Chapter 13 Bankruptcy: Pros and Cons
Last week, the Groce & DeArmon, P.C. blog looked at the pros and cons of Chapter 7 bankruptcy, how filing under Chapter 7 affects your credit score, and what the recovery time would look like. While Chapter 7 is the most common chapter of bankruptcy, Chapter 13 bankruptcy arguably presents more benefits because it doesn’t require the loss of property.
In today’s post, Groce & DeArmon, P.C. will take a look at Chapter 13 bankruptcy and break down the pros and cons of this chapter.
Pro: You Don’t Lose Property Under Chapter 13 Bankruptcy
This is the most obvious benefit of utilizing Chapter 13 over Chapter 7. While Chapter 7 will ultimately end with a discharge, it also does so at a higher cost than Chapter 13 when considering personal property. Chapter 13 allows debtors to attempt to pay off their debt before forcing them to foreclose or have their belongings repossessed.
Con: It Ties Up All Of Your Extra Cash
This might seem like a petty thing to be concerned about, but it is something to consider nonetheless. When you file under Chapter 13, you have to make your payments out of your disposable income, which is the money you have left over after things like food, shelter, and water. During your repayment period, the rest of the money that you earn from your paycheck will be put towards your debt.
Pro: Flexibility With Payments
Unlike other chapters of bankruptcy, those who file under Chapter 13 will be given a longer leash with payments. You will have more time to repay your debts, which means that the immediate financial burden when paying through Chapter 13 bankruptcy will be less than with Chapter 7 or other forms of bankruptcy.
Con: You Will Be Paying Off Your Debts Longer
While you get flexibility with the payment plan strategy implemented through Chapter 13 bankruptcy, you will also be paying off your debts much longer than you would under Chapter 7. Under Chapter 13, it can take up to five years to pay off your debt while it takes as little as three months to pay that debt off under Chapter 7. While that is preferable to losing property, you must consider the length of time you will spend under this chapter and whether having very little disposable income for a long period of time is realistic for you and your family.
Contact Groce & DeArmon, P.C. For More Information
Deciding which chapter to file when looking at bankruptcy is a big decision. At Groce & DeArmon, we want to help make that decision easier on you. For more information, give us a call at (417) 862-3706 or contact us online today.