(continued)

6- OK, What's the Downside?

If you miss any payments at all that are due under your Plan, your case will be dismissed by the Court, unless you get current before the dismissal hearing.

A Chapter 13 Plan keeps your budget strapped for 3-5 years.

You typically repay a lot more debt than you would have to pay in a Chapter 7.


7- How Does This Affect My Credit?

The Chapter 13 bankruptcy will appear on your credit report for 7 years after you file. This means, after a 3-year Plan is over, you would only have 4 years left with this on your credit report -- a big advantage over a Chapter 7, where it stays on your credit report for ten (10) years. Other accurate negative reports on your credit must be removed after seven (7) years (like late payments on credit cards, foreclosures, etc.). Your credit will most definitely be less damaged than had you taken a Chapter 7. The usual limitations will apply until the bankruptcy disappears off of your report: You will usually not get as high a credit limit as you once had, nor will you typically be able to borrow a large sum of money. But getting some credit (such as a secured credit card) shouldn't be that difficult and you will be able to rebuild your credit over time. What you will likely face is higher interest rates, required higher down payments, more points, etc. But you will typically be treated more leniently than a person with a Chapter 7. For instance -- mortgage lenders will give you the benefit of the doubt, giving you preferred credit status over those filing Chapter 7s.