What Are the Downsides of Filing Chapter 13 Bankruptcy?

If you are struggling financially, you may have considered filing for bankruptcy. You may file for Chapter 7 or Chapter 13. If you file a Chapter 7 and it is discharged, you technically still owe the debt. However, your assets will be protected from debt collection, lawsuits, and wage garnishment. No one to whom you owe money can attempt to collect it.

If you file a Chapter 13 bankruptcy, you will be expected to make an official payment plan for any secured debt that you have. Secured debt would include houses, cars, and boats. Unsecured debt such as a credit card is likely to be discharged from your credit.  If you break your payment arrangements, your creditors will be able to take action to collect the debt,

Although Chapter 7s absolve people of all or most of their debt, Chapter 13 is easier to attain. But, according to a Macco Bankruptcy Lawyer, there are certain drawbacks to filing a Chapter 13.

It Will Look Bad On Your Credit

A Chapter 13 bankruptcy will stay on your credit for seven years, just like with a Chapter 7. Each kind of bankruptcy will hurt your ability to get credit. Chapter 7 bankruptcy may even be considered better in some cases. If a company extends credit to a person with a Chapter 7, they know that all of that person’s debts have been discharged. Hence, they are more likely to be able to pay a new debt.

If a potential creditor sees that you have a Chapter 13, they will not only think that you cannot manage your bills, they will know that you still have bills to pay. If you have other bills that you have to pay, a creditor is less likely to extend new credit to you.

You Will Still Have to Pay Most of Your Bills

There are some tax debts that will not be absolved by any bankruptcy. Child support and student loan debts are often not included in a bankruptcy. If you file a Chapter 13, you will still owe payment on the things that cost the most and are the most necessary. You must make both house and car payments under a Chapter 13, but it will take longer to pay those bills.

You Can Still Get Sued

A Chapter 13 will make your payments smaller and give you more time to pay your bills. If you miss a payment, your creditors will be able to pursue collections. They may make calls or even try to sue you.

Advantages of Chapter 13

Chapter 13 does give you some breathing room in terms of paying bills. It also gives you a chance to formulate a new system of managing finances. If you follow the payment arrangement you made with the court, your creditors will not be allowed to call or sue you.

Before deciding which bankruptcy chapter to file or if you want to file at all, you should talk to a bankruptcy attorney. They are very familiar with the paperwork and documentation that is needed for a successful filing. Pro-se bankruptcy cases are often turned down.

Bankruptcy laws have changed a lot in recent years and a trained lawyer will keep up with those changes. They will know what arguments to use if any creditor tries to challenge you. If you file the right type of bankruptcy and you hire a great lawyer, your bankruptcy will be over with and you can move on with your life.