It's easy to pay so much attention to the benefits of Chapter 13 bankruptcy that you overlook some or all of the potential drawbacks.
While most people come to find that the benefits far outweigh the drawbacks, you must still have a clear idea of what you're getting into. Only then can you make a confident decision on what to do next.
Here are some of the potential disadvantages of Chapter 13 bankruptcy:
- Repayment plan: Unlike Chapter 7 bankruptcy, when you file for Chapter 13 bankruptcy you're required to repay your debts over the course of three to five years. With a repayment plan in place, most of your disposable income will go toward repaying creditors.
- Negative mark on your credit report: With a Chapter 13 bankruptcy remaining on your credit report for up to 10 years, it will be difficult, but not impossible, to improve your score and obtain a loan.
- You'll lose your credit cards: At first, this sounds like a bad thing, but you'll soon come to find that it's better for you. If you don't have access to credit cards, you don't have to concern yourself with running up a balance you can't afford to repay.
- Impact on future bankruptcy filings: If you file for Chapter 13 bankruptcy, it's more difficult to receive relief through Chapter 7 in the future.
- It doesn't relieve all your debts: For example, bankruptcy doesn't do anything to your student loan debt. Also, it has no impact on alimony or child support payments. You'll still be responsible for these obligations after filing.
Even if you have concerns about the potential drawbacks of Chapter 13 bankruptcy, you shouldn't let these scare you away from learning more. As you focus your attention on the benefits, you may come to realize that it's the best way to improve your finances.
It's never easy to make a final decision in favor of Chapter 13 bankruptcy, but it doesn't hurt to learn more about the process in Louisiana, what's required of you and the impact on your personal and financial life. Understanding your legal rights from the start will help guide you toward success.
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