With debts piling up, you may feel like you have no choice but to file for bankruptcy. Chapter 13 bankruptcy is a viable option for many that allows you to pay back creditors with better terms. It can allow you to get out of debt and start your financial life in a better position. There are a variety of things that you should understand before filing for this type of bankruptcy.
You should understand the basic way that a chapter 13 bankruptcy works. According to www.bankruptcyhome.com, this type of filing allows you to restructure debts instead of liquidating your assets as you would with a chapter 7 bankruptcy filing. You will generally come up with a plan to pay it back in three to five years using your income. Everything will be overseen by the court, and a specific payback plan will be implemented.
You should be aware of the advantages of a chapter 13 bankruptcy. You will typically be able to pay back the debtors in more favorable terms. It may involve less or no interest. Creditors must go through court to get debt and cannot hound you any longer. You may end up paying less overall because of the better terms. Foreclosures may be halted during this process as well. Co-signers may also be protected.
One of the most negative impacts of filing for chapter 13 bankruptcy is that it will affect your credit, usually in a negative direction. When creditors see a bankruptcy filing on your report, they worry about lending you money. You may have difficulty getting approved for credit cards or loans. This can affect you if you want to buy a house, a car or another item that you must finance.
Even if you do get approved for a loan, the terms may be much less favorable to you. You may pay a much higher interest rate, for instance. If you are buying a house or another large ticket item this can add up to a significant amount of money. A chapter 13 bankruptcy stays on your credit report for years, so this can affect you for a long time.
It can even affect you when searching for a job. A new trend for employers is to pull potential employers’ credit scores. They may look less favorably upon you if they see that you declared bankruptcy.
Chapter 13 bankruptcy is a large step to take and should be considered very heavily before the decision is made. Think about all of the factors listed above when deciding whether this is the right financial move for you.