You may have heard that there are a couple of ways to file for bankruptcy, both of which have certain advantages and disadvantages. Chapter 7 bankruptcy is generally referred to as a liquidation bankruptcy, whereas Chapter 13 bankruptcy is referred to as a reorganization bankruptcy.
Here are some of the advantages and disadvantages to filing for Chapter 13 bankruptcy. A bankruptcy attorney in the Hackettstown area can advise you on which method is best for you after considering your financial status.
Chapter 13 bankruptcy advantages and disadvantages
Chapter 13 bankruptcy essentially allows you to create a repayment schedule so that you can repay your creditors with your income over the next three to five years and not have to give up your personal property. However, not everyone is eligible for Chapter 13. If your income is too low or irregular, you may not qualify, as you will likely not be able to make payments according to the schedule.
Chapter 13 bankruptcy allows for flexibility in your payment plan and allows you to keep your property as you make payments, but it may take you longer to pay off your debts and any disposable income you have will go directly to paying those debts. A Chapter 13 bankruptcy will also remain on your record for up to 10 years, and will negatively impact your credit during that time. You will not be able to keep your credit cards, but you may be able to obtain new lines of credit at a higher interest rate after a couple of years. Also, if you declare Chapter 13 bankruptcy now, you may have a more difficult time declaring Chapter 7 bankruptcy later.
Deciding if Chapter 13 bankruptcy right for you
Making the decision to file for bankruptcy can be one of the hardest decisions you ever make. If you decide to go for Chapter 13 bankruptcy, you will be given a chance to repay your debts over time, without having to lose everything. However, there are many people that would be better served by a chapter 7 bankruptcy. Your attorney can help you make this decision and handle all aspects of the filing process.