Chapter 7 bankruptcy is mostly about completely eliminating the debts you have, but chapter 13 allows reorganization and at least partial repayment. Therefore, chapter 13 bankruptcy repayment plans seem to be the more responsible decision. Here is a look at some of the pros and cons of going with a chapter 13 repayment plan after filing bankruptcy.
Pro: You can lessen the burden of the debts payments you have.
If you are scratching and struggling to make your payments every month, chapter 13 repayment plans can be a logical solution. In general terms, the court will take a look at your financial situation and how much disposable income you have after living expenses, and then they will make a payment plan that will allow you to pay some of your debts. The payments will naturally be less than what they were before filing bankruptcy.
Con: Some payments will have to be paid outside of the payment plan.
There are certain types of debts that will be held separate from the rest of your debt because they may not be things that you can file bankruptcy on. For example, if you owe child support payments, alimony, or restitution for a crime committed, these are not the types of debts that can be lumped together in with the rest of the debts you are filing bankruptcy on. These kinds of debts already have court rulings governing how they are to be paid.
Pro: You may not have to pay the debts in their entirety.
One positive of chapter 13 bankruptcy repayment plans is that you may not have to pay all of your debts in their entirety. Many debtors will make arrangements and agreements with the court to take the least amount of repayment just to ensure they at least get part of or most of what they are owed. Some debts may even be forgiven through the process of filing bankruptcy.
Con: Chapter 13 repayment arrangements can be difficult to reorganize once in place.
It is not entirely possible to have your payment plan adjusted once it is set up, but it is also not all that easy. If you are still struggling to meet the repayment requirements with your chapter 13 bankruptcy arrangement, you will have to work with your lawyer and the court to make amendments. You will have to show just cause as to why you are having financial difficulties, and not every situation will mean a granted change in payment structure. Some things the court may consider would be something like a loss of employment or medical hardship.