Filing for bankruptcy is a significant decision that can have lasting effects on your financial future. For many individuals in Colorado facing overwhelming debt, Chapter 13 bankruptcy offers a viable solution. At the Law Offices of Andrew F. McKenna, P.C., we are committed to helping you make informed decisions about your financial health. Here, we explore the pros and cons of filing for Chapter 13 bankruptcy to help you understand whether it’s the right choice for you.



What is Chapter 13 Bankruptcy?

Chapter 13 bankruptcy, also known as a wage earner's plan, allows individuals with a regular income to develop a plan to repay all or part of their debts over three to five years. Unlike Chapter 7 bankruptcy, which liquidates assets to pay off debts, Chapter 13 focuses on reorganization and repayment.

Pros of Filing for Chapter 13 Bankruptcy

1. Debt Repayment Plan: Chapter 13 allows you to create a manageable repayment plan based on your income. This plan helps you pay off debts over a specified period, typically three to five years.
2. Home Foreclosure Prevention: Filing for Chapter 13 can stop foreclosure proceedings and allow you to catch up on missed mortgage payments. This is particularly beneficial for homeowners looking to keep their property.
3. Debt Consolidation: Chapter 13 consolidates your debts into one monthly payment, simplifying your financial obligations and making it easier to manage your finances.
4. Protection of Non-Exempt Assets: Unlike Chapter 7, which may require you to liquidate certain assets, Chapter 13 allows you to keep your non-exempt property while repaying your debts.
5. Co-Debtor Stay: Chapter 13 provides protection for co-signers on consumer debts, preventing creditors from pursuing them while you’re under the repayment plan.
6. Discharge of Certain Debts: After completing the repayment plan, remaining unsecured debts may be discharged, providing you with a fresh financial start.

Cons of Filing for Chapter 13 Bankruptcy

1. Longer Repayment Period: The repayment plan lasts three to five years, which can be a long commitment. You must adhere to the plan's terms throughout this period.
2. Impact on Credit Score: Bankruptcy will negatively impact your credit score, and Chapter 13 remains on your credit report for up to seven years from the filing date.
3. Disposable Income Restrictions: You will be required to devote all your disposable income to the repayment plan, which can limit your financial flexibility.
4. Complexity and Costs: Chapter 13 bankruptcy involves complex legal procedures and paperwork. Additionally, there are filing fees and attorney costs to consider.
5. Potential for Dismissal: If you fail to make the agreed-upon payments or adhere to the plan’s terms, your Chapter 13 case could be dismissed, and you may lose the protections it provides.

Is Chapter 13 Bankruptcy Right for You?

Deciding to file for Chapter 13 bankruptcy is a personal decision that depends on your financial situation, goals, and ability to commit to a repayment plan. It’s crucial to weigh the pros and cons and seek professional legal advice to determine the best course of action.

Chapter 13 bankruptcy can offer significant benefits for individuals struggling with debt, but it’s essential to understand the potential drawbacks. At the Law Offices of Andrew F. McKenna, P.C., we are dedicated to providing comprehensive legal guidance to help you navigate the complexities of bankruptcy and achieve financial stability.

If you’re considering filing for Chapter 13 bankruptcy in Colorado, contact us today for a consultation. Let us help you explore your options and make an informed decision for your financial future.