Chapter 13 Success Rate

Make sure you have the right information about Chapter 13 success rates to help you make an informed decision. The team at Acclaim Legal Services has helped numerous clients reach their financial goals through this legal process.

Read more about our research and analysis to explore whether this is the right debt relief option for you. For a personalized evaluation of your unique circumstances, reach out to us for a free consultation.

Success Rate of Chapter 13 Bankruptcies

If you need relief from debt, it's important to know your options. There are many debt resolution services, such as Debt Management Plans (DMPs), debt settlement, and bankruptcy.

We have years of experience working with people struggling with debt. Time and time again, we have seen how Chapter 13 repayment plans offer the best balance of court-protection from creditors and flexibility to adjust repayment schedules as circumstances change. Plus, you can reduce or even eliminate debt with a court discharge.

Yes — Chapter 13 is a type of bankruptcy. But it's also a budget-conscious repayment program that restructures your debts, allowing you to prioritize and pay off the most important debts first. Once your payment plan is complete, unsecured debt obligations are often eliminated.

Sounds great, right? It can be an excellent option for some people. Unfortunately, there's a lot of misinformation surrounding the Chapter 13 success rate. Many debt relief agencies are financed by credit card companies and banks. So, they push non-bankruptcy alternatives, manipulating and cherry-picking bankruptcy statistics to mislead people researching debt relief solutions.

If you're considering Chapter 13 bankruptcy to resolve your debts, you deserve all the facts. We encourage you to weigh the pros and cons of Chapter 13 and consider its overall success as a debt resolution process and financial tool.

 

 

What Defines Chapter 13 Success Stories?

In bankruptcy, the term “success rate” is often used interchangeably with “discharge rate.” A bankruptcy discharge is the final court order entered at the end of a successful case that effectively resolves the debt. Essentially, it means that your debt is legally forgiven.

However, getting your debts discharged is not the only way to define success in Chapter 13. There are numerous scenarios based on a client's unique circumstances where their bankruptcy doesn't end with a discharge but would still be considered successful. Examples could include:

• Conversion to a Chapter 7 bankruptcy: If a client's income changes and they now qualify for Chapter 7, they may choose to convert to this type of bankruptcy.
• Strategic or voluntary dismissal: If a client filed for Chapter 13 to stop creditor actions, such as a home foreclosure, the lender may approve a loan modification while the bankruptcy is in process. This resolves the mortgage issues, and the client can dismiss the case as the primary objective of maintaining home ownership was achieved.

The client would undoubtedly consider these outcomes a success. Yet, these cases would be included in statistics as part of the failure rate.

What Is the Success Rate of Chapter 13 Filings?

Does Chapter 13 actually help clients become debt-free?

Success statistics for Chapter 13 vary wildly depending on who you ask or where you search. So, to provide you with the most accurate and objective information, the Acclaim Legal Services team researched multiple sources to examine various points of view, such as:

• Annual reports published by BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act)
• Interviews with a Chapter 13 bankruptcy trustee and a retired bankruptcy Judge
• Numerous articles, blogs, and documents on the internet

We found that the national percentage of cases closed and discharged after successfully completing repayment plans is 49%, up from 43% in 2019 (source: BAPCPA report 2020, uscourts.gov).

Our firm-specific discharge rate at Acclaim Legal Services paints an even more optimistic picture, exceeding the national and state averages. Based on all firm cases assigned to a specific Chapter 13 trustee in the Eastern District of Michigan (source: Chapter 13 Standing Trustee), here's our success statistics:

• Chapter 13 plan confirmation rate: The court approved our clients' proposed Chapter 13 debt repayment plans in 88% of cases.
• Cases resulting in bankruptcy discharge: In 69% of the cases where the court approved the repayment plan, our clients successfully completed the program and had their remaining eligible debts legally discharged.

Why Do the Chapter 13 Results Vary?

These types of bankruptcies deal with complex legal issues, and each client's situation is unique. Here are some key factors to consider if you want to find debt relief through Chapter 13.

Experience of the Law Firm

Chapter 13 is considered a specialty area of the law. A basic understanding of bankruptcy law can be helpful — but you need an attorney with specialized experience. A team that understands eligibility requirements, how to create a plan that the court will approve, and someone who can guide you in interactions with creditors. As a local trustee puts it:

“Choosing the right attorney or law firm could be one of the most important decisions a consumer makes in the Chapter 13 process. An experienced attorney will not only ensure a client properly qualifies from the outset but will also set up a Chapter 13 plan that is optimized for success. A skilled Chapter 13 bankruptcy attorney will help their clients find success throughout the confirmation process and most importantly, they will closely monitor the case for any actionable steps necessary to bring the case to proper completion."

~ David Ruskin Esq, Chapter 13 Standing Trustee for Eastern District of Michigan

That's why you need a qualified attorney who understands and has successfully administered a large number of cases. The team at Acclaim Legal Services has over 120 years of combined legal experience helping clients achieve successful debt resolution through Chapter 13.

Economics of Geographic Area

A stronger job market allows individuals to maintain a stable income, which is crucial for completing a Chapter 13 repayment plan.

Effective Communication

Staying informed about your debt obligations and deadlines can be confusing. Plus, there are many key players involved in Chapter 13 that you need to keep in communication with throughout the repayment process, including your bankruptcy attorney, Chapter 13 trustee, and creditors. We can help.

Our team acts as the central point of contact, serving as a bridge between you, the bankruptcy court, and all parties involved in your case. We help you understand your rights and obligations, providing guidance throughout the Chapter 13 process.

Other Successful Outcomes

As mentioned before — a discharge isn't the only way to achieve a successful Chapter 13 outcome. You may choose to terminate your Chapter 13 case because you achieved your financial goals without a discharge, or you can convert your case to a Chapter 7 due to further financial hardships.

Both situations would technically be counted negatively in terms of completion percentages. However, most clients in these situations still feel like their case was a success.

What Causes a Chapter 13 Plan to Succeed or Fail?

If you want your Chapter 13 repayment program to succeed, you must be committed and willing to stay the course. These plans have complex guidelines that outline the process. Thankfully, you don't have to go it alone. Our team will stay by your side to help you avoid any missteps.

Here are the three main reasons a Chapter 13 program fails:

1. Plan payments: From the BAPCPA data we reviewed, one-third of the dismissals were caused by failing to make payments under the plan. Keeping up with your repayment program is the most critical factor for success.
2. Compliance: When a client fails to meet court and plan requirements, this can prevent them from receiving a discharge of their debts. That's why our team is here — to make sure you understand the ins and outs of bankruptcy law.
3. Communication: Individuals must maintain timely communication with the court regarding changes to circumstances. Our team will be your liaison, helping avoid communication gaps to keep the process running smoothly.

Comparing Debt Management Plans (DMPs) and Other Debt Resolution Options

Now let's compare your debt relief options. Besides bankruptcy, you may have heard of a Debt Management Plan (DMP) with a credit counseling agency. These companies attempt to consolidate multiple debts into one monthly payment, promising lower interest rates and better credit.

While this seems great, let's compare the key differences between filing for Chapter 13 and debt management plans.

Debt Management Plan Success Rates

As with Chapter 13, there is no guarantee that you'll successfully complete a DMP program.

The available information and reported data for DMPs and their completion success rates vary greatly. We saw reports as low as 20%, up to 55% to 60%.

It's difficult to get a verified success rate because tracking is not required by the government, as these programs do not operate under BAPCPA laws. Also, different agencies have varying definitions of success and success rates depending on their expertise and creditor relationships.

Repayment Terms

Both Chapter 13 bankruptcy and DMPs have this in common — you must choose to actively participate in the plan. Your participation and timely payments determine a program's success or failure.

The difference occurs in how the payments or budget are set up. DMPs are not always calculated on what you can actually afford to pay — but rather on what the creditor demands or will accept in payments.

“The problem is that DMPs, as currently constituted, are only useful for some consumers. Creditors call the shots when it comes to concessions offered through DMPs. They rarely reduce the amount of principal that consumers owe them, never as part of a DMP. Agencies really have only three concessions to offer that creditors will allow. First, creditors can “re-age” a credit card account of a consumer who enters a DMP. Most creditors will re-age an account once a year or twice in five years, the maximum allowed by federal financial service regulators.”

~National Consumer Law Center report (consumerlaw.org)

When you pursue a Chapter 13, you can expect a more manageable repayment plan with monthly payments tailored to your budget. The program may even reduce interest rates or optimize loan terms on your car or home.

Protections From Creditors

The second major difference between a DMP and Chapter 13 plans is their protections to creditors.

DMPs rely on their relationships with major creditors and their goodwill to set up a balanced and reasonable budget. Some creditors even fund these nonprofit debt relief agencies to help collect on debts owed to them.

One stubborn creditor could derail your entire DMP. Some creditors may even side-step the DMP and pursue legal remedies such as a judgment and wage garnishment.

The Chapter 13 plan requires that ALL creditors participate — it is not an elective process. Once the bankruptcy begins, Chapter 13 provides immediate legal protections from creditor actions, including foreclosure, vehicle repossession, and wage garnishments.

Financial Protection Tools

The Chapter 13 plan offers some unique and powerful tools that may not be available to those who seek a Debt Management Plan, such as:

• Prioritizing your debt to ensure funds are available to take care of the things that are most important
• Potentially reducing and eliminating a portion of debt
• Potentially reducing interest rates
• Legal protection from creditors and creditor actions such as home foreclosure, vehicle repossession, judgments, and wage garnishments

“Bankruptcy is also a legal solution which forces creditors to play by a set of defined rules. It also terminates collection calls and collection activity and stops pending lawsuits. Neither credit counseling or debt settlement solutions can make this claim.”

~Steve Rhode (Getoutofdebt.org)

Benefits of a Successful Chapter 13

If you stay the course and trust the team at Acclaim Legal Service to walk you through the Chapter 13 repayment process, you could experience numerous benefits, such as:

• Improved credit
• Improved debt-to-income ratio
• No more late reports to the credit bureaus
• Creditor protections
• Saved money on interest rates and late penalties
• Balanced budget

"Bankruptcy clearly came out as the quickest and most effective solution to resolving problem debt. I’ve lived through it. I know it is painful. But with the power of law behind it and the total number of discharges to filings behind it, bankruptcy would seem to be the most cost-effective way for debtors to deal with their debt in the shortest amount of time and receive the most comprehensive outcome."

~Steve Rhode (Getoutofdebt.org)

Why Trust Acclaim Legal Services for Chapter 13

Living with debt is exhausting, and it may be unclear how to find financial freedom. That's why you need a law firm that truly cares about providing real debt relief solutions.

For over 20 years, we've helped clients throughout Michigan and Metro-Detroit work toward a brighter financial future. Our deep understanding of the Chapter 13 process allows us to tailor this repayment program to your unique circumstances and financial goals. We work with you to help make the plan work for you. That means we will:

• Ensure you accurately qualify
• Set up an optimal repayment plan
• Provide timely and continual communication about deadlines
• Highlight the steps necessary for successful plan completion
• Properly monitor your case over the life of the plan
• Keep everything on track for a timely court discharge

Ready to Start the Chapter 13 Process?

If you've been struggling under the burden of debt, your Chapter 13 success story begins with finding the right legal team.

If you're ready to learn more, schedule your free consultation at Acclaim Legal Services. Call 866-995-1395 for a free, confidential meeting with one of our experienced Chapter 13 attorneys. After hours, new clients can call or text 248-840-3368 for an initial consultation or emergency service.

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