As with any form of bankruptcy, Chapter 13 has numerous positive and negative aspects to it. The filer needs to qualify for Chapter 13 first, which has strict income rules, but if you do qualify for Chapter 13 and the repayment plan that it offers, it could make it much easier for you to achieve some financial balance in your life in the future.
Let's discuss some of the negative aspects of Chapter 13 first:
- It may take up to five years for you to pay back your debts under the repayment plan that is negotiated.
- Your credit report will be damaged for some time. Chapter 13 bankruptcies may stay on your report for up to a decade.
- Along similar lines, getting new lines of credit will be very difficult. Your credit cards will be gone, getting a new one will be a trying endeavor, and getting a mortgage will be nearly impossible.
- It is also impossible to get a Chapter 7 bankruptcy in the years following a Chapter 13 filing. Even after the six-year moratorium on Chapter 7 bankruptcies following a Chapter 13 filing, it can still be difficult to successfully file for Chapter 7 bankruptcy.
Now, despite these negative bullet points, there are plenty of positives to take away from a Chapter 13 bankruptcy filing. Here are a few examples:
- The repayment plan will give you more flexibility to pay off your debts.
- Under Chapter 13, your assets that you are paying for under the repayment plan are protected. So you can keep your home, your car, etc.
- You have the ability to file for Chapter 13 bankruptcy multiple times.
Source: FindLaw, "Pros and Cons of Declaring Bankruptcy Under Chapter 13," Accessed May 22, 2017