The first question anyone asks in a consumer bankruptcy is what type of case is best for me. This decision would seem to be basic, but it can be complicated to figure out what options are available and which option will provide the best outcome for each individual person. Chapter 7 bankruptcy seems simple and chapter 13 bankruptcy seems complex but both of them are in fact tailored to different outcomes and each must be examined as options in consumer bankruptcy.
A chapter 7 bankruptcy is a liquidation case and you are normally paying fees before filing and not paying in anything after filing, although you may lose assets. A chapter 13 bankruptcy is a wage earner’s bankruptcy and you are normally proposing a plan that pays in money monthly until the plan is completed, usually a period of years. We have in depth pages on the web site explaining both types of cases.
There Are Benefits to Both Chapter 7 and Chapter 13
In some cases there is a clear benefit from one type of case over the other. In many cases both of them will be just fine. Clients often come to us wanting a specific type of bankruptcy case only to discover that they must qualify for the type of case they would like to file. It is not automatic that you can qualify for a chapter 7 bankruptcy case. There are income restrictions and if you earn enough money to make a meaningful repayment to your creditors then chapter 7 is likely off the table. You also need to qualify for a chapter 13 bankruptcy case. You must show there is enough income to cover the payment that will be made into the case based on the plan you are filing with the court and your budget.In some cases there is a clear benefit from one type of case over the other. In many cases both of them will be just fine. Clients often come to us wanting a specific type of bankruptcy case only to discover that they must qualify for the type of case they would like to file. It is not automatic that you can qualify for a chapter 7 bankruptcy case. There are income restrictions and if you earn enough money to make a meaningful repayment to your creditors then chapter 7 is likely off the table. You also need to qualify for a chapter 13 bankruptcy case. You must show there is enough income to cover the payment that will be made into the case based on the plan you are filing with the court and your budget.
In most cases, however, a client will be able to file either type of case. Each case is fact specific, so two people with similar types of debt can get very different outcomes depending on their income, personal assets, and goals. Sometimes very small differences in the facts between one person and another will create a very different outcome.
Your Attorney Can Advise, But You Must Decide
No matter what I think the best course of action is I do not decide for someone what type of case they should file. A bankruptcy attorney should go over your options and explain both Chapter 7 and Chapter 13 with respect to your specific facts. If you qualify for both you should decide which one to file with the help of your attorney. There are cases where you attorney may tell you that you cannot pursue the course of action you desire because you simply do not qualify for it, but in my experience those instances are not common.
I am always concerned with the advice I give about which type of bankruptcy to file. I advise people but I do not decide for them. There is no doubt I will give you my opinion. I don’t have any problem telling you what I think and leading you in the direction I think is best for you, but I will not substitute my opinion for your choice.
If you go to a bankruptcy attorney you should find that they are covering both of your options for a consumer bankruptcy case. Even if you call an attorney and you tell them what type of case you want to file they should still cover all your choices in chapter 7 and chapter 13. In fact, when a case is filed one of the things your lawyer must sign off on is a statement to the bankruptcy court that they covered your bankruptcy options with you before the case was filed. This is a mandatory part of the documents that are filed as part of the case.
Be careful of an attorney that only covers one option. Yes, that might the best option for you, but it is still your choice and they are still required to cover both options. If an attorney does not explain your options then in a way they are robbing you of your fundamental rights by making the decision for you. This is a big deal because attorneys do not have the power to decide for you if you qualify for both options.
If you have any questions about what the bankruptcy process would be like for you please contact our office. One of our bankruptcy attorneys will be happy to sit down with you and go over all of your options.
