Need another bankruptcy? Take a deep breath. It happens. Let us explain what to do if you think you might need another bankruptcy. Let’s start at the beginning.
You swore last time this would never happen to you again. But you never know when bad luck will strike again.
Let me share my thoughts on a common scenario that brings people to a bankruptcy lawyer—you need debt relief, but you previously filed a Chapter 7 bankruptcy. If you have debt relief questions, they should be answered by a lawyer that is a Certified Bankruptcy Specialist. By writing about common debt relief situations, I hope to encourage people to seek help from professionals and also to have an honest perspective about solving their financial problems.
Here’s a specific situation that I’ve encountered in my practice at Bayer, Wishman & Leotta PC that represents a pretty common problem:
“In February of this year I became ill and was forced to shut down my eBay business. Currently I owe them approximately $47,000 in fees. I have only modest income now. I live with my adult children. A few years ago my ex-husband and I filed bankruptcy when he lost his job. Are there any bankruptcy options for me?”
You are definitely not alone in this. Many people find themselves with serious debt problems again and again. Luckily, in your case there is a remedy! You should consider filing Chapter 13 bankruptcy. You are eligible for a Chapter 13 filing now provided that your Chapter 7 case was filed more than 4 years ago. As you may know, current law would not allow you to file a new Chapter 7 case until 8 years have passed from the date you filed your earlier case. But, as I said, a Chapter 13 case may be possible and could provide you with significant debt relief.
Let’s assume, for the sake of discussion, that you have no valuable assets and average or below average income. If so, you may qualify to file Chapter 13 now, with a bankruptcy payment plan. This plan would be based on what you can afford to pay towards your debts over the next 3 years. Sometimes that amount works out to be just pennies on the dollar!
Whatever you can’t afford to repay gets discharged by the Chapter 13 at the end of your 3 year payment plan. Sometimes the court will allow a plan to extend as long as 5 years if there is a good reason. Of course, if would be better for you to get in and out as fast as you can.
For people with valuable assets and above average income, the Chapter 13 rules are much more complicated. In those cases the repayment plan must take into account the value of property that creditors would have received if you had filed again under a Chapter 7 case. In simple terms, this means that we pretend you are in Chapter 7 and your valuable assets are sold to pay creditors; and that figures in to what your Chapter 3 plan must pay to creditors.
But for most people in need of debt relief, these complicated rules will not apply. So the bottom line is that the person asking the question above might qualify for debt relief in Chapter 13 even though she would not be allowed to file Chapter 7.
If you need debt relief and you have questions, you really need to sit down with a qualified bankruptcy lawyer. Your options will become clear only with a careful and thorough review of your situation. As with many bankruptcy specialists, we will sit with you and review your situation without charge. Knowing this, I hope you are encouraged to share our blog with family and friends that face financial challenges. And there is no excuse not to seek help. We’ll see you then.
The author, Marcus G. Tiggs, is a highly respected bankruptcy attorney and bankruptcy litigator. In law practice since 1989, Marcus was formerly the Managing Partner of Slate & Leoni, APC, and joined Bayer, Wishman & Leotta PC in 2001. He is a Certified Bankruptcy Specialist by the State Bar of California and teaches as Adjunct Professor of Bankruptcy Law at the University of West Los Angeles College of Law. Marcus is passionate in his devotion to helping people overcome financial distress, and he is strongly committed to public service.