Chapter 13 Dismissal and Why It Might Happen

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A Question Raised Through Bankruptcy Discussion

Finishing a Chapter 13, a type of bankruptcy for wage earners, has historically showed statistics very little success. National statistics for those who actually finish a Chapter 13 plan to pay unsecured debt ranges between 10 and 33 percent.

When a bankruptcy Chapter 13 filer cannot finish the plan, for whatever reason, the bankruptcy court handling the case immediately stops the progress of the case through dismissal. Many debtors seeking answers on bankruptcy forum websites have asked why so many cases of Chapter 13 bankruptcies have been handled through a dismissal?

Various Answers are Submitted to the Question Raised

For the most part, sometimes in a Chapter 13 bankruptcy case, something will happen during the bankruptcy to change the overall scheme of the plan. Most often than not, the Chapter 13 bankruptcy filer that has his or her Chapter 13 ended with a dismissal will still finish the bankruptcy by converting it to a Chapter 7 bankruptcy. This fact skews the high statistical analysis of dismissal for Chapter 13 filings.

Here is a list of some of the most common occurrences that may happen to cause a Chapter 13 to be regarded by a bankruptcy court for dismissal:

  1. A loss of income is the number one cause of having a Chapter 13 dismissed and converted to a Chapter 7.

  2. A change of mind by the filing debtor who wants to keep his or her home, is another often occurring event that can cause a dismissal. One of the advantages for filing a Chapter 13 is to keep your home. If the debtor, after filing bankruptcy, decides the home is too underwater to keep, he may change his mind about the bankruptcy and decide to give the property back to the mortgage lender.

  3. A lack of discipline can cause a dismissal of a Chapter 13. When you default on your payment plan, the bankruptcy court trustee can have the bankruptcy dismissed. Chapter 13 plans realistically look at allowing you the basic sustenance for living, and they do not leave much room for a lavish lifestyle until the plan payment period is concluded. If you cannot discipline yourself to that kind of budget, odds are you will ultimately default on the Chapter 13 payment plan, like you may have done with your creditors who brought you to a bankruptcy situation in the first place.

  4. You may have had unrealistic expectations when presenting your pay back plan to the bankruptcy court. Here you, and whatever legal counsel you had helping you, may have made an unrealistic goal for the plan, not allowing enough to realistically live on. The decision to file an unrealistic plan might cause you as much stress as you had while making bill payments prior to filing bankruptcy. In devising such plans, these type plans often end in default when the debtors keep getting behind.

A Chapter 13 is Not Necessarily for Everyone

A Chapter 13 is not necessarily for everyone, but it does meed a certain need for those who are bankrupt, employed and desire a fresh new start. If you are considering filing bankruptcy, you may wish to consult with an experienced bankruptcy attorney who can help provide you with legal answers to your questions and the experience to help you make a Chapter 13 plan you can live with until you finish the plan.

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