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Why would a Chapter 13 payment plan fail?

On Behalf of | Nov 22, 2021 | Chapter 13 Bankruptcy |

Chapter 13 bankruptcy provides a way for people to reorganize their debts. Unlike Chapter 7, Chapter 13 does not involve liquidation exclusively, as Chapter 13 involves setting up a payment plan. The process for following through with Chapter 13 seems straightforward. The Individual makes payments to cover those debts that did not face a discharge. However, many Illinois residents who enter Chapter 13 fail for various reasons.

Not succeeding with Chapter 13 bankruptcy

When the individual does not complete payments on schedule, the judge may dismiss the bankruptcy. Payment plans involve meeting monthly obligations for 3 to 5 years. Missing payments without discussing things with the bankruptcy trustee could lead to an unfortunate dismissal.

Was the payment plan workable in the first place? Those who do not properly review their financial obligations may submit a payment plan proposal that is not affordable. They may wish to keep a costly car or remain in an expensive home, but fiscal realities might catch up with them. A thorough financial review seems advisable before arriving at a payment plan figure.

Unexpected events could occur that harm the ability to follow through on Chapter 13 bankruptcies. Someone may lose a job or experience a decline in income. As a result, making the payments becomes challenging. When such a situation arises, informing the court without delay might be advisable.

Attempting to succeed with Chapter 13

Those who attempt to file for Chapter 13 without qualified representation could make mistakes. Serious mistakes might not cause problems until some time passes. It may take a while before an overly costly arrangement results in missed payments, but the disaster could prove inevitable.

If the judge dismisses the bankruptcy, expect collection action to resume. Bankruptcy protects consumers from creditor actions, and those protections end if the bankruptcy case ends up dismissed.