Advantages and Disadvantages of Chapter 13

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Milwaukee Chapter 13 Bankruptcy Attorney

Advantages
  • Debtor may cure loan defaults by making installment payments, and reinstate accelerated mortgage and other notes.
  • Debtor may be able to modify interest rates on some loans and extend the payment term on non-homestead debts to make them more affordable.
  • Debtor may have the ability to “write-down” secured non-homestead debts to the value of the collateral.
  • The Chapter 13 discharge is broader than under Chapter 7, so that more types of debts are dischargeable.
  • Debtor may be able to force (“cram-down”) affordable payments on secured and tax creditors that cannot be done under Chapter 7.
  • Debtor retains all desired property, provided creditors obtain at least as much under the plan as they would under Chapter 7.
  • Bars post-filing creditor actions against co-debtors if the creditor will be paid in full under the plan.
Disadvantages
  • Debtor’s future income is subject to administration by the trustee for up to three and possibly as long as five years.
  • Under the plan, the debtor must establish and live under a firm, but potentially adjustable budget during the repayment period.
  • The trustee is entitled to a commission on payments paid to creditors which reduces the value of what is paid to creditors.
  • Still appears as a bankruptcy on credit reports.