Advantages of Chapter 13 Bankruptcy
In our previous blog entry, RGG Law laid out some of the disadvantages of filing Chapter 13 bankruptcy. We feel it is important that you weigh your options, either way, so – as promised – now comes the time to look at some of the positive aspects and benefits of filing Chapter 13. As always when you are reading general advice, remember that each case has the potential to be different. If you are looking specifically for guidance, contact one of our bankruptcy lawyers.
It Takes Time
Our last entry presented the fact that Chapter 13 bankruptcy can take anywhere from three to five years as a negative factor. In some cases, however, taking a longer period of time can be beneficial.
Depending on how you got into enough debt to have to file bankruptcy in the first place, a period of time where your disposable income is restricted is an opportunity examine your spending and general financial habits. It can also offer some room to breathe and to plan for the future once the period of payments has ended.
Another upside to this is that, rather than faced with an unknown amount of time having to pay off debts, Chapter 13 bankruptcy gives you a set amount of time you will be repaying.
It Limits Spending and Borrowing
If you are using the three to five year period as a chance to re-assess your spending habits, Chapter 13 bankruptcy can help in a different way, too. During this period, you will be restricted from using credit cards, and though you can apply for a line of credit once your debt is repaid, you will be subject to higher interest rates. These are both elements of the process that can improve your future spending habits, as credit cards and loans are often the biggest factors that lead people to eventually file bankruptcy.
Your Credit Score
Another point that we addressed as a negative in our previous entry – bankruptcy of any kind will hurt your credit history. The other side of this coin, however, is that having a Chapter 13 bankruptcy in that history will hurt it far less than numerous unpaid debts, and will effectively offer a clean break if you are prepared to explain how it happened.
It Gives Your Debts an Expiry Date
During the three to five year period of repayment, the amount you pay is determined by your disposable income. If/once this period has ended, the full amount owed is not completely paid back, certain debts become “dischargeable”.
This essentially means that, as long as payments were made for the whole period, the debts are effectively paid. While some may well consider having a bankruptcy in their financial history as a black mark, there is no denying the immense relief that can come in being safely released from a debt.
RGG Law and Professional Guidance for Chapter 13 Bankruptcy
These are just some general advantages that come with filing Chapter 13. Getting into specifics can be more, or less complicated on a case-by-case basis. The important thing to remember is that there is help available. If you need professional advice and guidance, contact one of our bankruptcy lawyers or attorneys for a free consultation.