Chapter 13 - Individuals
Under Chapter 13, the debtor proposes a plan to pay his creditors over a 3- to 5-year period. This written plan details all of the transactions (and their durations) that will occur, and repayment according to the plan must begin within thirty to forty-five days after the case has started. During this period, his creditors cannot attempt to collect on the individual's previously incurred debt except through the bankruptcy court. In general, the individual gets to keep his property, and his creditors end up with less money than they would, were the amount given to the debtor to continue collecting interest, allowing the debtor to find a way to pay the amount owed without losing their assets entirely.
Advantages of Filing Under Chapter 13. The advantages of Chapter 13 over Chapter 7 include the ability to: stop foreclosures although a foreclosure would be reinstated upon completion of the bankruptcy; achieve a super discharge of debts of kinds not dischargeable under Chapter 7; value collateral; bifurcate the security interest of creditors in certain property that creditors are either charging too much interest for, or are over-secured, or both, and leading to a cram down modification of the debt; prevent collection activities against non-filing co-signers (co-debtors) during the life of the case.
Disadvantages of Filing Under Chapter 13. The disadvantage of filing for personal bankruptcy is that, under the Fair Credit Reporting Act, a record of this stays on the individual's credit report for up to 10 years. But you may obtain new debt or credit (credit cards, Auto, or consumer loans) after 12-24 months, and can get a new FHA mortgage loan 24 months after discharge and Fannie Mae and Freddie Mac loan after 36 months . but during the pendency of a Chapter 13 case the debtor is not permitted to obtain additional credit without the permission of the bankruptcy court. Moreover, creditors may not be willing to risk lending money to such an individual. However, this disadvantage is not unique to Chapter 13; it may also apply to individuals currently in a Chapter 11 case, Chapter 12 case, or those who are in or have recently been in a Chapter 7 case.
Advantages of Filing Under Chapter 13. The advantages of Chapter 13 over Chapter 7 include the ability to: stop foreclosures although a foreclosure would be reinstated upon completion of the bankruptcy; achieve a super discharge of debts of kinds not dischargeable under Chapter 7; value collateral; bifurcate the security interest of creditors in certain property that creditors are either charging too much interest for, or are over-secured, or both, and leading to a cram down modification of the debt; prevent collection activities against non-filing co-signers (co-debtors) during the life of the case.
Disadvantages of Filing Under Chapter 13. The disadvantage of filing for personal bankruptcy is that, under the Fair Credit Reporting Act, a record of this stays on the individual's credit report for up to 10 years. But you may obtain new debt or credit (credit cards, Auto, or consumer loans) after 12-24 months, and can get a new FHA mortgage loan 24 months after discharge and Fannie Mae and Freddie Mac loan after 36 months . but during the pendency of a Chapter 13 case the debtor is not permitted to obtain additional credit without the permission of the bankruptcy court. Moreover, creditors may not be willing to risk lending money to such an individual. However, this disadvantage is not unique to Chapter 13; it may also apply to individuals currently in a Chapter 11 case, Chapter 12 case, or those who are in or have recently been in a Chapter 7 case.
