When you are facing large amounts of debt, one option you can pursue is filing Chapter 13 bankruptcy. Learn about the pros and cons of Chapter 13 to learn if it’s the right option for you.
Pros of Filing Chapter 13 Bankruptcy
When you decide to file for bankruptcy, you have several options – including Chapter 7, Chapter 11, and Chapter 13. There can be many advantages to selecting Chapter 13, including:
- You have more time to pay off your debts than you did before filing for bankruptcy. You also may have more flexibility in the amount you need to pay in each installment or be able to stretch the payments out further.
- Once you apply for Chapter 13, creditors are not able to seek collection from you.
- After you get a repayment plan approved through the court, creditors cannot demand that you repay your debt in full.
- As long as you make payments according to your repayment plan, you can keep the property you are making payments on. This can include your house.
- Having a Chapter 13 bankruptcy on your credit report can be less damaging than missed payments, defaults, and repossessions that you could face if you do not file for bankruptcy.
- You can apply for new lines of credit one to three years after filing bankruptcy.
- You can file Chapter 13 again if you fall back into financial trouble. This is different from Chapter 7, under which you can only file once every six years. However, it will appear on your credit report each time you file for Chapter 13.
- The court can relieve you of some of your debts (as long as they are not the types of debts that survive bankruptcy).
- You can hire an attorney to help you navigate the Chapter 13 process and make sure you are taking advantage of all of the benefits filing offers.
Cons of Filing Chapter 13 Bankruptcy
While there are a lot of positives to filing for Chapter 13 bankruptcy, there can also be negatives that you should consider. These can include:
- The repayment plan can stretch over several years, meaning it could take you up to five years to repay your debts under Chapter 13.
- You must repay your debts through your disposal income, or any income you have left after paying for your necessities. This means that you will have to live on a limited budget until your repayment plan is completed.
- A Chapter 13 bankruptcy can remain on your credit report for up to 10 years.
- You will have to give up your credit cards when you file.
- If you don’t currently own a home, it can be difficult to obtain a mortgage while the bankruptcy is on your record.
- If you file for Chapter 13, you are unable to file for Chapter 7 for six years.
- You are still obligated to pay alimony and child support, even if you file for Chapter 13.
- Bankruptcy will not discharge your student loan debt.
- You cannot file for Chapter 13 if you had a Chapter 7 or Chapter 13 case dismissed within the past 180 days because you violated a court order, or you requested the dismissal after a creditor asked for relief from the stay put in place.
- You may still need to pay some of your debts after bankruptcy.
Contact an Attorney
As bankruptcy lawyers, we have been helping people in the Oklahoma City metropolitan area face and overcome challenges for more than 29 years. If you are considering filing Chapter 13 bankruptcy to cope with mounting debt, it’s crucial to hire an experienced attorney to help you through the process. Don’t let debt ruin your life. Call (405) 529-9377 for a free case review.