The Pros and Cons of Chapter 13 Bankruptcy

by | Feb 23, 2016 | Lawyers

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One of the primary reasons many people choose to file a chapter 13 bankruptcy is to save their homes from threatened foreclosures. Most homeowners will do all that they can to stay in the neighborhood they love, in the child’s school district and close to the job, doctor, dentist and friends. Filing a chapter 13 offers many benefits, but it also has some drawbacks.

What Is Chapter 13 Bankruptcy?

Chapter 13 is a reorganization bankruptcy. Filers typically end up paying a much lower monthly payment, including the past-due mortgage payments. Normally, those filing chapter 13 do not lose any of their property. The repayment period lasts three to five years. In order to be qualified for chapter 13 bankruptcy, it’s necessary to have a stable income and be able to make the renegotiated monthly payments.

Pros of Chapter 13 Bankruptcy

1. As soon as the bankruptcy is filed, collection attempts must stop, including foreclosure proceedings.
2. The one monthly debt payment will be much lower than the current amount needed to pay debts. During the repayment period, mortgage payments must be kept current.
3. The debts to be repaid are prioritized. The most urgent debts, such as child support and back taxes, are repaid first.
4. At the end of the repayment period, some of the remaining debt, if any, can be forgiven.
5. No property is normally lost.

Cons of Chapter 13 Bankruptcy

1. The monthly debt repayment will come from disposable income. That is whatever money is left over after paying for normal living expenses, food, utilities, etc. Until the bankruptcy process completes, the family will be living on a tight budget. There will be no fancy vacations or new big screen TVs.
2. In order to be eligible for chapter 13, someone can have no more than $360,475 in credit card debt, medical bills and other unsecured debt. They must also owe less than $1,081,400 in secured debt, including the mortgage and car loans.
3. All credit cards will be lost, but that can be considered a good thing.
Talk to an experienced bankruptcy attorney about your situation. The Law Office of David S. Kohm & Associates offers affordable bankruptcy representation to Texans in the areas of Arlington, Fort Worth, Keller and Lewisville. Contact the office at  to schedule your free consultation.