What we do is we take your income from all sources of income and we subtract your regularly incurred monthly expenses. At the end of that calculation, you have to have at least $100 a month left over that you can then send to the court appointed trustee and he uses that money to pay your creditors. So, in essence, I like to think of the chapter 13 as a debt consolidation. It puts all of your debt in one place and you pay it back over time through one central agent who is the trustee.
At what point does someone decide that Chapter 13 bankruptcy is a suitable or best option for them?
Brad Weil: One of the requirements of Chapter 13 is that you have to have disposable income. So, for a lot of people, that will be the deciding factor because you are going to have to make a bankruptcy plan payment to a court appointed trustee. The trustees that I’ve spoken to basically had a rule of thumb that a plan payment had to be a minimum of $100 a month. So, what that basically means is you have to have a minimum of $100 a month of disposable income, and disposable income is the difference between your income and your expenses.
The first thing that people have to decide is whether or not they’re going to do a chapter 7 liquidation or a chapter 13 re-organization. Once you educate them on those differences and why one’s better than the other, they all have pros and cons. Then, it’s just a matter of getting used to being in a chapter 13 because the chapter 13 lasts for long time, you know, the chapter 13 is designed to last 3 to 5 years whereas the typical Chapter 7 will last on average about six months. And so, people have to be used to being in bankruptcy for five years, and that can be hard. Call our offices and let us help you figure out which is best.