When you file that bankruptcy, that stops a call of interest
and you just pay what you are liable to do the filing and you can pay that off over a 5 year period. So, then you know that what the trustee is paying on that debt goes to principal and it’s paid off in 5 years or in 2 years or 3 years or whatever and you’re done. Now, if you’re proposing less than 100 per cent plan, which means you’re not going to pay all of your creditors anything that you owe, you’re going to pay, say, 50 cents on the dollar. Then, the minimum plan you can propose is a 3-year plan. And if you’re, what we call, an above median debtor, which means your income is about median income for your stay, then you have to propose a 5-year plan, they won’t let you propose a 3-year plan.
Interviewer: How long could the whole process of a Chapter 13 last? How long is it supposed to last and could it be extended?
Brad Weil: By law, the minimum bankruptcy plan in a Chapter 13 that you can propose is a 3-year plan, 36 months. The maximum bankruptcy plan that you can propose is a 5-year plan, 60 months. If you are paying all of your creditors through the plan, what we call a 100 per cent plan, you can propose less than a 3 year plan. We’ve done 2-years plan for people just to pay back their debts. And the reason for doing that is when you pay your debts back through Chapter 13, you don’t pay any interest on unsecured debts. It’s whatever you owe as it has been filed. And some people, all they can afford is the minimum payment on their credit card, which is like 20 or 30 per cent interest that has been maxed out a year ago. And they’re not getting anywhere; they’re just constantly paying like a dollar or two of those interest.
Sometimes I look at a person’s income, I look at their debts and I say you know what? There’s no point for you to do a Chapter 13, you should do a Chapter 7. Sometimes, the person comes in and he says “I want to do a Chapter 13” and I say, well do you understand the difference? Once I’m comfortable that they understand the difference, then I’ll go ahead and retain them on 13. Most people, if they’ve done their research and they come in, they usually have made up their mind that they want to do a Chapter 7. Sometimes, I think that Chapter 13 would be better than a Chapter 7 and sometimes, they disagree with me and they say “No. I want to do a Chapter 7”. In that case, we go ahead and we do the Chapter 7 if they otherwise qualify for it.
Interviewer: Before they make their decision to go and file bankruptcy, could someone consult you first in order to help them make their decision?
Brad Weil: Actually, we encourage that. The way that we do it is for us, it’s a three-step process. Now, the first step is the free initial consultation. And in the initial consultation, what I do is I sit down with the client or the husband and wife, considering an individual or a couple, and I explain the difference between the Chapter 7 and the Chapter 13. I don’t usually get into the 11 unless I see that that’s the only thing that person qualifies for, I like to keep people out of the Chapter 11 because they’re expensive. But we break down the difference and I break down why I would recommend one over the other.