Dealing with financial problems is not something one wants to face; however, when they occur, they are something that need to be addressed. Much negative connotations are attached with the bankruptcy process. Many individuals are concerned about it impacting their future credit and even affect his or her reputation or self-image. Thus, it is important to understand how filing for bankruptcy could be beneficial, even if there are setbacks to also consider.
What are the pros and cons of filing Chapter 13 bankruptcy? Let’s begin with the pros of this process. Chapter 13 helps a debtor develop a payment plan, helping them pay off debts in a more manageable and reasonable way. While it takes longer to address debts than Chapter 7 does, there is more flexibility in this process. In some cases, one can stretch out their debt payments and even reduce the amount they pay. A major benefit is that a debtor gets to keep the property they are making payments on, such as a home or a vehicle.
The cons associated with the process typically include the fact that Chapter 13 typically takes up to 5 years to repay debts. These payments must come from disposable income, which means any extra cash is tied up the entire repayment period. Filing for bankruptcy impacts one’s credit and a Chapter 13 filing will remain on a credit report for up to 10 years. Other impacts include the inability to get credit cards with a good rate, it makes it tough to get a mortgage and it can address certain debts, such as alimony, child support and student loans.
No matter what got you into your current financial situation, it should be understood that it is possible to get out of it. Filing for bankruptcy may seem daunting, but it can be a real solution that could provide a fresh financial start for those struggling with debt.