Chapter 13 bankruptcy law offers petitioners an opportunity to restructure the debts they owe. This means that you might be able to convert something like $100,000 worth of debt into an $80,000 payment plan that you will have three to five years to finish.
Pursuing a Chapter 13 bankruptcy, however, isn't a perfect choice for everyone. Before you make this decision, it's wise to learn about some of the pros and cons.
Pro: Ability to Deal with Secured Debts
One major reason people often consider pursuing Chapter 13 is that it allows them to restructure secured debts. These are debts that are backed by a real object or property, such as a mortgage that is backed by a house or a vehicle loan that is backed by a car.
You can't do this with the Chapter 7 system, the alternative option. In Chapter 7, secured debts are handled by returning the items securing them to the respective creditors.
Con: Not Everyone Is Eligible
When you petition for Chapter 13 bankruptcy relief, you have to prove that you can afford to pay if the court makes an adjustment to your debt load. You will have to document what your income, living expenses, and other obligations are. The court will then want to see that nearly all of your disposable income is committed to making payments according to the plan you've proposed.
Pro: Retain the Ability to File Chapter 7
Under Chapter 13 bankruptcy law, there is an allowance for the possibility you might not be able to pay based on the plan. If this happens, you can still petition for Chapter 7.
Bear in mind, though, that the court frowns on people stringing the process out. You have to make a good-faith effort to complete the plan if at all possible.
Mixed: Time to Get Back on Your Feet
Chapter 7 cases tend to take months once the debtor has proven they're eligible. Conversely, a Chapter 13 case will take months to go through the petition and approval process and years to get through the payments. If you're confident that time and a little breathing room are all you need, this is a great arrangement. On the other hand, if you're not quite sure, it might hang over your head.
Pro: Retaining Property
As long as you are able to pay, you can retain the property you have. Likewise, you may be able to make reduced payments on your existing secured loans.
For more information, contact a Chapter 13 bankruptcy law service.
Share30 July 2020
Hello, my name is Neil Gamford. Welcome to my site about bankruptcy proceedings. After my divorce, I was left near penniless and without a place to stay. I was paying all of my income to alimony and my remaining debts. Although I had a solid payment plan in place, it was getting difficult to cover my financial obligations without a home. Luckily, I met with a bankruptcy attorney, who helped me find a way to discharge my debts and start over. I hope to share the information I learned throughout that process with you through this site. Please feel free to visit anytime.
