It is a very common thing in these United States for a Chapter 13 Bankruptcy to “fail”. They fail in the sense that they are dismissed before the Discharge of debt is entered quite regularly and for a number of different reasons.
The Debtor is often just not able to live on the proposed budget and stops making chapter 13 plan payments. Sometimes, people lose jobs, get ill or any number of other things happen, that make the chapter 13 plan payment difficult or impossible to make.
The Bankruptcy Code has been written with these types of problems in mind.
If you can't complete the Chapter 13 plan you may be able to file a motion with the Court and ask the Judge to grant you a “Hardship Discharge”.
Here are the criteria:
1. You failed to complete your plan payments due to circumstances “for which you should not justly be held “accountable”
You must be able to show the Court that something more than just a temporary job loss or the flu. The new condition you have found yourself in needs to be “permanent” and you may need some evidence of the condition.
2. You have paid your unsecured creditors at least as much as they would have received if you had filed a chapter 7 case.
If all you would have lost in the chapter 7 bankruptcy was your collection of Shaq memorabilia, than this may not be a hard burden to meet. On the other hand if you are protecting your non-exempt antique gun collection this burden may be more difficult.
3. Modification of the Plan wouldn't work
The Judge has to be provided evidence that modifying the plan won't work to save it.
The First of the three criteria is usually the most difficult one to prove. If you are in a Chapter 13 Bankruptcy and think you meet all three criteria, you should talk to your Attorney about this option.
For most, it is usually easier to convert to a Chapter 7 Bankruptcy if available, or to dismiss the Chapter 13 and plan for a Chapter 7.
Experienced Arizona Bankruptcy Counsel is necessary when you are facing problems with your Chapter 13 case especially if you facing a real hardship.