People who are struggling with huge amounts of debts often choose bankruptcy to get rid of them. Chapter 7 bankruptcy is preferred as most of the times you get away without losing any property and all your debts are discharged. However, those who fail to qualify for chapter 7 file for chapter 13 bankruptcy. in this chapter, Dallas based bankruptcy law firm Recovery Law Group lawyers say, debt reorganization takes place and you pay your creditors through a repayment plan. There are pros and cons associated with this chapter of bankruptcy.
Benefits of Chapter 13
- Bankruptcy is removed from the credit report after 7 years, unlike chapter 7 where it stays for 10 years.
- You can protect even non-exempt property in this bankruptcy chapter.
- Unlike chapter 7, there is no means test parameter for eligibility.
- The repayment plan is for 3-5 years duration. Since you pay the debts over a large period of time, you can reduce the payments considerably.
- Since you had made payments to your creditors, lenders favor people who had filed for chapter 13 bankruptcy compared to chapter 7 bankruptcy.
- Compared to chapter 7 filers, re-establishing credit is easier for chapter 13 bankruptcy filers (12-36 months).
An experienced bankruptcy lawyer can help determine whether the benefits are enough to opt for this chapter. You can seek consultation by calling 888-297-6023.
Shortcomings of Chapter 13
- The negative impact of chapter 13 bankruptcy will impact your credit report for seven years.
- While chapter 7 bankruptcy gets a discharge within 3-6 months, chapter 13 takes 3-5 years to get a discharge.
- All of your disposable income is used to pay your creditors through a repayment plan. This will leave no scope for vacation or recreation for as long as the repayment plan continues.
- Income tax for the previous four years needs to be filed in this case.
- Future employment chances might be affected due to bankruptcy as often credit checks are conducted by employers.
After discussing the pros and cons of Chapter 13 with experienced bankruptcy attorneys, you can decide the best course of action to get rid of your debts.