CHAPTER 13 BANKRUPTCY RICE AND BEANS

Bankruptcy Attorney Johnathan Ginsberg has pointed out a fairly common problem in chapter 13 cases.  Specifically,  chapter 13 budgets (both before and after bapcpa) are not realistic and lead to failed chapter 13 plans.

In a chapter 13, the debtor must propose a budget.  That budget is scrutinized by the Chapter 13 Trustee.  The trustee will often challenge any portion of the budget that is not for the purpose of paying a fixed expense or common expense.  The problem with this approach, life is full of "unexpected" expenses.

For instance, what happens in Arizona when the air conditioning unit breaks and the cost to repair is $1200.00 and the cost to replace is three times that.  Where is the chapter 13 debtor supposed to obtain the funds if some savings are not built into the plan.   Do they live without air conditioning or quit making the chapter13 payment.  what do you think....  

This problem crops up often in chapter 13 cases and is probably one of the main contributors to the overall poor success rate of chapter 13 filers.

Attorney Ginsberg rightly points out that if the purpose of BAPCPA or at least one of them, was to produce chapter 13 bankruptcy filers instead of chapter 7 filers, then the Trustee and the Court should allow some argument for realistic budgets that include room for unforeseen problems.   Read it here.