Pros & Cons Of Chapter 13 Bankruptcy

It is difficult to apply for bankruptcy. You have to consider how your reputation, future credit, and self-image will be affected. However, one thing good is that for a short time, creditors will stop harassing you with their calls, collection letters, and visits. If you are considering filing for Chapter 13 bankruptcy, it is advisable that you weigh the pros and cons and see which is best for you.

1. It can take five years to repay your debts. It sounds like a long time. However, your payment terms will be more flexible with smaller amounts. You can also choose to forfeit property that you are still paying. Once you have a repayment plan, your creditors cannot force to collect your payments in full amount.
2. With a Chapter 13 bankruptcy repayment plan, all of the money left after your basic needs is put aside for loan repayments. It ties up all your extra cash during the repayment plan. On the lighter side, you keep your property during this time.
3. A bankruptcy, whether it is Chapter 7 or Chapter 13, will always ruin your credit for some period of time. In Chapter 13 cases, it stays 10 years in your credit report.  On a positive note, a bad credit report is better than having to explain your missed debt payments; dealing with lawsuits or repossessions to a lender.
4. All your credit cards will be closed. It may be a bad thing but after a year you have the chance to apply for new credit lines but you will be charged higher interest rates.
5. If you file for Chapter 13 bankruptcy, you can’t file for Chapter 7 bankruptcy within six years. On the positive side, you can repeatedly file for Chapter 13 bankruptcy until you qualify for Chapter 7 bankruptcy.
6. Bankruptcy doesn’t relieve you of your other obligations, e.g., child support, student loan debts, mortgage lien, etc. However, it will lighten your financial responsibilities and stop aggressive collectors.
7. You have to explain the reasons for your financial mess to a trustee or judge. But they have heard worse stories than yours.
8. Chapter 13 bankruptcy reorganization and liquidation has you file a full petition with lots of documents and paperwork to be submitted such as details of your income, expenses and debt. There is also a need to prepare a comprehensive repayment plan. If your goal is to save your property and relieve yourself of the creditors’ collection plans, paperwork won’t be such a difficult task.
9. You have to make sure that you can pay your repayment plan and if you think this remedy won’t work, it  would probably be better to let go of your property and start over again than go through a long stressful process of paying your debts.
10. Your money is monitored, with your wages attached to ensure payments, a trustee is active in managing your financials, lots of court hearings, higher legal fees, are the other disadvantages of Chapter 13 bankruptcies.  Again, it is best to weigh it: Save your property by paying your debts for five years but you might be stressed with that lifestyle or dispose your properties to pay your remaining debts and start again without the stressful payment scheme.

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