Do you need to file for bankruptcy to get out of your tough financial situation? You may be overwhelmed with the different types of bankruptcy that are available and figuring out which one you should use. Here are some reasons for and against using Chapter 13 bankruptcy to help you make a more informed decision.
Why You Should Use Chapter 13
There are many positive reasons for using Chapter 13 bankruptcy.
You'll Save Your Assets
One of the main differences with Chapter 13 is how you will be able to hold onto your expensive assets that you do not want to lose. Your home, car, and other property will be safe due to your debts just being restructured. Chapter 13 essentially consolidates your debts so that you can easily pay them back over a longer period of time, so nothing is being discharged and requires liquidating assets.
You'll Be Eligible For New Credit Faster
Since you are repaying those debts, Chapter 13 is going to have a lower impact on your credit score. It will result in being eligible for new lines of credit must faster than you would with other forms of bankruptcy. This can be helpful if you are looking to get another mortgage in a few years and were worried about what to do if you have to move.
Why You Should Not Use Chapter 13
There are a few considerations when using Chapter 13 that may not make it a good idea.
You Won't Be Free From Debt Immediately
While other forms of bankruptcy give you a huge relief in terms of discharging debt, this is not possible with Chapter 13. You can expect all of your extra income to go towards that repayment plan for the foreseeable future, which can make the next few years really tough. You won't be able to switch the bankruptcy to Chapter 7 and get rid of those debts if you find the consolidated payment plan to be too much.
You May Not Be Eligible
Don't make the mistake of assuming that you'll qualify for Chapter 13 bankruptcy. It is not allowed to be used for businesses, which would require Chapter 11. While all income levels are allowed to use Chapter 13, having a business can easily complicate the situation.
Work with a local bankruptcy lawyer for help deciding on what type of bankruptcy will be right for you, such as chapter 13 bankruptcy, and then help guide you through the bankruptcy process.