Illinois study examines effect of apologies on bankruptcy filings

Chapter 13 bankruptcy may provide the debt restructuring struggling families need. A recent study by the University of Illinois College of Law sought to answer the question of whether a bankruptcy repayment plan was more likely to be approved if the filing party offered an apology to the court. Under Chapter 13 bankruptcy, the filing party’s debt is restructured or forgiven, but the law doesn’t mention anything about an apology.

To complete the study, researchers evaluated responses from 137 judges. The law professors conducting the study submitted a fictional family filing for Chapter 13 to the court. Half of the filings included an apology and the other half did not. About 40 percent of judges that received the plan with the apology approved it, while only about 34 percent of those that received the plan without the apology approved it.

The concern has been that an apology may sound like an admission of guilt. One of the researchers points out, however, that judges may view the apology as a sign the filing party will take a more active role in managing their finances in the future. He also indicated that there are many different attitudes towards filing for bankruptcy today, including the view that it is a “business decision.”

For individuals seeking a fresh financial start and to stop creditor harassment filing for Chapter 13 bankruptcy may provide a reasonable solution to achieve those goals. It is designed to create a repayment plan that includes manageable payments.

Repayment plans range from three to five years depending on income. Once the stated period of time has passed and the filing party can demonstrate that the he or she is current on non-dischargeable debts and has remained faithful to the repayment plan, the remaining debt will likely be discharged.

Chapter 13 may be a helpful option to those with a reliable source of income who are facing overwhelming debt and looking for a fresh financial start. The reorganization process may be able to provide the debt relief they seek.

Source: Wall Street Journal, “Do Apologies Matter in Bankruptcy?” Katie Stech, February 15, 2013

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Illinois study examines effect of apologies on bankruptcy filings