Are There Disadvantages Of Chapter 13 Bankruptcy?

Are There Disadvantages Of Chapter 13 Bankruptcy?

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 the future.
  • 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.