Thomas F. Miles, Attorney and Counselor at Law
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Advantages and disadvantages of declaring Chapter 13 bankruptcy

Chapter 13 bankruptcy is commonly recognized as the reorganization bankruptcy. This form of bankruptcy essentially eliminates the need to sell all of the person's assets for repayment and instead replaces this with a repayment scheme which makes use of the income of the person to gradually pay off outstanding payments. Chapter 13, as with all plans, has its own advantages and disadvantages.

Advantages: This form of bankruptcy allows you to have a considerable amount of time to get things in order, and allows for arrangements to be made to deal with the repayment which is not an option when asked to repay the debt at once. Also, the repayment period can be drawn out for a longer time in case the trustees are willing to negotiate, thus allowing for smaller more reasonable payments instead.

Under the chapter 13 plan, your assets are safe from seizure and sale as long as adherence to the plan is followed. The plan could potentially save you from the mental anguish and stress of becoming homeless. It can be extremely hard to deal with the circumstances in which all your assets are sold off, and you are left with just the clothes on your back. The chapter 13 plan can rid you of any and all debts that cannot survive bankruptcy, excluding special cases, such as alimony. By the end of the repayment plan, all withstanding debts could be eliminated.

Disadvantages: The chapter 13 plan can prolong the repayment for up to 3 years and thus lock you down with its rules and conditions during that period of time. The repayment is made by using your income thus any income that is left after basic necessities are paid for shall be channeled into the repayment cash stream. This means savings are not feasible for the duration of the plan. Filing for Chapter 13 will also make it impossible for you to obtain a mortgage and lead to the cancellation of all of your credit cards. Even if you have filed for bankruptcy under Chapter 13, you will not be able to evade alimony or your student loans.

Filing for bankruptcy is never easy but is sometimes a necessity. To ensure that you have the right knowledge and guidance before choosing a plan, it is highly recommended that you consult an experienced attorney near you.

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