Bankruptcies Can be a Case by Case Basis
Video Transcribed: Oklahoma Bankruptcy Attorney Edward Kelley, 888 Debt Line. We’re in the middle of the series, should I do a seven or 13? We’ve talked about your income, which is a major factor. What kind of debt you have, secured or unsecured, which will determine what’s the best option for you. We also now will talk about not just secured or unsecured, but do you have any non-dischargeable or special priority debt? I won’t go into detail about priorities, that’s something your lawyer can explain to you on a case-by-case basis, as needed. Or, we may have a series about that at some point.
But for example, you’ve got tax debt, if it’s less than three years since you filed it, not dischargeable. Student loans are backed by the government, not dischargeable. Child support, criminal penalties. So you have to think about not only what type of unsecured or secured debts do I have, but is there anything here I can’t discharge? That may or may not push you into one chapter or the other.
For example, if you have tax debt, and you have some disposable income leftover for a 13, you are probably going to be better off, if you can pay it in time, to throw it into a 13 and just deal with the IRS. I think the IRS can, in some cases, charge hundreds of dollars a month in penalties and fees. That won’t happen in the 13. They will build in interest, but you’ll end up with a set amount that will be paid by the trustee, locked in at the beginning.
That is major advantage with the IRS. So although you could do a seven and just keep your tax debt, get rid of everything else, freeing you up to pay it, you may want to consider a 13 just for that reason. Instead of paying the IRS directly, let the trustee do it, and force a final amount that you probably will never get from the IRS. So that’s a big one.
If you have student loans, again, if you have been in default or if you are getting late fees and penalties and are going under, it depends somewhat on your lender, same deal. Put it in a 13 if you’ve got time to pay it, and that means 60 months on both of these. If you can pay it off then, do a 13.
A lot of times if you have a debt, for example child support, same deal. If you’ve got a back support that keeps accruing interest, you may be able to do something with that, or your attorney may be able to, in a 13. Consider that. Maybe I’ll talk about this again in special powers of the 13. Those lenders will just hit you and hit you and hit you, and you don’t have much say about it, or as a non-attorney, not much ability to do anything about it. But when they’re dealing with the trustee, they are far less apt to try to gouge you.
Another consideration, seven or 13, if you have non-dischargeable debt, are you going to be better off getting rid of all your other debt in a seven, cutting and running? With student loan or other things, you never know if the government will ever start allowing some of those to be dischargeable. So you might be holding out for that. That doesn’t seem likely. We’re going on many, many years now.
But hopefully, this has been helpful. As always, you can reach me at 188 Debt Line, Edward@wirthlaw.com or on Facebook at our group called Oklahomans for Debt Relief.