The Pros and Cons of Chapter 13 Bankruptcy

PROS

• Only the Debtor can propose the Chapter 13 Plan.  It is effective when confirmed by the Court.
• Upon completion of the Plan, the Debtor is discharged from most types of debt.
• Except as requested by the Debtor, all debts are paid only from the Debtor's income, not from the sale of any assets.
• Any foreclosure process or enforcement of a lien on real property is generally halted, at least pending Plan confirmation.
• The Debtor can hold on to real property subject to a long term note and deed of trust if the Plan is complied with and it provides all necessary stipulations.
• Any pending repossession, sale, or lease termination resulting from monies due and owing on a debt or a lease, secured by or pertaining to personal property, is generally halted pending Plan confirmation.
• The Debtor can retain a lease of real or personal property if the Plan is complied with and provides for the lease to be 'assumed' and for full payment, within a few months, of any default thereunder. Payment of current rental payments would resume. 
• The Debtor can keep personal property that secures a loan, or any real property subject to a short term note and deed of trust, irrespective of a default, or any real property subject to an involuntary lien (e.g. an income tax or judicial lien), if the Plan is complied with and provides for payment of the entire balance of such obligation or of the value of the property securing the debt, whichever is less, by way of monthly payments during the Plan period, with interest at a rate generally less than the contract rate.
• The Debtor can also hold on to real property, that is not the Debtor's residence and that is subject to a long term note and deed of trust, under some circumstances.
• A Chapter 13 can be dismissed or converted to a Chapter 7 by the Debtor at any time.

CONS

• Only an individual can file (i.e. not a corporation or a partnership).
• The Debtor has to pay unsecured claims to the extent he or she has sufficient income to do so for at least a three year period
• Recent unsecured income tax must be paid in full under the Plan but usually without interest.
• The Repayment Plan period cannot extend beyond five years.
• There are debt limits imposed upon the Debtor.
• There is a rather short timetable given to file a Plan.
• May delay credit repair by the time period of the Plan.