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The pros and cons of Chapter 13 bankruptcy

On Behalf of | Jul 21, 2019 | Chapter 13 Bankruptcy |

In Tennessee, residents have several different options when it comes to filing for bankruptcy. One popular option is Chapter 13. With all bankruptcy options, there are unique benefits and potential drawbacks. Today, we will take a look at some of both for this specific type.

FindLaw discusses some of the benefits of Chapter 13 bankruptcy first. The first benefit is that it allows a person to avoid foreclosure. Not only that, but they will be able to keep their assets, which isn’t the case with Chapter 7 bankruptcy. With Chapter 13, a person may be able to cure delinquent payments on the mortgage over a period of time. Additionally, foreclosure proceedings are stopped as soon as it’s filed. Finally, Chapter 13 only remains on a person’s credit report for 7 years, compared to 10 years for Chapter 7.

Credit Karma, meanwhile, takes a look at some of the potential drawbacks associated with filing for Chapter 13. One is that there are “no second chances”. A person must repay their debts within the three to five years that the repayment plan covers. If a payment is missed, the person risks receiving a dismissal, which can lead to the liquidation of the assets they were trying to protect. There aren’t many real ways to correct the situation if these plans slip. Additionally, the credit score will suffer for 7 years and qualifying for new credit can be hard.

There are other bankruptcy options to consider as well, if Chapter 13 is not suitable. However, for many people in many situations, it is exactly what they are looking for.