What Are The Common Causes of Chapter 13?
There are several reasons why a person would need to avail himself of Chapter 13 bankruptcy protection. The most common reason is due to a loss of income. Job loss is probably the most likely cause of someone needing to file for Chapter 13 bankruptcy. In the case of a married couple, the loss of one of the spouse’s income can be extremely detrimental. When this occurs, payments get skipped on the mortgage, auto, utilities, etc. Loss of income can also result from an illness or injury. Depending upon the nature and length of time off, monthly bills can go unpaid, creating a deficiency.
Another major cause of need for Chapter 13 is divorce. Often times, it takes both spouses to make the monthly obligations. In the case of divorce, you have the loss of one spouse’s income coupled with the fact that there may now be two separate households with multiple expenses at each location.
Lastly, people can simply overspend and overextend. Credit can be a very dangerous thing. People often don’t realize that they are spending their future income on items that they purchased today. This overextension of credit can lead to the need to reorganize. Obviously, in the case of Chapter 13, the credit is terminated and the person must repay all or a portion of the debt over a three to five year period of time.
