Pros and Cons of Filing Chapter 13 Bankruptcy
Just as it is with chapter 7 bankruptcy, when it comes to filing chapter 13 bankruptcy you will find that there are some pros and cons associated with doing so. Chapter 13 is not necessarily a great option for every consumer, while some consumers can benefit greatly from choosing this bankruptcy filing option. Understanding the advantages and disadvantages will help a consumer decide if chapter 13 filing is appropriate in a given situation. Here are some of the things you need to consider if you plan on filing chapter 13 bankruptcy.
Many consumers prefer chapter 13 bankruptcy filings because such a filing allows consumers to retain their main assets. If the consumer owns a car or home, it does not have to be sold in order to be approved for chapter 13 bankruptcy status. Instead, bills are negotiated by the courts, and a trustee will collect an established payment on a monthly basis from the consumer. The payments are then used to pay off bills as instructed by the court. A downside to this is that the consumer does not establish how much is paid every month; the court does. Thus, the consumer that files chapter 13 must be prepared for the monthly fees he or she will eventually face.
When you decide to file chapter 13 bankruptcy, you will need to know exactly how much money you are making now and the money you have made for the last six months. You will have to provide the documentation to your lawyer, who will, in turn, provide it to the court with your application. Basically, the court wants to know that you have the means for entering into a repayment plan with your creditors. Your debts will be reduced to a small percentage of what they once were; this is a good advantage gained via a chapter 13 bankruptcy filing. However, you will not completely escape your debts and you will be paying a trustee for the next five years so that your debts can be repaid.
You may have to engage in debt management courses if you choose to file for chapter 13 bankruptcy. Today, courts want to know that, not only are you going to get your debts under control via bankruptcy filing, but that you will keep them under control in the future. Debt management courses will prove beneficial in the long run, but they are not free and they can prove timely. The consumer may have to go to one or more classes to learn positive methods for controlling debt. There are initial fees associated with filing chapter 13 bankruptcy too, and the debt management classes you must take are also accompanied with a fee. Thus, you face attorney fees, bankruptcy filing fees, debt management course fees, and the repayment of your reorganized debts.
When it comes time for chapter 13 bankruptcy filing, the consumer must also be aware that only certain debts are eligible. Student loans, fines imposed by the government, child support payments, and any fines one has received due to unlawful activity cannot be erased with a chapter 13 filing. What’s more, this type of bankruptcy works much like chapter 7 filing offers when it comes to the affect it has on one’s credit report. When a consumer has chosen to file chapter 13 bankruptcy, he or she may be ineligible for credit for seven to ten years time.
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