Chapter 13 bankruptcy protection – long the neglected sibling of Chapter 7 debt elimination bankruptcies – has become more and more hotly demanded by citizens of the United States during the current recessionary troubles our economy’s been facing. While Chapter 13 bankruptcies will not liquidate unsecured debts, the process will still help borrowers satisfy their creditors as a trustee chosen at random by the Chapter 13 bankruptcy courts approves a plan to help the debtors pay off outstanding and unwanted balances. Also, unlike some of the other techniques, the Chapter 13 bankruptcy plan could help borrowers re-negotiate their secured debts like car loans or real estate mortgages and potentially stave off foreclosure or repossession through Chapter 13 bankruptcy protection. However, though Chapter 13 bankruptcies have become decidedly more popular in recent years, there are still some disadvantages to the proceedings which every interested borrower must be aware of before they attempt a Chapter 13 bankruptcy declaration and potentially worsen their situation.
In the beginning of the Chapter 13 bankruptcy process, the paperwork is honestly not that far different from the other sorts of bankruptcies. The Chapter 13 bankruptcy filer will still be required to provide the bankruptcy court officials with a thorough account of all of the household debts – whether or not the filers want the debts to remain generally untouched by the Chapter 13 bankruptcy proceedings, such as home mortgage loans not already delinquent – as well as a listing of all assets and sources of income that the family possesses. Furthermore, as with any bankruptcy documentation, all errors or omissions in the paperwork found by the many analysts charged by the Chapter 13 bankruptcy court with looking over each bankruptcy filing could pose severe penalties and even criminal prosecution for every borrower unlucky enough to mistakenly report something due to a lapse in memory.
Also, Chapter 13 bankruptcy proceedings last for several years, borrowers must remember, and, during the many, many months that the case is open, the Chapter 13 bankruptcy trustee will be expected to approve virtually every financial transaction that would be made by the Chapter 13 filer and his or her family. Furthermore, though borrowers filing for Chapter 13 bankruptcy do not need to worry about the forfeiture and auction of their household furnishings as with the debt elimination bankruptcy alternative, they will still witness the devastation wreaked upon their credit ratings and FICO ratings. Even though Chapter 13 bankruptcy protection doesn’t actually liquidate the credit card bills or similar unsecured obligations like Chapter 7 programs, there's little distinction made by the credit bureaus.
FICO scores treat the Chapter 13 bankruptcy program in exactly the same (extremely negative) fashion as other bankruptcies, and a record of the Chapter 13 bankruptcy filing shall remain on credit reports for up to ten years depending upon the state. With regards to employment or housing applications that ask about bankruptcy, the notation will bother borrowers who take the Chapter 13 route for a lifetime. Indeed, much as the Chapter 13 bankruptcy solution may be attractive to home owners wishing to save their residence, most ordinary citizens who simply wish to reduce their outstanding credit card balances or other debt loads would be far better served by some program such as settlement negotiation that utilizes a payment schedule more accurately representing the requirements of their clients and demonstrates far more success in eventually discharging all high interest loans to the satisfaction of the lenders.
