Most people who are going to file a bankruptcy will be looking at Chapter 7 and Chapter 13 cases. The names for these types of bankruptcy come from the different chapters in Title 11 (the name of the book published by Congress that contains the laws on bankruptcy) that describe liquidation cases and wage earner cases. The terms are really just nicknames for those chapters. There are separate sections for each on this site, but this is a basic overview.
A Chapter 7 is a basic case, the fees are due before filing, and you generally are discharging debts such as credit cards, medical bills, and personal loans. You continue to pay secured debts if you want to keep the property securing the loan and it will not correct or fix a default if you are behind on a car or house loan. It can be very effective if planned out correctly. It will be very disappointing if it is done incorrectly as you could lose assets or worse.
A Chapter 13 is a more complex case, in this office the attorney’s fees are paid through the case (not upfront) and you are making a payment into a bankruptcy trustee for anywhere from 36 to 60 months. You are usually filing this kind of case because you are trying to keep a car, a house, pay tax debt, stop a student loan garnishment, or simply have no upfront money to do a Chapter 7. It is generally more effective than a chapter 7 and more expensive but nowhere near as dangerous.
The bankruptcy system is generally setup to help the honest person who has fallen on hard times get a breather or a fresh start. There are tradeoffs as the filing of the bankruptcy will generally ruin your credit, but for most people that is not the major concern when they are in a position to even think about a bankruptcy.
People can represent themselves in a bankruptcy case but it is probably the worst idea possible for most people. An attorney can take you though the options in bankruptcy, covering the advantages and disadvantages. You can find out if the options in bankruptcy would help you and the risks you might face.
Chapter 13 or Chapter 7?
The list of differences between the two types of bankruptcy in every case is so long it would be impossible and impractical to go through them all. The question above is the most misunderstood question by attorneys, non-attorneys, and everyone in-between.
There is almost never a “best” choice for what type of bankruptcy you should file. Many attorneys believe that Chapter 7 is always best and some believe that Chapter 13 is always best. You probably know someone who has filed and they have their opinion about what you should do. Almost everyone misses what is most important – getting informed about your options and making your own choice.
When people are full of doubt and stress and someone is there to help them it is easy to allow the person helping you to make the decision. It is often easier for the person helping you if they are allowed to make the decision for you. You must not allow this to happen. Make your decision based on the information and advice of a professional, but make sure it is your decision.
We advise you to let go of your preconceived ideas when being advised on this issue. Put aside what you have been told by other people and listen for yourself. We find that most people feel much better about the decision they make when they have all the facts in front of them.
We will cover the cost benefit analysis of both types of cases, explain the options of both types of cases, and give you a recommendation based on your facts.