Podcast #6: Re-filing, Income Dictating Chapter 7 vs. Chapter 13

Disclaimer

While the information given in this podcast is instructional, it is not intended to be taken as legal advice for your particular legal or financial situation. The recommendations that we give to one person may not be appropriate to your particular situation. The information contained in these podcasts is also not intended to replace the advice that you would receive from an actual consultation with a competent legal professional practicing in the area of consumer bankruptcy law.

Welcome

Welcome to Morsebankruptcy.com, the podcast. We take different questions from different sources. This podcast in particular is dealing with questions asked by visitors to our website. These are generally first questions they are asking to see if bankruptcy is a possible solution for their situation. This visitor writes:

Viewer Question

Hello, we filed a chapter 13 bankruptcy and it was dismissed last month, unfortunately. Is there any way to re-file and protect ourselves?

MorseBankruptcy.com Recommendation

Well, as a general rule the answer is yes. You can generally re-file a chapter 13 or even a chapter 7 bankruptcy if you so wish. The question though we usually ask before just immediately re-filing somebody is why did the original bankruptcy get dismissed.

Now, if you are filing a chapter 13 to save your home. In other words, you’d missed a series of home payments and the bank was wanting all those home payments to be paid at once to stop a foreclosure, and clearly you and probably no one else could do that, that might be one issue.

But now if you are in a 13 because the attorney who filed it for you told you, you had to file a 13 because of your income or whatever reason they gave you. We’ve had a series of those cases recently where we reanalyzed the numbers and found out that maybe the reason that 13 didn’t work out is because the person never needed to be a 13 to begin with. That with proper deductions taken against their income and what’s called the means test, the income test which qualifies either for chapter 7 or if your income is too high requires a chapter 13 filing. We found that when the deductions are run correctly, a certain number of these folks did not need to be in a 13 to begin with and once we are able to re-file them with proper deductions as a chapter 7, they were able to receive discharge and go on to the next chapter in their lives.

Now as we were talking before if you were filing a 13 because your home was going into foreclosure and instead of being able to come up with the money, the arrears on the home all at one time as the bank requires you were using the chapter 13 to then spread out those in this payments over 3 to 5 years which is what a chapter 13 would do for you. That is you can certainly re-file the bankruptcy and put the stay order back in place. May not have some rights to get that order removed or changed quickly, and you would certainly have to continue making your regular house payment and the chapter 13 payment in order to be successful on the 13 and save the home.

However, much like the scenario before, a lot of times when you go back in and you look at these 13′s, you find areas where not all the deductions were taken or may be not every expenses in the household was accounted for. So maybe that 13 was paying out a little more than it should have. It was requiring the filer to make a larger payment than it would it had to have made, had the numbers been successful correctly argued in the first instant.

So, in this person’s particular situation we don’t know whether they were a 13 to save a home or whether were a 13 because of income reasons or some other reason they were told at the time. But this is certainly the kind of situation where you’d want to sit down with the bankruptcy attorney and have them pull up your prior filing, specifically they need to look at your means test, and talk to you about the reasons for filing and see if there isn’t a better way to either restructure that 13 so that the payment is more doable. Something that your household, your family can actually live with or maybe look at it and see if we can’t find out maybe it didn’t need to be a 13 in the first place. Maybe those objectives can be accomplished in other ways. But in the event it’s an interesting situation though unfortunate but nonetheless a very good question.

Prerequisites

There are no prerequired tutorials for this tutorial.

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