Making the Right Choice
So depends on several factors. As you might recall, Chapter 7 is a deal. You give up all your qualifying debt, hopefully, a lot, in exchange for all of your unprotected assets. Hopefully none or very little, usually none or very little. Remember, your house is protected, your vehicles are protected to a certain extent, and your household stuff is protected. Your lake house is not protected, and the 10,000 you’ve got under the mattress, is not protected, but most people that come to me don’t have that anyway.
So what’s a Chapter 13? Well, as you might recall, that is where you pay what you can, not what you owe for five years. Actually three to five years, depending on circumstances. And you may be doing a 13 because you make too much money to file a 7. As you recall, if you make over the caps, IRS caps for household size, which change quarterly, are somewhere between 45 and 50,000 for 2 people and 10,000 approximately for each person over that. If you’re way over that cap, you don’t have expenses to bring you down, you may have to do a 13. So that’s one factor.
The other, are you losing your home? Are you in foreclosure? If you’re wanting to force the mortgage company to allow you to catch up on your mortgage, which often you can’t get them to help you do voluntarily, you can use Chapter 13. So normally you might even file a 7, you might qualify to file a 7, but you want to save that home. You can also do it with a vehicle by forcing the mortgage company to let you catch up. As long as you can pay that regular monthly mortgage when you start Chapter 13 and a percentage of the back that you owe, the arrearage as we call it, then you’re home-free. That’s a power the court absolutely has.
So, couple of reasons you might want to do a 13 instead of a 7. To summarize. One, you make too much money, you just can’t do it. If that’s the case, then what we’ll do is calculate your disposable income and decide how much you can pay, and then you’ll pay that much. So you can owe 100,000 but if you only have $50 a month left over, that’s $50 of disposable income. Generally not going to have a payment that low, but that’s the principle. If you have $100 a month leftover, you’re going to pay $100 and at the end of 5 years, anything leftover is going to discharge. Another reason you might do a 13, you can do a 7, but you want to save your house. You can do that in a 13. So that’s why you’d want to do a 13. Otherwise, do that 7. It’s a much better deal.
So that’s our Three Minutes Of Financial Freedom. OKC bankruptcy lawyer Edward Kelley here. You can always reach me at Edward Kelley Law, kelleylaw@gmail.com, or by phone at (580) 478-3130. You can also reach out to me at oklahomacitybankruptcyattorney.pro.