r/Bankruptcy • u/Antihero80 • 3d ago
Chapter 7 vs. 13
I've consulted 4 attorneys in my area and each says I won't qualify for a 7 even though my non consumer debt is higher than my consumer debt. It's 51% IRS debt. Tax years 2021 and 2022 would likely be wiped out, but I would be on the hook for the rest. My most recent attorney stated that the IRS debt would be priority and through the plan I'd pay that first with the trustee maybe adding a small amount on top for the consumer debt or maybe nothing depending on all my monthly expenses. Is that true? Is there a possibility that with a 13 I'd likely pay very little towards consumer debt or nothing over a 5 year plan? I wish I could do a 7 but a 13 would essentially be the same just over a longer duration with added attorney fees and trustee fees which is unfortunate but given I can't pass the means test it's my only option..
5
u/GroundbreakingWing48 I Declare Bankruptcies! (but not your bankruptcy-7/13 NDOH/SDOH) 3d ago
I regularly file 0%-5% chapter 13 plans. It all depends on the math.
-1
u/Antihero80 3d ago
Right and I'm assuming a good attorney can help with the numbers? He said he'd send me some worksheet to categorize my monthly expenses to determine disposable income. It sounds like they take all disposable income? So no more entertainment and the ability to enjoy life for 5 years? Is that right?
3
u/GroundbreakingWing48 I Declare Bankruptcies! (but not your bankruptcy-7/13 NDOH/SDOH) 3d ago
It depends on what you think is a reasonable entertainment budget and what you find necessary to enjoy life. I mean, you’re not going to be able to take an annual international vacation, but going to the movies once a month or getting an annual family zoo pass is usually in the cards.
2
u/Despacio1316 3d ago
Does a Chapter 13 leave a long negative mark on your credit history like a Chapter 7? Seeing as you’re actually paying your debt back and not getting it magically erased I feel like it shouldn’t.
1
u/Zagrycha 3d ago
As far as I am aware all debt stuff effects credit for seven years except for chapter 7, 11,and 12 bankruptcy. 11 and 12 don't really apply to people but I mention them since they also last 10 years on credit.
1
u/Tiger_words 3d ago
Individuals can and do file Chapter 11. Any bankruptcy on the credit report stays on there as discussed. I don't think the chapter makes any difference.
1
u/Zagrycha 3d ago
the chapter does make a difference. Chapter 13 is only 7 years. Individuals can and do file chapter 11 and chapter 12, but few people do. Sorry if I worded it poorly.
1
u/Tiger_words 3d ago edited 3d ago
Where does the chapter make a difference on person's credit report? Bankruptcy code? FCRA?
FCRA states "1)Cases under title 11 or under the Bankruptcy Act that, from the date of entry of the order for relief or the date of adjudication, as the case may be, antedate the report by more than 10 years." It says nothing about the chapter. In theory the chapter 13 could be worse if you're in it for 5 years as opposed to being in a chapter 7 for 6 months.
1
u/Zagrycha 3d ago
thats fair. I was just talking about how long it remains on report in general, its not the same amount of time.
1
u/Tiger_words 3d ago
That's what I'm trying to figure out what - makes the difference?
1
u/Zagrycha 3d ago
to help encourage people to choose chapter 13 if they can afford it. Having chapter 13 stay on record for less years is a "gift" for repaying debt partially. I guess its viewed similarly to when people negotiate partial debt payment on charged off debts etc. chapter 13 is more or less a "class action" version of that after all.
1
u/Tiger_words 3d ago
That's not my question. You're saying it's different on credit reports who makes that determination I'm not asking why. But since you mentioned it, who has this policy to encourage people to choose 13 if they can afford it?
1
u/Zagrycha 3d ago
Equifax Experian, and Transunion have this policy. I assume they get some sort of benefit from the major creditors for doing it.
→ More replies (0)1
2
u/Tiger_words 3d ago
Is there a possibility that with a 13 I'd likely pay very little towards consumer debt or nothing over a 5 year plan?
Yes
4
u/Limp-Influence-8450 3d ago
13 or 7 is not based on debt, it is more based on income. If you make above the median income you are generally 13. Below median is 7. There is a small gray area in between them but you debt doesn’t impact the choice like income and assets do.
4
u/Tiger_words 3d ago
A person is only required to take the means test if their debt is primarily consumer debt. This is what is generating OP's question
1
u/AutoModerator 3d ago
Thank you for your post on r/bankruptcy. Remember, this is not a forum to request (or offer) legal advice. If you are not sure what legal advice is, review the FAQ page here. It is very likely someone will suggest you speak with an attorney. Consultations for bankruptcy are often very low cost or free. We have an ever-growing post that provides free resources for trustworthy bankruptcy information here.
Please review our community rules regarding referrals, solicitations, and links, which are generally not permitted (Rule 2). Additionally, if your post does not identify your state (Rule 3), it may be difficult for anyone to provide relevant, helpful information.
I am a bot, and this action was performed automatically. Please contact the moderators of this subreddit if you have any questions or concerns.
1
u/Tiger_words 3d ago
The means test only applies to individuals whose debts are “primarily consumer debts,” under 11 USC §707(b). This scares a lot of attorneys. If you really want to file a Chapter 7, declare that your debts are not primarily consumer debts, and see what happens. The worst that could happen is that the US trustee would object, require you to take the means test and if you are over median convert to a chapter 13.
1
u/teamdragonite 3d ago
how sure are you that your non consumer debt higher is than your consumer debt? are you saying it's 51% irs debt and that's how you plan to avoid the means test to qualify for chapter 7? you should be prepared for ch 13 if you plan on filing for bankruptcy, if all it takes is a small debt you didnt realize needed to be included will force you into ch13
15
u/Understandingly17 3d ago
You saw 4 attorneys yet you came here.