Should you file a chapter 7 or a chapter 13 Bankruptcy?

When I worked at a bankruptcy attorney's office We once had a client that wasn’t sure which bankruptcy chapter to file under as well. Chapter 7 is by far the most utilized form of bankruptcy for consumers.

Why?

Because it just wipes the slate clean and gives you a fresh start. The only good reason for most consumers to file a chapter 13 is because they A. Have some nonexempt property to protect or B. They’re not eligible for chapter 13.

Just keep in mind that a chapter 13 bankruptcy will eat 3–5 years of your life!

Anyway back to the client. She had become insolvent due to a divorce. She didn’t have much so we steered her towards a chapter 7. No big deal standard procedure.

At the hearing a the magistrate will always give the creditors a chance to formally object to the debt discharge. However, this is usually a formality as they rarely ever show up.

At the hearing the magistrate asked the standard questions and then he asked

“Are there any objections to a full and complete debt discharge?”

Then we heard a voice …

“yes your honor we have objection”

The room fell deathly silent. You could hear a pin drop. Everyone turned around and saw this large man with slicked black hair stand up.

He said they objected because the woman had exaggerated her income on the credit application and therefore shouldn’t be allowed a discharge.

Unfortunately for this lady she owed a company that rhymes with ‘Mescover’ over 10k and they are notorious for fighting for their money.

The magistrate asked if that was true and she said it was. He then told her the only way he would allow the case to proceed was for her to refile as a chapter 13.

She was devastated as she didn’t want to have 5 years of her life taken up, When we were alone in the office I suggested debt settlement as an alternative.

A debt settlement would only take 18–48 months to complete and be far less expensive than hiring a lawyer for a chapter 13.

She did and she actually finished in 30 months. She ended up getting 50% of her debt knocked off without having to pay an expensive lawyer.