Each year, thousands of people in Florida file for bankruptcy protection. There are two broad options for personal bankruptcy: Chapter 7 bankruptcy (more common) and Chapter 13 bankruptcy (more available). For some people who are dealing with serious financial challenges, Chapter 13 is either the better option or, potentially, the only option.
What Is Chapter 13 Bankruptcy?
Chapter 13 bankruptcy is a form of reorganization available to individuals with regular income. It allows a debtor to propose a repayment plan to pay back all or part of their debts over three to five years. To be clear, Chapter 13 bankruptcy is not a liquidation bankruptcy. Chapter 13 enables debtors to keep their property while catching up on missed payments for secured debts such as mortgages or car loans.
The debtor submits a proposed plan to the bankruptcy court, and creditors have the opportunity to object. Once confirmed, the debtor makes scheduled payments to a trustee, who distributes funds to creditors.
Note: Chapter 13 bankruptcy is the alternative form of personal bankruptcy to Chapter 7 bankruptcy. Unlike Chapter 7, Chapter 13 focuses on repayment instead of liquidation.
The Pros of Chapter 13 Bankruptcy
1. You Can Get a Monthly Payment You Can Afford
One of the biggest advantages of Chapter 13 is the ability to restructure debts into a single monthly payment that fits your budget. The bankruptcy court in Florida will evaluate your income, expenses, and debt load. From there, you propose a plan that consolidates obligations into manageable installments over three to five years. The process eliminates the pressure of multiple creditors demanding immediate payment. Along with that, it also stops collection actions during the repayment period. The structure of the plan gives you breathing room and predictability.
2. You Can Better Protect Assets Through Chapter 13
Chapter 13 bankruptcy is the best available personal bankruptcy option for people who want to try to protect their assets. Chapter 13 is especially useful for protecting homes, vehicles, and other essential assets. If you have fallen behind on your mortgage or car loan, the plan allows you to catch up gradually without losing the property. Unlike Chapter 7, there is no forced liquidation of non-exempt assets to pay creditors. Instead, you keep your property while making scheduled payments. The automatic stay provides added protection by halting foreclosure or repossession while your case proceeds.
3. Many More People Qualify for Chapter 13 than Chapter 7
Back in the early 2000s, there was a major federal legislative bankruptcy reform law passed. That bill made it harder to qualify for Chapter 7 bankruptcy protection. Many people in Florida actually cannot qualify to file for Chapter 7 liquidation bankruptcy even if they are dealing with serious financial challenges. There is a strict means test. On the other hand, Chapter 13 is open to a broader group of debtors, provided they fall under statutory debt limits and can make plan payments.
The Cons of Chapter 13 Bankruptcy
1. It Will Cause Harm to Your Credit (At Least Temporarily)
As with any form of bankruptcy, Chapter 13 is not going to be good for your credit in the short term. Filing under Chapter 13 will appear on your credit report and stay there for up to seven years. During that period, obtaining new credit or loans becomes more difficult and expensive. Lenders may view you as high risk, and interest rates will reflect that. While completing the repayment plan can help rebuild credit over time, the short-term impact is serious.
2. Monthly Payments Are Required
Unlike Chapter 7 bankruptcy, which discharges most unsecured debts quickly after liquidation, Chapter 13 bankruptcy requires years of consistent repayment. Debtors must commit to making regular monthly payments for three to five years. Missing payments puts the case at risk of dismissal. That could leave debts unresolved, and creditor collection efforts could start up once again.
Why Trust the Florida Bankruptcy Lawyers at The Dellutri Law Group
Are you dealing with serious financial challenges? You are certainly not alone. Bankruptcy can seem like a big step to take. Still, it can be the right option and the best path towards a more stable, sustainable financial future. At The Dellutri Law Group, PA, we put people and families first. Our Florida personal bankruptcy lawyers have the skills and experience to take on the Chapter 13 bankruptcy process, including advising you on whether to pay off your plan early.
Contact the Dellutri Law Group today for a free consultation.
