Sadly, most bankruptcy plans fail within 12 months of approval. This places petitioners in a difficult position because they lose court protection against creditors and could easily end up losing the items they fought so hard to protect.

The reason most bankruptcy plans fail is due to strict guidelines enacted by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) which took effect in 2005. The new laws require debtors to enter into Chapter 13 payments which can extend up to five years.

During the repayment phase debtors often are forced to contribute as much as 60-percent of disposable income. This places serious financial constraints which leave debtors strapped for cash if unexpected emergencies arise. Oftentimes, they must choose between putting food on the table and paying the bankruptcy court.

When petitioners face temporary financial problems they might be granted leniency through the court. However, if they do not obtain authorization or miss two or more consecutive payments their creditors can ask the court to dismiss the petition.

When this occurs, the judge can rule to terminate the bankruptcy or allow debtors to enter into Chapter 7. This chapter requires turning over non-exempt assets to the Trustee. Assets are placed into an estate and either returned to creditors or sold through liquidation auction. Acquired funds are used to pay creditors. Once outstanding debts are paid, remaining assets are given back to debtors.

Prior to filing a petition, it is advised to conduct research about BAPCPA and investigate bankruptcy alternatives. This debt-relief option rarely provides the help debtors are seeking. Filing bankruptcy is a disruptive event that can take years to overcome. Not only does the petition remain public record forever, this credit blemish wreaks havoc on credit scores.

Under BAPCPA guidelines, debtors are not allowed to take on new debt while the payment plan is in place. If emergencies arise that require applying for credit, debtors will need to provide evidence of financial hardship to the court.

The problem is most people won\’t qualify for any type of credit for the first year or two after filing. Lenders that offer bad credit financing usually charge the highest allowable interest rate. This puts debtors back into a negative financial cycle which could easily cause them to fail out of bankruptcy.

Once this occurs, creditors can file lawsuit and seek restitution through a court ordered judgment. Judgments remain on credit reports until the debt is repaid. Every judgment is a black mark against credit reports and can lower FICO scores by 30 to 70 points.

Lenders assess interest based on FICO scores. Those with high scores pay less interest than people with low scores. FICO scores are also considered when renting a house or apartment, buying a car, level of security funds required for utility services, insurance premiums, and sometimes even employment opportunities. In other words, good credit is essential for many facets of life.

One positive aspect of BAPCPA is debtors are required to participate in credit counseling services before bankruptcy approval is granted. There are instances when counselors are able to negotiate with creditors and help debtors avoid bankruptcy.

Credit counseling has to be taken through a U.S. Trustee approved agency. BAPCPA requires counseling occur no more than 180 days prior to filing the petition. Individuals considering personal bankruptcy should consider obtaining counseling through an approved agency. If they aren\’t able to negotiate with creditors they will have met the requirement. A nationwide list of approved counselors is published at Justice.gov.

There are times when bankruptcy is the only viable option. If so, it is imperative to be vigilant about paying Chapter 13 payments. Talk to your lawyer about leaving some breathing room in the payment plan. Failure to leave adequate funds is a common reason most bankruptcy plans fail.

Author Bio: Simon Volkov is the author of \”Short Sale Hardship Letter eBook Course.\” He has written extensively on bankruptcy, BAPCPA, bankruptcy alternatives, and why most bankruptcy plans fail and provides an extensive article library on the topic at www.SimonVolkov.com.