Those who file for bankruptcy need to review all of their options before moving forward, especially since there are different strategies to tackle debt and the approaches vary from one bankruptcy to the next. For example, someone working through a Chapter 13 bankruptcy needs to approach the process in a different manner than someone filing for Chapter 7 or Chapter 11. Although Chapter 13 is very advantageous for many people, it has a very high failure rate.
In this post, we will examine some of the reasons why Chapter 13 bankruptcies sometimes fail. Moreover, the high failure rate of Chapter 13 bankruptcy underlines the importance of preparing.
Unexpected financial challenges
Many Chapter 13 bankruptcies fail because of unexpected financial problems. For example, someone who loses their job or struggles with medical costs due to an accident likely experiences more difficulty when it comes to their Chapter 13 repayment plan. The birth of a child and other major life events can also impact someone’s ability to continue making payments properly.
There are many other reasons why Chapter 13 cases sometimes fail. For example, some people take the wrong approach or even try to file for Chapter 13 bankruptcy without the assistance of a legal professional. Furthermore, some people file for Chapter 13 even though they plan the case failing, simply to buy time (such as a homeowner who wants to prevent foreclosure so they can sell their home).
There is a wide range of considerations related to filing for Chapter 13 and our law office discusses this topic in more detail throughout our site.