When you think about personal bankruptcy, Chapter 7 is probably the most well-known. It allows people who are stretched too thin to discharge much of their debt and get a fresh start. But what if you make too much money to qualify for a Chapter 7 bankruptcy and you’re still struggling each month to pay your bills? If this sounds like you, it may be time to consider a Chapter 13 bankruptcy.
If you’re interested in learning more about Chapter 13 bankruptcy, call Kademenos, Wisehart, Hines, Dolyk & Wright Co. LPA. Our Ohio bankruptcy lawyers are happy to go over different bankruptcy options with you and determine which one may be best for your situation. For a free consultation, call (419) 625-7770, or use our online contact form.
Chapter 13: The Pros and Cons
Below is a short list of the top pros and cons to consider when you’re looking at Chapter 13 bankruptcy.
Pros
You don’t have to take the means test.
As part of the new bankruptcy laws put in place in 2005, people who wish to file for Chapter 7 bankruptcy must take a means test to ensure they qualify. If you want to file for Chapter 13, however, you don’t have to worry about qualifying. Chapter 13 is the plan people choose when they have a lot of disposable income, but also a lot of debt.
You can pay off your debts in smaller, more affordable amounts.
In a Chapter 13 bankruptcy, much of your debt is added to a repayment plan. In this payment plan, you’re still paying off debts, but your interest rates are usually much lower. Further, your payment plan only lasts for three to five years.
You get to keep your personal property.
A Chapter 7 bankruptcy usually requires you to sell at least some of your assets in order to have money to pay priority debts. A Chapter 13 bankruptcy allows most of your assets – as long as you understand that you will have to pay for them.
It stays on your credit record for a shorter time than a Chapter 7 bankruptcy.
Your credit will take a hit after a bankruptcy. Chapter 13 doesn’t affect the situation quite as much. A Chapter 13 bankruptcy usually remains on your credit record for seven years, while a Chapter 7 stays on for 10 years.
Cons
You are still on the hook for your debt.
You are technically filing for bankruptcy, but Chapter 13 is also known as a debt reorganization. Chapter 13 takes the money you owe and rearranges it so that:
- Certain debts get paid off through the repayment plan
- Other debts get discharged when you have completed your obligations
- Others remain your financial responsibility
It doesn’t discharge all your debts.
After your repayment plan has been completed, you may still be on the hook for certain debts. Generally, these are secured debts that aren’t dischargeable through bankruptcy, such as your mortgage or car loan.
It’s more expensive.
Because of the complicated nature of the plan, it costs more in filing fees and attorney’s fees than a Chapter 7 does.
Talk to Us about Chapter 13 Bankruptcy
Do you feel like you spend every month forking most of your paycheck over to debt collectors, but you’re not actually making any progress on paying your bills? If so, you may want to talk to the Ohio bankruptcy lawyers at Kademenos, Wisehart, Hines, Dolyk & Wright Co. LPA. We can help you decide how to move forward. Contact us online, or call (419) 625-7770 to schedule your free consultation.