Denver Bankruptcy Attorney: The Advantages and Disadvantages of Chapter 13

Ever since personal bankruptcy laws changed a few years ago, people have been confused about whether to file for Chapter 7 or Chapter 13 bankruptcy.  Before you consult with a Denver bankruptcy attorney, it helps to have a basic understanding of your options. 

Chapter 13 is a less damaging form of bankruptcy, and is similar to a corporate “reorganization”.  It is designed to be a “wage earners plan” for people who have filed for Chapter 7 in the past seven years, who continue to have a steady income or who still have significant equity in their home.  In contrast to a Chapter 7 filing, Chapter 13 allows individuals to retain their assets and halt pending home foreclosures while they reorganize their debt and make workable payment plans with their lenders.  While the proceedings do take place in a Colorado bankruptcy court, a Denver bankruptcy attorney can help minimize the stress involved by simplifying the legal aspects of the process.

Once a Chapter 13 bankruptcy filing goes through, all creditors must cease any actions against you.  Some advantages of a Chapter 13 payment plan are as follows:

1) You have a much longer period of time to settle your debts
2) You will keep all of your property
3) You will be protected against wage garnishment and other collection efforts
4) Any debts that were not discharged in a Chapter 7 bankruptcy can be reduced in a Chapter 13 payment plan
5) You are protected against foreclosure by your mortgage company
6) You can file repeatedly

Like all bankruptcy filings, Chapter 13 also has some disadvantages:

1) You will need to repay your debts from your disposable income, which can tie up your cash during the repayment period
2) Legal fees can be higher because the filing is more complex than Chapter 7
3) Some of your debts will survive after the bankruptcy is closed, which means you must continue paying
4) Debt can linger on for years, which may present a burden to future income

Filing for Chapter 13 may not be your first choice, but it is one way to get a fresh start and relieve yourself from financial hardship.  However, if you plan to file in the state of Colorado, you will need the legal advice and representation of a Denver bankruptcy attorney.  Contact the law firm of Clawson & Clawson, LLP to schedule a free consultation.