Despite all the benefits of Chapter 13 bankruptcy, such as the ability
to start fresh with your finances, there are some potential disadvantages
to become familiar with before pushing forward.
Here are some things to keep in mind:
- A Chapter 13 bankruptcy requires you to use a repayment plan to pay some
or all of your debts. This can last as long as five years, meaning that
your bankruptcy will linger for quite some time.
- You don’t get to keep all your disposable income. Unlike with Chapter
7, your disposable income goes toward repaying your debts.
- It will ruin your credit. Generally speaking, a Chapter 13 bankruptcy will
remain on your credit report for seven years. This can make it a challenge
to receive any type of loan, such as to purchase a car or home.
- You are not permitted to keep your credit cards. While this may sound like
a bad thing, it can actually help keep you out of financial trouble in
- You can’t file for Chapter 7 in the near future. If you
file for Chapter 13 bankruptcy, you are not permitted to file for Chapter 7 until a period of six years goes by.
You can’t decide for or against Chapter 13 bankruptcy until you first
compare the many pros and cons. Once you do this, all the while understanding
your personal situation, it’s easier to decide what to do next.
As you search for a way to improve your finances, learn more about Chapter
13 bankruptcy, how to start the process and the impact it will have on
your life. Even if you don’t proceed, the knowledge you gather could
help you in the future.