At Kain & Scott, we get this question a lot. Do I qualify for Chapter 7 or 13 bankruptcy? Financial problems come in different sizes and varieties. Generally speaking if you are looking at a bankruptcy website, then bankruptcy is something you should consider. Why do I say this? Because you are obviously struggling with some debt or you would not be searching for solutions right?
Most people qualify to file for bankruptcy. The more definitive question is which chapter will you be filing. There are very, very few people who do not qualify for either Chapter 7 or Chapter 13. I have been doing bankruptcy work for 20 years and may have seen 1 person who fit into this category. Statistically speaking, it is irrelevant. Nearly every person we meet will either qualify for a chapter 7 or 13.
CAN’T PAY BILLS ON TIME
If you can’t pay bills on time, you need to be thinking about bankruptcy and whether bankruptcy is a tool you can use to get your life back on track. To be clear, if your monthly bills consist of rent, groceries, utilities and transportation and you can’t pay them, there is not much bankruptcy can do for you. We always tell our guests we can’t solve an income problem, but we can solve a debt problem.
Say you have 20k in credit card debt and you can’t keep up. This is when you definitely need to speak with an attorney to see if bankruptcy can help you get your life back.
BEHIND ON AUTO/HOME LOAN
As I said before, financial troubles come in all shapes and sizes. Sometimes we see people with only 8k in debt- but they are single and have 3 kids and make $15.00 per hour. 8k in debt might as well be a million dollars if you are in the same situation.
Occasionally, we meet with guests who say look- I have no unsecured debt, but I lost my job and I am six months behind on my mortgage and they set a foreclosure sale- and I am in a panic! First, I would be in a panic too so I completely understand the concern. Second, there are remedies available. In a case like this we can file a chapter 13 bankruptcy, cure the mortgage arrears over 3-5 years and you do not lose your home! If you are like my client who lived in Eagan, Minnesota and was behind on his home, this is welcome news!
Same is true for a car loan. If you fall behind and you need the vehicle to go to work to earn a paycheck, keeping the vehicle will be very important! Chapter 13 allows us to pay the arrears or the whole vehicle loan over time and modify the terms of the loan. Slick!
Guests may not realize these tools exist if they have no unsecured debt- but they do exist and we use them often to protect our guests.
I AM ASSET RICH BUT CASH POOR!
It happens a lot. We meet with guests who are asset rich but cash poor and the creditors are howling at the door. Is there a way not to lose assets and yet pay the debt according to terms you can afford? You bet there is- it’s called a chapter 13 bankruptcy, or as I like to refer to it a government sponsored debt consolidation plan. How does this work?
Let’s use Rick as an example. Let’s say Rick owns 10% of the Marriot hotel worth 3 million dollars. He draws an income from the quarterly distributions from his Marriot stock and this is what he uses to live on. Rick is retired and needs this income to survive. He makes 60k a year on his distributions.
Rick has 50k in credit card debt and he got behind because he was helping out one of his kids who got into some trouble with drugs and needed treatment desperately. His credit cards went delinquent and one big creditor has already gotten a judgment against Rick.
With this judgment, Rick’s creditor has discovered his stock ownership in the Marriot and now wants to seize control of the stock to satisfy the debt. The trouble is if the stock is liquidated now Rick will be forced to fire sale his stock and lose a lot of money plus take enormous tax hits not to mention losing his income stream.
Rick calls Kain & Scott- and sets up an appointment. He learns that he can do a chapter 13 bankruptcy, pay all of his creditors in full over a 5 year plan, without interest, and whoever doesn’t file a proof of claim on time doesn’t get paid at all!
It gets better- all collection activity is barred against Rick or his assets while in the plan and Rick will lose no assets in a chapter 13 bankruptcy! POW POW POW!
This was a great solution for Rick. He paid his creditors in full, interest free, according to terms he could afford, and he only paid creditors who filed a proof of claim on time. He kept control over his assets and the creditors stopped bugging him- he had peace in the valley.
CONCLUSION
The reality is most Minnesotans qualify to file bankruptcy- the issue is determining which bankruptcy should you file - a chapter 7 or a chapter 13? Everyone’s circumstances are different. One size does not fit all. That is why meeting with an experienced bankruptcy attorney makes the most sense. Getting your life back rocks!
Just ask the thousands of Minnesotans we helped since 1972! Not one of them regretted filing bankruptcy, but they did regret waiting so long to file bankruptcy. Prolonging pain is uncomfortable and miserable. In the end- waiting only makes your family suffer longer- needlessly. Like a surgery avoided for years- and then finally had, I wish I never would have waited so damn long! Sometimes flowers bloom at different times- that is ok. We all have our own distinct pace in life- I know I have mine. When the time is right- or when you are ready, request a free consultation anytime.
