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If your debts are too high for you to repay or you are in danger of a lawsuit from a creditor, you may consider filing for a Chapter 13 bankruptcy. A bankruptcy filing will protect you from a lawsuit and prevent creditors from repossessing your assets.
The Facts
To qualify for a Chapter 13 bankruptcy, your unsecured debts cannot exceed $336,900 and your secured debts cannot exceed $1,010,650.
Time Frame
A Chapter 13 bankruptcy will provide you with the opportunity to pay off your debts over a three- to five-year period. After this time period has expired, the bankruptcy will be discharged if the debts have been paid off.
Benefits
The bankruptcy court will negotiate with your creditors to lower the balances and interest rates on your debts. Excess fees are also commonly eliminated by the court.
Disadvantages
A bankruptcy will have an adverse effect on your credit rating. The Fair Credit Reporting Act states that a bankruptcy will appear on a consumer's credit report for up to 10 years.
Considerations
If your income level drops prior to the bankruptcy being discharged, you may apply with the bankruptcy court to alter the terms of your repayment plan or convert your Chapter 13 bankruptcy to a Chapter 7.
Source:
Fair Credit Reporting Act (section 605)
Resource:
Federal Trade Commission
Bankruptcy FAQ
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