Chapter 13 bankruptcy can provide a lot of benefits to the individual filer. As with all chapters of bankruptcy though, there are some downsides to filing for Chapter 13 bankruptcy. Today, we would like to discuss the many different positives and negatives of filing for Chapter 13.
Let’s talk about the positives first. The main benefit of Chapter 13 is the repayment plan, which though it will take a longer time to fulfill than a Chapter 7 bankruptcy, it will also make it a bit easier to pay off your debts without losing critical assets. In addition, trustees that oversee a Chapter 13 bankruptcy can be flexible with you, as they want to ensure the filer fulfills his or her repayment plan. Along those lines, if you do fulfill your repayment plan, your creditors aren’t allowed to chase you down in search for full payment for what you owe.
There are some negative aspects to Chapter 13. For example, your disposable income will be locked up in the bankruptcy. Disposable income is considered anything that you have after paying for necessities. You will also lose all of your credit cards, and the Chapter 13 bankruptcy will remain on your credit report for up to 10 years. It will also be difficult to file for Chapter 7 bankruptcy in the future, if you were to ever need it.
People that are considering bankruptcy should discuss their unique situation with an attorney to ensure all of their bases are covered.
Source: FindLaw, “Pros and Cons of Declaring Bankruptcy Under Chapter 13,” Accessed Feb. 12, 2017