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Creditors would rarely agree to terms provided in reorganization plans
voluntarily. The Court necessarily is vested with authority to enforce reasonable plans.
Completion of the plan is considered full performance and all debts are considered
paid in full. But, how does Chapter 13 effect credit after bankruptcy? The answer
may surprise you. Creditors always promote Chapter 13 to receive payments, but
after discharge, penalize debtors the same as if discharging all debts through Chapter 7.
From a creditor's viewpoint, Chapter 13 bankruptcy is a far more
profitable form of federal debt relief. From a debtor's viewpoint,
little justification can be made for struggling for 3 to 5 years, with
no disposable income, for the peace of mind resulting from partial
payments. For debtors who qualify for quick liquidation cases, the
effect of discharge is nearly identical under all cases, and credit
availability and the subsequent improvement upon credit scores begins
after the case is complete.
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