I understand what you are saying, and generally, don't disagree. If you can do CH7, not a question do it.
However, there are situations where you need to do Ch13 and it is very helpful.
That stat about 80% of people failing CH13 is thrown around a lot, and I do believe it. BUT - how about the stat about people that do CH7 - get their debt wiped out within a few weeks and are back to the same old habits within months or a couple years? I bet its nearly 80%!
I can say this, I tried to qualify for CH7 and it got converted to CH13 due to income, and it was a hit to the gut for me. However, it's been the best thing that ever happened to me financially. My CH13 payment nearly $1K a month a while I have plenty left to live life just fine, it did force me to look at my financal decisions. Today I manage my finances, my finances don't manage me. I firmly belive if I didn't do CH13 I would have ended up repeating that bad behavior. Thats just me being honest.
I want to say, I don't blame or look down on others that do CH7, I would have too! I just am sharing my honest experiences.
Was your payment very high? How much did you have 'left over' each month?
Total Debt before?
The 'side gig' was that cash tips?
and most important were you in a 100% repayment plan, 3 or 5 year plan?
My monthly payment was right at $900. My debt was about $50K (half of that student loans), and it was a 5 year 100% payback plan. I paid it off a year early. The side gig was working at a local running store. $20 an hour and I usually worked about 12 hours a week. Sometimes less if I didnt want to work a Sat or a Sun. I cant remember how much I had left over each month. But it was enough to live just fine and still save a bit. Not so much that first 1.5 years but then I moved to have a higher paying job + signing bonus so I could get out faster and also save more. Plus the cost of living where i moved was super low.
Nice to hear you are doing well, and good luck with all your future financial endeavors. I looked carefully at ch 13, spoke with an attorney and almost filed, but ultimately decided against it. I spent hours studying the pros and cons, watched countless Youtube videos on bankruptcy and talked to a guy at work who went thru ch 13. It seems so much depends on the trustee you get. That person can make or break your life during the plan's time-frame. I did not want to take that gamble with the next 5 years of my life. So I have been successfully negotiating with my creditors on reduced payment plans and settlements.
It will still take me about 5 years to be debt free but it will happen on my terms and not the bankruptcy court. I don't have to answer to some arbitrary 3rd person. Oh...and I did cancel all my credit cards. It really helps me stick to my budget.
I don’t know about the 80% fail rate, but for me this was the best thing I ever did. My payments where almost a grand, but that was still less than I was paying everyone before. 5 years was a long time, but forced me to budget better and was really a wake up call. I now have a little over 6 months before it’s gone off my credit and I’m in better financial shape than I have ever been in my life. For me it was a good thing. I would have done a 7 if I could have but did not qualify, so for me this was the best way out.
I think we're going to get screwed over on our chapter 13. We will make 80k this year because of my spouse's overtime, usually we'd make more like 66k. We are a family of 3 with one dependant. Right now, it looks like our payment will be $2300 a month.
We passed the means test, but, then when actual numbers are plugged in, we don't pass because we have a cheaper mortgage and cheaper car payments so basically we're going to get hosed for being more budget conscious. We're really out of options though, so, it's that or nothing. Our payment is only going to be $300 less a month than our current payments.
If there was any other option, we wouldn't do a 13.
Edited to add: Really, the only reason we are going ahead with it is that we know something will happen and spouse will get laid off or something and we'll convert to a 7 at that point. But, it's going to be an uncomfortable couple years or so. I wonder how much of that 80% fail rate is people who end up having to change to a 7?
The 80% fail rate usually means people had decided to stop making the plan's payments because they were tired of living on such a painful budget. Most of these poor folks still don't qualify for a Ch 7 conversion so they are back that the mercy of all those nasty creditors. The harassing phone calls start again; the threat of law suits starts again and their credit report shows a bankruptcy. Talk about getting screwed!!!
The BIG credit score hit and NO court protection to boot. That's the absolute worse way to go! You'd be better off selling your blood every week.
In my opinion, the best option, if you qualify, is Ch 7. Yes it stays on your credit report longer but you get to start over immediately with a clean slate. No more crushing debt! You can start saving money and begin changing your life without waiting the 3 to 5 years for a Ch 13 to clear. Plus within 2 years you will start getting new credit opportunites. It's a no-brainer.
I decided to go with a 7 to file because I’m eligible and won’t lose any assets, so it would be crazy for me to file a 13.
The biggest reason a 13 was so unattractive to me though was the fact that since my debts are so high, I would still have a very large utilization and I pretty much couldn’t do anything credit-wise for five years while repaying my debts.
A 7 was a no brainer for me since my credit will likely recover in a few years and I can walk away from the debts free and clear rather than being in the same situation I’m in now, just with court protections.
I plan on having a major overhaul in my spending habits when I get my discharge but yes, it is astounding to me how many people who file CH7 get in the same or worse situation before the prevous one even falls off.
BK is an opportubity for a fresh start but it doesn't change behaviors.
Wait....in Chapter 13 you are:
"FORCED to repay as much of your debt as possible"
You're forced to repay actual money you owe? That's crazy! Who came up with that? Why should anyone have to repay money they owe?!?
So you watched Youtube and talked to a guy at work. Cool. That's how I make high level life decisions too.
Ok all jokes aside. The main reason people do Chapter 13 is they own property and they want to keep their home long term. Chapter 7 does not allow you to do that. If all you own is mattress, a couple of dead AA batteries and a Transformers poster then yeah, you're unlikely to even be looking at Ch13. Also as others have pointed out, many times people are barred from filing Ch7 because their income is too high. So courts say sorry but you have enough income to pay these people back over time.
The nerve of them!