One of the goals  of bankruptcy reform in 2005 was to push more people into filing Chapter 13 instead of Chapter 7 where unsecured creditors usually get nothing. Although a few debtors are no longer eligible to file Chapter 7 some attorneys are giving up too easy on whether they can find a way qualify clients to file Chapter 7, instead recommending they file Chapter 13. Although this might not necessarily sound like a bad thing, it can be for people with little or no reason to enter a long term debt repayment program.

    With the housing market still in decline so too are the percentage of successful Chapter 13 plans where debtors actually make it the full 3 to 5 years. Many of my clients have simply decided it is no longer to in their best interest to save a house with little to no equity. Many more are also experiencing a decrease in income making the monthly bankruptcy payments unaffordable.

     Another pitfall of Chapter 13 since the bankruptcy reform in 2005 is the elimination of the “super” discharge in Chapter 13 that made it more attractive. This along with other factors have led to a significant decline in Chapter 13 cases and hence revenue for Chapter 13 offices. The cost to keep the Chapter 13 office solvent is being spread across a smaller pool of debtors leaving the Chapter 13 trustee searching for ways to raise revenue. One of the ways in some districts is to charge a premium on house payments paid though the trustee office. Although Chapter 13 may still be your best option please consider whether you can truly afford the “wage” earner plan that envisions 3-5 years of monthly payments. If your attorney seems overly anxious to put you in Chapter 13 and you don’t understand why, it may be time for a second opinion.

Charlotte Bankruptcy Lawyer

Jason Witt