When considering Chapter 13 bankruptcy, you will want to meet with an experienced bankruptcy attorney to fully understand how this type of bankruptcy will impact you. Even if you pass the Means Test for Chapter 13 bankruptcy, you may want to consider the advantages and disadvantages of a Chapter 13 bankruptcy prior to filing.
Advantages to a Chapter 13 Bankruptcy:
- Provided you can afford the payment plan, you can choose to keep all your property, exempt and non-exempt.
- Debts are not canceled as in a Chapter 7 Bankruptcy, but they can be reduced under a Chapter 13 bankruptcy.
- Creditor's collection efforts and wage garnishment attempts are stopped immediately.
- More debts are considered to be "dischargeable".
- Co-signers are immune from the creditor’s efforts if the Chapter 13 Bankruptcy repayment plan is for full repayment.
- As long as you meet the terms of the plan, you are protected against foreclosure on your home.
- You have more time to pay debts that cannot be discharged by either type of personal bankruptcy (taxes, back child support, etc.).
- You can file a Chapter 13 at any time.
- You can file Chapter 13 repeatedly.
- You can categorize creditors by class where different classes of creditors receive different percentages of payment.
Disadvantages to a Chapter 13 Bankruptcy:
- You create a payment plan using your post bankruptcy income. This ties up your income over the Chapter 13 plan period.
- Legal fees are higher since a Chapter 13 filing is more complex.
- Your debt must be under $1,000,000 (e.g., unsecured debts are less than $250,000 and secured debts less than $750,000).
- Your plan, and therefore your debt, will last for three to five years.
- You are involved in the bankruptcy process for the term of the three to five year plan.
- Stockbrokers and commodity brokers cannot file a Chapter 13 bankruptcy.
- You may be able to strip off and discharge a home equity line of credit or second mortgage if your house is worth less than the first mortgage.
- If you have an older car loan you may be able to lower the principal balance and interest rate of your car loan.
These are general guidelines. Every situation is different and your circumstances will determine which type of bankruptcy, if any, is the best decision for you. To learn about the options available to you, call our office directly at 314-961-9822 to schedule your FREE Consultation with a bankruptcy attorney. You will not spend a dime to get the legal advice you need to make such an important decision!