How often are debt collectors going to need their payments?
Brad Weil: Well, that’s a beautiful thing about bankruptcy. When you file a bankruptcy of any type -7, 11 or 13 – the filing of the bankruptcy stops all legal action against you and your property. So, the filing of the bankruptcy actually stops the debt collection activity. They cannot call you, they cannot send you a bill, they can’t do anything. If your wages are being garnished, the filing of the bankruptcy stops the garnishment.
“What qualifications there were for 13?”
It is a qualification known as “Feasibility”, what we call plan feasibility. You have to be able to afford to pay back everybody that has to be paid back. Your plan has to be feasible. So, your plan payment has to be high enough to pay the IRS and the car and the arrears on the house. Otherwise, something has to give.
If you do a Chapter 13 and you owe that, you’re actually going to pay it back through the Chapter 13. So, by the end of the Chapter 13, you’ll get it discharged and you won’t owe the tax liability anymore. So, the IRS can’t come knocking on your door after the bankruptcy and say “Hey, we’re still here” and that can happen in a Chapter 7. So, if you’re not careful and you don’t know what you’re doing, you can still face tax liability after Chapter 7, that won’t be the case in a 13. Now, going back to your previous case you had asked, this has kind of popped into my head.
Interviewer: What sort of person would prefer Chapter 13 bankruptcy over Chapter 7? What sort of financial standing should they have at the current time?
Brad Weil: It’s people that make enough money to pay back their debts but maybe they have too many debts and they’re overwhelmed. I do have people that file Chapter 13 that are 100 per cent planned. They use the Chapter 13 as a debt consolidation. I have people that file Chapter 13, like I said, to reduce interest rate on cars. People file Chapter 13 to stop a foreclosure and save their home. They do it to pay back taxes to get basically the IRS, the guys from the Franchise Tax Board off their back because Chapter 7 and you owe priority tax liability, that priority tax liability would not be discharged, you will still owe that at the end of the bankruptcy.