the UST's Motion to Dismiss for 707(b) we had to convert to 13 in February.

I have posted quite a bit about my situation as things have progressed.

Its a long story.

[HHM]

I agree with Flamingo in part, many chapter 13's fail due to the debtor not being able to make necessary choices. but the other half of the coin is changed circumstances. 5 years is a long time, things simply change.

Keep in mind, the goal of a BK is discharge. Most people who start down the path of a chapter 13 end up with a BK discharge in some manner, most end up converting to chapter 7, so those cases really aren't failures.

Purely anecdotal, but IMHO, the causes of chapter 13 failure, in order of most common to least common are...

1. Debtor changed circumstances during life of plan.
2. Unrealistic expectations or goals of debtor at time of fling (e.g. below median income, trying to save house they cannot afford).
3. Debtor unable or unwilling to make necessary lifestyle change to make plan work (usually 2 and 3 go together).
4. Poor representation (or no representation) leading to unrealistic plan payment.
5. Choice of chapter 13 is simply wrong strategy to deal with the debtors problems.

[keepsmiling]

My 13's primed to fail, and I'm not even a month into it.

Our payment is not going to be confirmed.

Had my 341 today and the amount of blood they want to squeeze out of this turnip is a non-starter.

Not to mention the 13 TT as much as said to us today that the Judge in my case will essentially come up with "his own number" of what he thinks we should be able to live on as a family of 3 in the county we live in, and the rest will have to go into the plan, and if that's not agreeable, dismissal is the only option. Negotiations not welcome. So instead of having just the 13 TT as the Creditor's advocate, it appears that the Judge in our case is ALSO the Creditor's advocate, instead of a neutral arbiter. 2 against 1 isn't really fair in my opinion. The game seems rigged.

Ah Alorth, been wondering how you have been doing. Do you want to start a separate thread and fill us in? So sorry it's been going so badly for you.
This is about the house and school, right? did your lawyer do any homework to see if there is precedent for your mortgage payment in your district?

[Slingerland]

Purely anecdotal, but IMHO, the causes of chapter 13 failure, in order of most common to least common are...

1. Debtor changed circumstances during life of plan.
2. Unrealistic expectations or goals of debtor at time of fling (e.g. below median income, trying to save house they cannot afford).
3. Debtor unable or unwilling to make necessary lifestyle change to make plan work (usually 2 and 3 go together).
4. Poor representation (or no representation) leading to unrealistic plan payment.
5. Choice of chapter 13 is simply wrong strategy to deal with the debtors problems.

I'd like to add another, please:

6. Not understanding their own bankruptcy and not asking questions of their attorney BEFORE filing.

Why do I LOVE this site? I've learned so much BEFORE filing. The people on this site have helped me to learn about bankruptcy, and that knowledge is helping me to communicate with my attorney. Many people are too deep in the embarrassment of their bankruptcy to ask questions of their attorney. They feel stupid, embarrassed and low, and they do not want to ask questions that they think will be "stupid" in the eyes of their attorney. And the client will even hide information from their attorney to avoid looking dumb(er). They simply hand their pay stubs and receipts to the attorney and close their eyes.

But if they do not ask questions... and if they do not tell their attorney everything... how can they get the best plan for them? Bankruptcy is danged serious. My view is that the attorney is there to provide expert advice. But the final decision and understanding MUST be the responsibility of the bankruptcy filee.

And to flip the coin, there are those attorneys who simply look down at their clients. They do not explain what is happening. And the client is too ground down by the situation to sit back and say "Wait, I have a question..." So the attorney files a vanilla case and the client might not get the quality of representation that is needed.

In my ongoing interviews to find an attorney I'm comfortable with, I've found three experts in BK where rental houses are of concern: one is aggressive in defense of the client. One tends to anticipate the trustee and file less agressive plans the trustee will not object to. (The third I'll be meeting this coming Tuesday.) A major factor in my final decision... maybe the most important factor... is their willingness to take questions from me, and their willingness to explain alternatives to me. I make it clear: they are the expert, not me. But the decision and responsibility is totally mine.