Advantages and Disadvantages of Filing Chapter 13 Bankruptcy

There are two primary options for individuals interested in filing Bankruptcy, Chapter 7 and Chapter 13. While Chapter 7 involves a liquidation of all debts not affirmed, Chapter 13 bankruptcy, also known as a reorganization, involves working with the bankruptcy court to develop a payment plan to pay unsecured creditors a portion of what they are owed, either over a 3 or 5 year period, established in accordance with the value of your assets and your ability to pay. Under a Chapter 13 plan, secured claims and priority claims (such as unpaid child or spousal support) generally must be paid in full. Chapter 13 is sometimes referred to as a "wage earner's" bankruptcy, as typically the debtor must establish to the trustee and court that he or she has enough disposable income to fund a plan under Chapter 13 to provide creditors with repayment of at least a portion of the relevant debts. Even if the Chapter 13 plan is confirmed, the debtor does not receive a discharge until he or she has paid the monthly payments to the court for the entire period of the plan.

Advantages:

  1. You keep all exempt and nonexempt property.
  2. You have a set period of time to pay off debts.
  3. Potentially reduce the amount of money you have to repay on your automobile loan (see article on “ Cram Downs”)
  4. Co-signors on loans are safe from creditors, so long as your plan provides for payment in full.
  5. Prevent foreclosure or repossession based on delinquent pre-filing payments, and repay your arrearage through the Chapter 13 Plan.
  6. If you are upside down on your home and have both a first and a second mortgage (or equity line), you may be able to strip the second mortgage lien so that it doesn’t encumber the property, depending on the value of your home;
  7. You have protection against creditor collection efforts, including garnishment.
  8. You can discharge certain debts that are not dischargeable under Chapter 7.
  9. You can file again, even if you filed bankruptcy previously.

Disadvantages:

  1. Typically, all of your Disposable Income must be paid to Court pursuant to the plan.
  2. Typically more expensive in attorney's fees because more complex.
  3. Persons with more than $922,000 in secured debt are typically ineligible for Chapter 13.

It is crucial that you meet and discuss all aspects of your bankruptcy case with a qualified bankruptcy attorney prior to filing. This discussion will allow you to consider the pros and cons of bankruptcy and set you on the correct path. At Coleman, Chambers, Rogers & Williams, LLP we offer a free initial consultation, either by phone or at our bankruptcy offices in Gainesville, Georgia.

Coleman, Chambers, Rogers & Williams, LLP provides bankruptcy filing services in the Northern District of Georgia, Gainesville Division, in and including Banks, Barrow, Dawson, Fannin, Forsyth, Gilmer, Habersham, Hall, Jackson, Lumpkin, Pickens, Rabun, Stephens, Towns and Union counties and the cities of Dawsonville, Dahlonega, Homer, Commerce, Jefferson, Toccoa, Blairsville, Jasper, Ellijay, Cleveland, Hiawassee, Young Harris, Blue Ridge, Clayton, Cornelia, Winder, Clarkesville, Demorest and Braselton. Feel free to contact Rob Chamber, Cale Rogers or Jim Edge at (678)- 928-5757 or visit our website at http://www.colemanchambers.com/ for a free initial consultation.