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The good news and the bad news about Chapter 13 bankruptcy

Many Tennessee residents find themselves overwhelmed by debt. If you are experiencing financial difficulties, you are in good company. More than likely, you have tried tightening your purse strings, adjusting your budget and cutting out luxuries in order to stay afloat.

Unfortunately, creditors continue to call, and you can't seem to make a dent in your debts. You may find that you are in danger of losing your home. One option you may consider is filing for Chapter 13 bankruptcy, but you want more information before making your decision. In that case, it may help to know the advantages and disadvantages of filing under this chapter.

The advantages

Let's start with the good news. Chapter 13 provides you with the following advantages:

  • You may retain any secured property on which you continue to make payments.
  • You may be able to stretch out your payments and/or reduce them.
  • You may be able to give up a piece of property on which you no longer want to make payments.
  • You may be eligible for new credit lines between one and three years after your discharge.
  • The sooner you file, the sooner you may begin rebuilding your credit.

One thing that many people fear when considering bankruptcy is embarrassment. Rest assured, the trustees and judges have heard it all before, and many situations are worse than yours.

The disadvantages

While you gain numerous advantages, you also face some disadvantages:

  • You won't be able to keep your credit cards.
  • Your payment plan may take up to five years to complete.
  • All of your disposable income remains tied up in the repayment plan during its term.
  • A Chapter 13 bankruptcy remains on your credit for as long as 10 years.
  • It may be more difficult to obtain a mortgage loan, but not necessarily impossible.
  • You cannot discharge student loans, alimony, child support and some tax debt.

Other procedural disadvantages may apply to your situation as well, but these are the cons most common to everyone.

Making the most of Chapter 13

In order to get the most out of your Chapter 13 filing, you may want to work with an experienced bankruptcy attorney. This process can become complex quickly, and the documentation requirements can be frustrating. Without an advocate to guide you through the process, you could miss out on experiencing all of the advantages available.

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