Mark J. Bamberger, Ph.D., J.D., Owner/Attorney and Counselor at Law
The Mark Bamberger Co., LLC
It’s a simple fact of math. Seven is smaller than 13. But in considering bankruptcy, (Chapter) 7 might not be better than (Chapter) 13. In simple terms, a Chapter 7 (“BK7”) is a full, start over from scratch, bankruptcy option for individuals and/or small businesses. They are generally cheaper and faster than a Chapter 13 “(“BK13”).
A BK13 is a personal (or small business) reorganization program whereby you propose to pay back a percentage of your unsecured (and 100% of your secured) debt to the trustee of the court for his or her systematic distribution to your creditors. That percentage can range from 0% to 100%. Typically a personal BK13 payment plan ranges between 2% and 50%. BK13s are generally more expensive since your attorney has to shepherd the case from filing through confirmation to discharge and closure. BK13s last between three (3) and up to five (5) years.
The decision as to which option to pursue is far more complex than a short article here can handle. There are some general rules of thumb, but you should seek legal counsel before making the decision:
- If you have relatively minor unsecured debt and do not have real estate in jeopardy, you may be able to get away hiring us to haggle settlement offers for your unsecured debt and avoid bankruptcy altogether;
- If only one spouse has debt in his or her name, you may consider having that one spouse file bankruptcy alone;
- If you do not own real estate, have not filed a BK7 within the past eight (8) years, and have a household income under what is termed the “Means Test”, a BK7 might be best;
- If you own a home that is in foreseeable jeopardy of defaulting and you want to try to keep the property, a BK13 is probably best for you and your family; and
- If your household income is above the Means Test and/or you have filed a BK7 within the past eight (8) years, consider a BK13.
Needless to say, there are many more considerations to be made and I would be happy to schedule a free, no obligation consultation to explore your particular situation. Mind you, you do have the legal right to file your case by yourself (pro se), but bankruptcy law under 11 U.S.C. can be complex and unforgiving, so professional assistance is often strongly recommended.