Chapter 13 Bankruptcy
Although a Chapter 13 bankruptcy can provide many debt burdened people some breathing room to pay their
creditors, it is certainly not without its drawbacks. A Chapter 13 bankruptcy will remain on your credit report for up
to 10 years, making it harder to qualify for loans and resulting in higher interest rates on the loans you do get.
In addition, you will have to pay a filing fee and court fees, and you may be charged interest on the amount you
filed, up to 8 percent. If you choose to have an attorney, you will have to pay their fees as well. Before you file a
Chapter 13 bankruptcy, you should know exactly what it can and cannot do for you.
A Chapter 13 bankruptcy allows you to defer your payments, and create a new payment plan in order to pay off
your debts. No payments are cancelled entirely, although some payments may be reduced. The amount of
repayment you have to make under a Chapter 13 bankruptcy varies from case to case. It may depend on your
salary and the type of debt you have.
The amount you have to repay can range from 10 to 100 percent, but you will be able to make your payments
according to a feasible payment plan. In the meantime, the Chapter 13 bankruptcy will stop creditors from trying
to collect money from you. A Chapter 13 bankruptcy usually lasts between three and five years. It can last less
than three if you can pay off all your debt during that time, but it cannot last longer than five.
During your Chapter 13 bankruptcy, you are required to be very cautious about incurring more debt. The new debt
you incur may not exceed $100. This does not mean $100 per creditor, it means $100 total. If an emergency
arises and you need to incur more, you must file a request with your trustee to do so.
Most people who declare bankruptcy declare a Chapter 7, since Chapter 7 bankruptcies actually erase part or all
of your debt. However, Chapter 13 bankruptcy is better in some cases, and many who cannot qualify for a
Chapter 7 can qualify for a Chapter 13. You may want to declare a Chapter 13 bankruptcy rather than a Chapter 7
if:
- You owe the IRS, or you are behind on your mortgage (secured debt cannot be discharged under a Chapter 7,
but it can under a Chapter 13).
- Your income is too high to qualify for a Chapter 7
- Chapter 7 would liquidate some assets that you want to keep.
- You filed Chapter 7 sometime within the past six years and are therefore not eligible to file another one.
Declaring a Chapter 13 bankruptcy is generally not something you want to do, unless you have no other option.
You may want to contact a debt reduction agency to find out if there is anything they can do for you before filing a
Chapter 13 bankruptcy.
Remember, once the Chapter 13 bankruptcy goes on your record, it's there to stay for quite some time, which
may end up costing you quite a bit of money in interest. All in all a Chapter 13 bankruptcy may be a lifesaver for
some people. It will stop creditors from harassing you, and enable you to create a realistic repayment schedule
without losing your home.
What is bankruptcy, how it all works, the different types of bankruptcy and what they mean.
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