Chapter 13, will it be a horrible five years?

[ForsakenBK]

I am going to file for chapter 13 bankruptcy, but I read on the internet that chapter 13 has a high failure rate. Will the five years be a period where there is no ability to a restaurant or take a short vacation?

[justbroke]

A Chapter 13 is tough. However, in some districts, there are over 80% of. Chapter 13 cases that are successful. Nationally, though, the total drops to 56% for 2022 (down from 58% in 2021).*

The problem with a Chapter 13 is that those that refuse to or cannot budget, will fail. It's that simple. There is nothing that is going to fix a debtor's pre-filing behavior. On the other hands, there are those that could have completed a Chapter 13 but life intervenes with job loss, a reduction in income, or tragedy which prevents them from being successful.

You will find many successful Chapter 13 debtors on this forum. I am one of them and I was actually Pro Se. There were times that were tough but we persevere through them. I think the first 2 years are the most difficult. You learn how to deal with ups and downs and change your spending behavior. It was not an "easy" thing to get through but it was bearable.

My family never knew I was in bankruptcy. I bought annual passes for the local theme parks, took them there often, and made the best of it. We had "make your own pizza" night rather than take out pizza. We had many many "movie" nights and I subscribed to Disney's DVD service at the time. I still have nearly every Disney movie from 2008-2016 either electronically or on a DVD/BluRay. We even would take mini-vacations to Orlando using frequent traveler points I accrued from work (I accrued hundreds of thousands of points across airlines and hotels each year).

You have to find something to make it work. It helped that we had a pool out back and I grilled every weekend (not steaks... but chicken and burgers).

As Chuck would say... "It was the best of times, it was the worst of times..." I made it work.

* Source: BACPA Report: 2022, U.S. Courts

[shipo]

ForsakenBK, as stated by justbroke above, Chapter 13s ain't fun, but one can get through them; been there, done that, got the tee-shirt.

From my perspective, the single biggest mistake one can make going into a Chapter 13, a mistake I made by the way, is to not have a new(ish) car which will survive the 5-years. If one has an older car, attorneys will typically recommend going out and buying a relatively inexpensive new or newish car, with a full warranty and service plan for the duration. This will be considered a "secured debt" and will be paid by the trustee and will be fully paid for (or very nearly so) by the time the discharge comes through.

As for vacations, no, you're not going to be able to spend the Bastille Day week in Paris in a room at the George Cinq, but a camping trip to a national park for hiking and stuff is certainly within reason.

Keep us posted on your journey.

[notreallyme]

Going on my second year in a five year 100% plan. The first year was pretty tight, luckily I listened to some of the experts here and set up an emergency fund for unexpected expenses. For us, it was a new furnace and a minor car repair. listen to them when they say something is going to come up.

We had to set up a budget and cut some things out. Before, we used to do a lot of take-out and eat that at home as a family. We cut that out - now if we are eating at home, it is home cooked meals. And we reduced the number of times that we go out. Vacations were scaled back - used to have a full family vacation and then one for just my wife and I. Last two years we have done smaller less expensive vacations. It helped that two of the kids finished up college and are out on their own in different states now, so large family vacations were probably not happening anyways.

Things get a bit better in year two due to annual salary increases. Since we are in a 100% plan, our monthly payment was fixed based on the assumption that all creditors will file, so any extra income from salary increases or my wife picking up extra hours falls into our income. I know that for many, if you are in a less than 100% plan, picking up extra hours doesn't always make sense as the trustee grabs it for the creditors. Hoping that year three is a little bit better again with another raise.

A lot of what you can do depends on your plan and your trustee - will they grab extra income or tax returns? Tax returns aren't included in our plan, but we didn't want to come up a payment on 4/15 every year but needed every dollar we could squeeze out for our budget, so played with our w4 a couple of times a year. Missed it in 2022 and had to pay $2,500. Did a better job this year and will get a refund of around $140.
Long way of saying that things will get better over time if you set an initial budget and are able to stick with it.

[CHIQUITA]

Your life changes and you learn to live below poverty level for awhile.

[Carmella]

It's not easy peasy going into Chapter 13, but for us it was really our only option to get rid of debt/get back on our feet. And I am glad we did it, wished we would have done sooner. We procrastinated that last year before filing.

I wish I knew more about the process before going in because I would have been better prepared. The car issue is a real issue. We were stuck sharing a car which was not easy at all, but at least it was doable since we worked close enough to each other and my job was flexible with my hours.

You will be on a tight budget most likely, though there are some people who have enough money left to put into savings.

I cut costs any way I could. We were also helping my young adult daughter who was graduating from college and needed to work a low paying internship before landing a "real" job. The Chapter 13 only considered the income for my husband and myself.

You have to learn to budget and can't waste money. We put off home repairs longer than we should have since we couldn't afford it. I shopped a lot at Walmart since their prices were lower and I would make lower cost meals. Sometimes I took a peanut butter sandwich for lunch (don't like jelly!) because I could make a loaf of bread and a jar of PB stretch a while.

My opinion on this doesn't mean much, but I do think BK 13 should have a little more flexibility to allow for unexpected events, but it doesn't. I tried not think of bad things that could screw up our ability to make the payment.

But the STRESS in BK13 was so much LESS than the stress prior to BK13 when we owed so much money it was killing us at least the struggle in BK13 is over in 3-5 yrs. And it has helped us so much to get rid of that debt. We were in 100% payback, but some of the creditors did not file so we ended our BK13 in just under 5 yrs.

No one knew we were in BK13. I had only one friend I told, she had actually gone through BK7 and mentioned BK to me when I told her of our financial problems and I didn't consider it soon enough due to the stigma. My friend passed away not long after our BK13 journey had started. I told people we were paying off debt when people got nosey--like "why don't you buy another car?" or "why do you shop at Walmart?" My husband was annoyed by his coworkers about having his wife drive him to work. People should be less nosey like the saying goes, "you never know what someone is going through." But people are like this and if you stick to your answer they eventually shut up. Most people won't agrue too much if you say you want to pay off your debt in 3-5 yrs!

And guess what more people than you ever thought have been through BK themselves. I searched people on PACER and I didn't gossip about them or talk to them about it, but it opened my eyes that we are not alone even though it feels like it. I had a few people volunteer info about BK when I said we were paying off debt.

One big thing was we didn't have enough money to pay the IRS during the BK, this was taxes owed after we filed. They allowed us to make voluntary payments during BK. When BK was over we were able to get a payment plan. They offer two types of plans one has a fixed payment which has more fees/interest and the other was to pay off within a certain time frame and the interest was very minimal. The IRS was surprisingly pleasant to work with, but it was a hassle to call them and not every employee was as knowledgeable.

Also be prepared that you may lose online access to pay car payments and mortgage if it's paid "outside the plan." There are few ways around it like paying through a third party or going back to snail mail.

You can find the good, the bad and the ugly if you search old posts. I think it was definitely worth it in the long run for my husband and myself. We are just around 1 year post discharge.

[CHIQUITA]

Congratulations!!! Life looks so different when one is not weighed down with debt. Good Luck Living!!

[Kimbergrl]

Hi! I filed Chapter 13 in October 2023 so I'm fairly new to it. I'm paying 100%. The good thing is that because several of my creditors didn't file a claim, I only have to pay back less than half of what I initially thought. That was a huge relief. I'll be in the plan a little over 2 years. I got on a budget. I'm still not great at following it but I'm getting better. I overspend on groceries so i started the cash method this week. I have a newer car with an extended warranty so I'm grateful not to have to worry about car repairs. I'm paying on it outside of the plan. I was so overwhelmed at first. I didn't think I would be able to make the payments each month but it's working out. I feel such relief now. I'm a sole caregiver for my mother so going on vacations or having any type of life isn't an issue right now. I work, go home and take care of her. I was able to eek out an emergency fund of $1000. I'm not touching that money unless it's a true emergency. Like everyone else said, it can be tight but stick to your budget and you'll be okay.