Some cases are doomed to failure. A Chapter 13 case cannot be approved by the Court if it is not “feasible.” “Feasible” means that the debtor will be able to make all of the payments proposed by his or her Chapter 13 plan.
For example, a household of four with total monthly income of $1,850 per month could not realistically be expected to make bankruptcy payments of $1,000 per month and still be able to afford food, rent and other basic living necessities. The $1,000 payment may be necessary to hang onto and pay for two late-model cars. Filing a case will temporarily save those cars from being repossessed, and the vehicle owners will feel good about that for a short time. The “sticker shock” comes later, when they realize they cannot afford the bankruptcy payments. They may be able to limp along for a while, but sliding farther and farther behind is probably inevitable. When the bankruptcy case fails they may be farther behind on vehicle payments than when the case began.
The lesson here is to make sure you know what your Chapter 13 payment will be before you agree to file the bankruptcy case. Part of the work you will do with your attorney before filing is to go over your monthly budget. Review your monthly income and expenses carefully and make sure your budget is realistic and that you will be able to make the required payments.
Talking about an obvious feasibility issue early in the process is important because it helps to explore all of the options, and potential outcomes. In the example above, the Debtors may have been able to surrender one of the cars in order to make payment on the remaining vehicle affordable.