I have people come in for a free consultation who think that they can get a quick and free analysis of whether they can do a 7 or a 13. Almost all want a 7 as they think that it will be cheaper,quicker and will “get rid of all my debts, as opposed to a Chapter 13.” That is sometimes true. As in everything, the devil is in the details. I have no idea what that saying means but there it is. Wikipedia says “The idiom “the devil is in the detail” refers to a catch or mysterious element hidden in the details.”
In the bankruptcy context you can add “and this catch or mysterious element can kill you.”
My initial analysis is that we always do a Chapter 7 unless (1.) You do not ‘fit”. or (2.) A Chapter 13 bankruptcy can do something WONDERFUL for you.
Not all attorneys know all of these interesting and quirky laws. Like it is also true that if it is mostly business debt that too may make a huge difference. Ask your attorney AFTER you hire him.
You do not fit if you make too damn much money. There is art to this calculation. Anyone can go online and look at a means test and come up with an inaccurate assessment. There are many, many bodies buried around this seemingly easy looking MEANS TEST. Base jumping looks easy too, but base jumping PROS DIE doing their sport. You can buy all the base jumping equipment you can afford on the internet. There are high rocks you can jump off of all over Colorado. It sure looks easy. Attorneys go to conferences and read all they can to figure out what is acceptable in that test and still there are questions. We recently had a client pass the test after a lot of our hard work and we were very pleasantly surprised.
You also do not fit in a Chapter 7 if you have received a discharge in a Chapter 7 bankruptcy in the last 8 years. If the case was dismissed you may be able to do another Chapter 7 but there are other things that may have to be done if you do. It is tough work for your attorney to figure all the ins and outs and that is what we do. I mean it is not digging a ditch all day in 100 degree Pueblo weather, but it is hard work in that there are so many, many things to consider. I can look at work done on these by some other attorneys and point out errors made by knowledgeable let alone attorneys new to the area and God knows some can sometimes do that on my work. Attorneys also have big disagreements on how to approach Chapter 13’s and what will happen if things are done one way or the other. There are cases that I refer to other attorneys because they involve issues that are just too involved, complicated, out of my range of experience, or would be time wise too expensive to make sense to anyone. And people want to figure this out without an attorney?
“A Chapter 13 Bankruptcy can do something wonderful for you.” That means that the “wham bam thank you mam” approach of the Chapter 7 does not have the diversified and depth aspects of a Chapter 13. If I am not making this seem like rocket science then I am doing you a disservice because it is rocket science. (I recently had the Kodak moment at a Boy Scout project of being able to say to a lady that “this physical labor does not take a rocket science then I am doing you a disservice because it is rocket science. (I recently had the Kodak moment at a Boy Scout project of being able to say to a lady that “this physical labor does not take a rocket scientist” to an actual female rocket scientist. Now how many of us get to do that? As my son says, “Dad not everyone thinks your humor is funny”, and I am not sure she did either.)
Anyway, a Chapter 13, besides being available when a Chapter 7 will not work for you, can sometimes, and I emphasize SOMETIMES, do wonderful things like get rid of a second mortgage, catch up arrears that you owe on your home, allow you to pay less money on your car than you owe, allow you to do a Chapter 13 payment that is LESS than your car payment INCLUDING your car payment, and sometimes your creditors get to pay your attorney fees.
SOMETIMES, a Chapter 13 can allow you to keep the boat or other prized asset and give you up to 5 years to pay the trustee for that asset. We do not advise that but we also do not advise falling in love with a 1957 Chevy that you have to keep no matter what. And selling that asset for a dollar or giving it away to someone can mean that you have GIVEN your asset to the bankruptcy court. There are acceptable ways to deal with this but GUESSING what those ways are may be penny smart pound foolish. Ok I am an old guy so Google it. Ha.
Chapter 13 can also sometimes help correct a CLEVER maneuver that a client does right before seeing his attorney; like quit claiming a home to Mom a week before filing bankruptcy. DON’T DO IT. If you file ANY bankruptcy and then lie about that transfer you may need a referral to a criminal attorney. The trustees often check the real estate records and a wrong move here can cost you the home and that may be the best of what happens to you. TALK to an attorney before doing any of this. Be clever at poker or slot machines where you KNOW what you are risking. I think about all those clever people at casinos who play the slots and have a SYSTEM. Beware the guy with a system and make sure he has already chipped in for gas before the drive home, as chances are by the end of the night he will be broke and YOU will be buying him that breakfast at International House of Pancakes. Be cautious of those inspired moments where you jump out of a window on a starless night and you do not know what is out there.
By the way, usually a Chapter 13 gets rid of all debts too unless you make too damn much money. Not always of course but do not leave here thinking that a Chapter 13 means you pay back all or any of your debt; sometimes yes, many times no.
And you don’t really CHOOSE one over the other. Usually only one bankruptcy really fits your unique situation. I mean you CAN choose to lose an asset or pay more money but normally people want to figure a way NOT to do that. If you feel bad about not paying certain debts or even all of them you can after bankruptcy pay anyone you want but our job as we see it is to get you through your bankruptcy as cleanly and as debt free as possible. Our joke is that if you want to pay your debts after the bankruptcy that you can send the money in cash to my Cayman Island account and then I will pay your bills. On second thought, let me give you that address.