Advantages of filing Chapter 13 bankruptcy:
- Bars post-filing creditor actions against co-debtors if the creditor will be paid in full under the plan;
- Debtor retains all desired property, provided creditors obtain at least as much under the plan as they would under Chapter 7;
- Debtor may have the ability to “write-down” secured non-homestead debts to the value of the collateral;
- Debtor may be able to modify interest rates on some loans and extend the payment term on non-homestead debts to make them more affordable;
- Debtor may cure loan defaults by making installment payments, and reinstate accelerated mortgage and other notes;
- The Chapter 13 discharge is broader than under Chapter 7, so that more types of debts are dischargeable; and
- Debtor may be able to force (“cram-down”) affordable payments on secured and tax creditors that cannot be done under Chapter 7.
Disadvantages of filing Chapter 13 bankruptcy:
- Debtor’s future income is subject to administration by the trustee for up to three and possibly as long as five years;
- Under the plan, the debtor must establish and live under a firm, but potentially adjustable budget during the repayment period;
- The trustee is entitled to a commission on payments paid to creditors which reduces the value of what is paid to creditors;
- Still appears as a bankruptcy on credit reports; and
- Interest stops on most tax obligations paid under the Chapter 13 plan.