How A Chapter 13 Bankruptcy Can Affect Your Life

 Posted on September 27, 2024 in Chapter 13

Chapter 13 bankruptcy allows you to get relief from your debt without having your assets liquidated. However, this type of bankruptcy does require you to keep making payments towards your debt for around three to five years. Your debts will be consolidated so that you will make a single monthly payment. This payment is meant to roughly equal your disposable income. If you are preparing to file for bankruptcy under Chapter 13, it is important to understand how it might affect you and your family, both during and after the repayment period. An experienced New Braunfels, TX bankruptcy attorney can explain how Chapter 13 bankruptcy works and how it might affect your life in the short and long term. 

The Impact of Chapter 13 Bankruptcy 

Many people file for Chapter 13 bankruptcy not because they want to, but because they cannot pass the means test to file under Chapter 13. A few effects of a Chapter 13 bankruptcy include:

• Losing your disposable income - Having to keep making sizeable monthly payments is the biggest downside of filing under Chapter 13. Your monthly payment will be calculated to roughly equal your disposable income. This means that you will have little money left for discretionary spending. Your lifestyle may change quite a bit during the repayment period. 

• Having your remaining debt forgiven - When the repayment period has ended, any balance you still owe will be forgiven. If you have significantly more debt than you could realistically repay in three to five years, filing for bankruptcy will probably be financially advantageous in the long run. 

• Some harm to your credit - A Chapter 13 bankruptcy will affect your credit, but generally less than a Chapter 7 bankruptcy would have. It may take some time to rebuild your credit, but with careful financial management, your credit score can recover well. 

• An automatic stay on collections efforts - If you are tired of getting phone calls and letters from debt collectors or are at risk for repossession, you will be happy to know that all collection efforts must stop immediately when you file for bankruptcy. If any creditors keep trying to collect on your debt after the automatic stay is issued, they would be violating a court order. 

An attorney can help you decide whether Chapter 13 bankruptcy is right for you. 

Contact a New Braunfels, TX Bankruptcy Lawyer 

Law Offices of Chance M. McGhee is committed to helping people find lasting debt relief through bankruptcy. Experienced Bexar County, TX bankruptcy attorney Chance McGhee will walk you through the process. Contact us at 210-342-3400 for a complimentary consultation.