What Can Go Wrong In A Chapter 13 Bankruptcy?

13 Jul What Can Go Wrong In A Chapter 13 Bankruptcy?

Perhaps the most difficult part of a Chapter 13 bankruptcy is getting the plan confirmed.  The court has to approve the proposed plan.

There are several common reasons why the court might not approve a proposed plan.  It might be infeasible – the schedules put into question the ability of the debtors to make the intended payments.  Or, it might not apply as much of the debtor’s income as necessary to fund the plan. Or, maybe it wasn’t proposed in good faith.

These are all difficult problems that can often be avoided with good counsel and careful drafting.  But sometimes there just isn’t a cure, and you end up not being able to confirm a plan.  Then the case will either get dismissed or converted to a Chapter 7.

And there’s the problem.  If the case is dismissed, any automatic stay is terminated and the creditors can proceed with their collection attempts.  Or worse, a mortgage company can complete its foreclosure.

If the case is converted to a Chapter 7, all of your property, except that which is exempted, belongs to the bankruptcy estate.  You might have to turn over bank accounts or other assets.  Other property can be sold to pay your unsecured creditors.  All things considered, not what you thought when you filed the Chapter 13!

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Douglas Jacobs is a California bankruptcy attorney and partner in the Chico law firm of Jacobs, Anderson, Potter & Chaplin. Since 1988, Mr. Jacobs has taught Constitutional law and Debtor-Creditor/Bankruptcy law at the Cal Northern School of Law. He has served as Dean of Students since 1994. He is a frequent lecturer on the subject of consumer bankruptcy law, and has spoken at both state and national levels.
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