There are 2 types of bankruptcies for the average person. Chapter 7 bankruptcy is the wham bam, thank you mam, quickest, least expensive, no payments, over in months instead of years bankruptcy. We always suggest it to our clients except in 2 situations: 1) the client does not fit in a Chapter 7, or 2) a Chapter 13 can do something wonderful for you.
DOES NOT FIT usually either means that you have filed a Chapter 7 within the last 8 years or you make too much money or you have an asset problem; meaning the asset may be lost in a Chapter 7. You can only file a Chapter 7 once every 8 years and that goes from the FILING DATE. Making too much money depends on many things but the more money you make the more this question comes into play. You can almost ALWAYS file some sort of Chapter 13. I cannot think of any situation short of fraud where you could not file a Chapter 13 of some sort, even right after another bankruptcy was filed. That means that in almost every case, NO ONE NEEDS TO BE GARNISHED in this country.
DOES SOMETHING WONDERFUL FOR YOU means that the flexibility of a Chapter 13 can be used to do several things, like:
1) save a home from foreclosure and give you time to modify your loan or 5 years to catch up what you are behind
2) allow you in certain circumstances to get rid of a second mortgage
3) allow you in certain circumstances to “cram down”, only paying the value of a car or other secured item instead of what you currently owe.
4) allow you to pay out over 5 years if you have an asset “problem”. This might mean an ownership of certain real estate that is problematic or you own a boat that you want to keep or a million other asset questions that can only be resolved in a Chapter 13.
5) If you make a lot of money, it gives you a way to control the repayment of your creditors and to control expenses like interest, penalties and costs.
6) Bankruptcy FORCES creditors to STOP while the bankruptcy does its magic.
(Remember that in MANY cases, creditors are paid NOTHING, whether in a Chapter 7 or a Chapter 13. Chapter 13 means you make a monthly payment and that may be only $50 or $80 per month. It does NOT mean that you are necessarily paying anything to your creditors.)