Positive life outcomes after Chapter 13

According to a study from the National Bureau of Economic Research, a nonprofit and nonpartisan think tank, people who complete Chapter 13 Bankruptcy have positive life outcomes after Chapter 13 compared to those that don’t file.

The paper is titled Debt Relief and Debtor Outcomes: Measuring the Effects of Consumer Bankruptcy Protection. In this study, social scientists looked at what happened in people’s lives who filed successful Chapter 13s, and what happened to those who had their Chapter 13s dismissed.

WHAT POSITIVE BENEFITS DID PEOPLE WHO COMPLETED CHAPTER 13 ENJOY?

The people who completed Chapter 13 bankruptcy:

Lived longer
Made more money,
Reduced the likelihood of foreclosure by 19.1%

Sounds great, doesn’t it?

Is there a catch?

If people could get a raise by filing Chapter 13, there would be many more people who filed. This study is one of few pieces of research that looks at what actually happens to people after they file for bankruptcy.

To estimate your Chapter 13 repayment plan or if a bankruptcy could be helpful for your situation, use the calculator below.

Is filing for bankruptcy a good thing?

My clients have told me countless stories about how their lives have improved after filing for bankruptcy.

Bankruptcy laws are an important part of the American safety net. Americans use credit for many things, and most of the time credit is a good thing.

However, one financial mistake, a health issue or a change in family circumstances, can cause debt to spiral out of control.

Filing for bankruptcy allows people to regain control of their financial lives, and this study is proof that it actually works.

CAN THE STUDY BE CRITICIZED?

As experienced Minnesota Bankruptcy Attorneys, we’re not surprised by the findings of the report, however, there is something that needs to be remembered.

What the study actually looked at was what happened to people who completed their Chapter 13s, versus what happened to people who had their Chapter 13s dismissed.

The most common reason to have a Chapter 13 dismissed is failure to make all of the Chapter 13 payments
A common reason for people to stop making Chapter 13 plan payments is because they lost their job or had some sort of medical or family emergency

Because one of the common reasons to have a Chapter 13 dismissed is job loss, we should not be surprised to learn that people who have dismissed Chapter 13s do worse than those who complete their Chapter 13s.