Filing for Chapter 13 bankruptcy is a good option if you are facing substantial debt and also have an income at your disposal. If you are proactive about your bankruptcy payments, you could regain control of your financial situation and become debt-free in just a few years.
However, it is important to note that there are some consequences that come with filing for any form of bankruptcy. A Chattanooga lawyer could educate you about the financial impact of Chapter 13 bankruptcy in Chattanooga and help ensure that you are prepared to take on the required responsibility.
Chapter 13 bankruptcy allows the debtor to make payments that they can afford and to discharge the debts that they can’t pay in full. This kind of bankruptcy filing could also remove a second mortgage or lien on a vehicle and allow the discharge of some tax and domestic support obligations.
One of the most significant benefits is that a person who goes through Chapter 13 bankruptcy can usually keep their property, instead of having to liquidate their assets as they would in a Chapter 7 case.
The bankruptcy code for Chapter 13 bankruptcy allows the debtor to keep their secured properties. As long as they meet certain criteria to make their payments according to their bankruptcy plan, including any arrearages like overdue payments, then the debtor can eliminate things like second mortgages or liens from the amount that they owe on their home or vehicle. A local lawyer could help a debtor create a bankruptcy plan that allows for these kinds of properties to be protected.
Once a debtor has filed for Chapter 13 bankruptcy, the bankruptcy code divides up their property into two categories, secured and unsecured. Secured debt has a specific loan agreement in which the debtor promises that if they don’t make the payments, they have something of value that the creditor can take. For example, a creditor could take and repossess the car of someone who does not make their car payments. Unsecured debts do not carry something of value that can be taken away, such as student loans, as a debtor’s educational degree is not something that a creditor could repossess.
The most important disadvantage of filing for Chapter 13 bankruptcy is that it has an adverse effect on the debtor’s credit rating. Even if a debtor undergoes their bankruptcy case and emerges financially stable, they will still have a bankruptcy on their record, which could make it difficult to apply for loans or seek employment in the future.
Additionally, sometimes the debtor is not able to make the bankruptcy payments that the court orders. This would adversely harm their ability to convert the case or get a discharge and would impact the time in which they could later file for bankruptcy. An experienced attorney in the area could advise a debtor to make timely payments and strictly follow their bankruptcy plan to avoid this outcome. If the debtor makes their payments and is discharged from their debt, they can move forward from this situation in much better financial standing.
If you are struggling with debt and feel that filing for bankruptcy is your best option, you should contact a Chattanooga bankruptcy attorney right away. A skilled legal professional could ensure that you do not go into this complex process blind and offer you valuable guidance to reduce any negative impact that a bankruptcy filing could have on your financial status. Call today to set up a consultation and learn more about the impact of Chapter 13 bankruptcy in Chattanooga.