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Bankruptcy Law

Advantages and Disadvantages of Filing Chapter 13 Bankruptcy

Bankruptcy Law Filing for bankruptcy under Chapter 13 of bankruptcy law will come with a number of advantages.  A New York Chapter 13 bankruptcy attorney from our firm will be able to explain to you all of the benefits you will enjoy by filing under Chapter 13 depending upon your specific situation.  Chapter 13 bankruptcy holds a number of benefits over filing under Chapter 7, and one reason it is appealing to most people is because there is a greater chance of retaining assets.  Chapter 7 involves the liquidation of a person's assets to pay off debt, which can be a scary thing for many people to face.  Individuals wishing to retain their property may choose to file under Chapter 13 because their debt will be restructured and they can pay off the debt over time instead of having all their assets liquidated to pay off the debt.

Our attorneys have seen their clients enjoy many of the following advantages by filing Chapter 13 bankruptcy:

  • You can prevent your home from being foreclosed on.
  • You can pay off past due mortgage payments or car payments.
  • Chapter 13 may be effective in paying back taxes and can stop interest from accruing on your tax debts
  • You can keep valuable property & assets which would not be exempt under Chapter 7 bankruptcy.
  • If you keep your agreement and pay the monthly payment for the entire term of your bankruptcy, your remaining debt will be discharged.
  • After being approved for Chapter 13, creditors must stop all collection efforts.
  • Chapter 13 will place an automatic stay on foreclosure proceedings if you have already been served a foreclosure notice.

Although Chapter 13 bankruptcy has certain advantages for the individuals who file under it, there can be some disadvantages that you should be aware of.  The advantages of filing under Chapter 13 significantly outweigh the disadvantages, but our lawyers feel that clients should be fully informed about every aspect of this legal process before they decide to file bankruptcy.  When it comes to your finances, it is important that you be aware of all the possible effects of filing bankruptcy under Chapter 13. 

The exact disadvantages of Chapter 13 bankruptcy will differ depending upon the case, so it is important to speak with a New York Chapter 13 bankruptcy lawyer about any possible downfalls to filing under this Chapter of bankruptcy law.  Some of the possible disadvantages may include the following:

  • Chapter 13 bankruptcy may remain on a person's credit report for up to 10 years, affecting their ability to qualify for credit, loans, apartments, and other items that require credit approval.
  • Individuals who have declared Chapter 13 bankruptcy may need to obtain the permission of a bankruptcy trustee before being able to apply for or receive additional credit.
  • A case involving Chapter 13 bankruptcy can last anywhere between 3 and 5 years, maintaining the debtor's status as  "bankrupt" during this time.
  • If there is an increase in a person's income over the life of their bankruptcy case, they may face an increase in the monthly payment amount.
  • Although the debt repayments are lower for a longer period of time, individuals may end up paying more of a percentage of their overall debt than those who choose to file under Chapter 7. 
  • There are limits as to how much debt you can have in order to qualify to file under Chapter 13.

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