Potential clients, when you first come to me for a consultation, you are often confused about which Chapter in Bankruptcy is best for you. You are nervous, flustered, and scared. You’ve done your legal research on the infamous google and have decided that your financial situation is forever doomed.
Leave the research to me, and let’s work this through by breaking down your financial situation into three parts. I do my job in gathering the necessary financial information to help you decide which Chapter in Bankruptcy is better fitting for you. At times, I may say that Bankruptcy is not the best option. I don’t sell you Bankruptcy; I help you make an informed decision based on your situation. You get to decide.
First, let me explain quickly the differences between a Chapter 7 vs a Chapter 13 Bankruptcy. In a Chapter 7 bankruptcy, most unsecured debts are discharged, or forgiven without having to do a payment plan like in a Chapter 13. The Chapter 7 bankruptcy is quick and easy and generally over in 3 months from when the case is filed to when it is closed. In a Chapter 13 Plan, you are committed to making payments to the Trustee’s office for 36-60 months to pay towards your secured and unsecured debts. For more details on the differences between the two chapters, please refer to my previous blogs where I have gone into more detail on this topic.
When I start my consultation, the first question I ask is, “How many people are in your household?” Followed with, “What is your gross combined income for everyone in your household?” This helps me determine if based on income alone, you are eligible for a Chapter 7 Bankruptcy. For an example, if you are a household of 4, (husband, wife, and 2 minor children) and your median income for the household does not exceed $81,226.00 (current allowed median income for a household of 4 in South Carolina), I am now leaning towards a Chapter 7 Bankruptcy for you.
The second part of my consultation I will focus on what assets you have in your name to see if I can protect everything that you want to keep. Do you own a home, a car, land, timeshare, boats, motorcycles, etc.? If so, we need to determine the amount you still owe on these assets minus the current fair market value for these assets. If the values of your assets do not exceed the allowable exemptions under the bankruptcy code, I am leaning towards a Chapter 7 Bankruptcy for you.
The third part of my consultation I will need to verify that you are current on your secured debts that are tied to the assets you want to retain. For an example, if you have a house and a car, I make sure that the secured debt attached to the house or car is current by the time we file the case. If you are current on your mortgage note and car note, I have made my determination that you are eligible for a Chapter 7 Bankruptcy and not a Chapter 13.
I have seen too many clients being pushed into a Chapter 13 when they do not need to be. If income is below the median, no asset issues, and the potential client is current on his/her home and car, I do not see a reason for placing this client in a Chapter 13 payment plan. Although the attorney’s fees for a Chapter 13 is almost twice as much as a Chapter 7 attorney’s fee, I always strive to put my client’s needs first and do what is right by them. I will not push a client into a 60 month payment plan when they do not need to be. I see no benefit to the client when their income is below the median income and they are current on their secured debts (i.e. mortgage, car). Placing a client into a Chapter 13 Plan when income is scarce will inevitably cause stress on the client for the next 60 months. How can they maintain current on their plan payment when they barely have income to make the plan sustainable? Yes, it would benefit my firm economically to earn double the retainer fee to file more Chapter 13s, however would this be better for my clients? I don’t think it would be. I will do a thorough review of your case and help you decide which Chapter in bankruptcy is the best for you. At the end of our consultation, you will be able to make an informed decision for yourself. I remain transparent in my practice as your attorney. Potential clients, your needs and interests come first here at Lam Law Firm.
