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Is Chapter 13 Bankruptcy A Good Choice?



It’s difficult to declare bankruptcy and you might be debating between which kind to file. Many people make the decision to file for a chapter 13 bankruptcy birmingham al as it is one of the better options in some situations. Many people are embarrassed about asking questions about bankruptcy as they are afraid it will impact how their friends and family view them. Here are some pros and cons when it comes to Chapter 13. 


Cons 

Under Chapter 13, it can take 5 years to be able to repay all of your debts. In order to pay the debts, all of your “disposable income” is tied up by the program. This means anything that you have “extra” after paying for medical care, food, shelter, and other bills is taken to pay off all of your debt. This means that you won’t have access to any extra cash during this whole process while can be quite inconvenient. 

Even though you have claimed bankruptcy, you will still have debts that you cannot get out of such as student loan debt and child support. If most of your debt is from student loans, bankruptcy might not do much to help your situation. In addition, you probably won’t be able to get a new mortgage any time soon. It can take years to be able to build your credit enough for companies to trust you with any significant loans. You’ll also be waving goodbye to any credit cards as those will all be canceled once you have filed. 

Pros 

While there are a considerable amount of cons, there are a lot of pros when it comes to filing for Chapter 13 bankruptcy. Chapter 13 can make paying off your debts take longer, but it is also a more flexible option when it comes to payments. Some of the options that your bankruptcy trustee may offer are reduced amounts on your payments, extended payment deadlines, or even giving up some of your property in lieu of payments. Once you have completed the creation of a repayment plan, your creditors are not allowed to try to obligate or pressure you into paying the debt you owe to them in full. You will also get to keep the property that you are paying on through your plan. 

A bankruptcy will stay on your credit score for years, but it can sometimes look better and be easier to explain than foreclosures, lawsuits, and repossessions. While some people aren’t happy about losing their credit cards, it’s sometimes a good thing as they may be part of the reason that they are in the financial crisis that they are in. When you are applying for credit or trying to rent something, you’ll have to get used to explaining your credit history. 

The sooner you claim bankruptcy, the sooner you can start to fix your credit. You can file for Chapter 7 every year while Chapter 13 doesn’t have the strict time limits. It’s important to remember though that your credit report will include every time that you filed.

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