What Are the Disadvantages of Chapter 13 Bankruptcy?
While Chapter 13 can offer some real advantages to a debtor, there are significant disadvantages as well:
- The debtor is required to send a copy of the income tax return to the trustee each April and must turn over any tax refunds received;
- Chapter 13 cases are now coming under greater scrutiny from the court and from the trustee;
- If a debtor has a significant increase in income midway through the case, monthly payments to the trustee may be increased as well;
- A Chapter 13 case requires a debtor to be "in bankruptcy" for at least three years whereas a Chapter 7 case is normally concluded within four months;
- Lump-sum distributions, i.e., personal injury settlements, inheritances, etc., received during the case normally have to be turned over to the trustee.
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