QUESTION
Should my parents file Chapter 7 or Chapter 13 bankruptcy to get out of debt?
Asked on Aug 10th, 2012 on Bankruptcy - Kansas
More details to this question:
My parents own their own home have 2 paid off old vehicles.
The value of home $45,000.00 presently. They have $75,000.00 in credit card debt and no income, but Social Security coming in.
My mother is bipolar and my dad has Parkinsons disease with dementia.
My understanding is that Chapter 13 addresses secured debts like mortgages or car loans. Will this stop repossession and garnishments?
What can protect the mortgage on the home? There is no debt on the home. It's paid off.
Is Chapter 7 is designed to eliminate debt like credit cards, medical bills, utility, and personal debt?
This is our goal for they have no bills other than household expenses.
Would 7 be better and get completely out of the debt and keep their house which is paid for? Please advise, thanks.
13 ANSWERS
Bankruptcy Attorney serving Phoenix, AZ
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Law Office of D. L. Drain, P.A.
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Bankruptcy is a very complicated process.
Answered on Jul 08th, 2013 at 12:05 AM
Chapter 7 Bankruptcy Attorney serving San Francisco, CA
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Bertrand, Fox & Elliot
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Because of the complexity of your parents assets, it is important to determine the value of the assets before deciding if a Chapter 7 or 13 would be better. They could lose property through a Chapter 7 that they might be able to keep in a Chapter 13. They should consult with an experienced bankruptcy attorney before moving forward.
Answered on Aug 22nd, 2012 at 11:28 PM
Chapter 13 bankruptcy is a repayment plan. Chapter 7 is a better choice for your parents as it will get rid of the credit card debt, and they will be able to keep their vehicles and home as both are protected under the exemption provisions.
Answered on Aug 22nd, 2012 at 11:27 PM
Good job in the fact summary. Your parents can fully protect their home and file a chapter 7 bankruptcy. Depending upon the value they might have trouble fully protecting both vehicles, but you should be able to work something out. The chapter 7 will stop any and all collection procedures. Your parents probably should file, if only for the psychological relief, but really, no-one can touch their home or their social security, bankruptcy or no bankruptcy. The credit cards can go ballistic if they like but your parents can stay in their home as long as they pay the property taxes. The main beneficiary of your parents' bankruptcy is likely to be you, since getting clear title to their home might be a challenge if they have unpaid judgments when they die.
Answered on Aug 22nd, 2012 at 12:35 AM
Criminal Law Attorney serving Fremont, CA
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Steven J. Alpers, A Professional Corporation
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Chapter 7 would be better get a lawyer to assist you because you will have to claim exemptions for the house and the cars to protect them from creditors.
Answered on Aug 22nd, 2012 at 12:34 AM
Bankruptcy Law Attorney serving Livingston, NJ
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Law Office of Stuart M. Nachbar, P.C.
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There is a great deal to think about here. If they have a house w/ no outstanding Mtg, and using your #'s, in NJ they would have an exemption of 42,000 approximately, so the house should be safe. The vehicles may be subject to issues with the trustee as there value per KBB is unknown. They could do a C13 Plan, but not a great idea as minimum plan is 3 years. Should be able to squeeze into a C7. If you are in NJ, please see someone, like me, who knows the code and the exemptions and can work with you to get them into the right Chapter 13.
Answered on Aug 22nd, 2012 at 12:33 AM
Appellate Attorney serving Grosse Pointe Farms, MI
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Musilli Brennan Associates, PLLC
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They should see an attorney. Whether they qualify for a 7 or 13 is an issue of their circumstances. It would appear that they could get some relief in bankruptcy and that would, at least temporally, stop the collection action.
Answered on Aug 22nd, 2012 at 12:31 AM
Litigation Attorney serving San Antonio, TX
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Graves Law Firm
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Your parents are clear candidates for Chapter 7 liquidation. Their homestead is exempt from seizure, and if each has a driver's license, the two cars are exempt as well. You mention repos, but what is subject to repossession? Appliances? Furniture? If and only if there are financing liens on those items, they'll have to be reaffirmed and/or paid in order to avoid repossession.
Answered on Aug 22nd, 2012 at 12:30 AM
Chapter 7 Bankruptcy Attorney serving Clinton, MS
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Timothy Kevin Byrne Attorney at Law
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If they qualify, I would file a Chapter 7.
Answered on Aug 22nd, 2012 at 12:30 AM
Keven A. McKenna
Not necessarilly. Essentially, assets minus exemptions minus liablities determe whether the house is protected in a chapter 7. In a chapter 13 you have to a payment plan over 5 years for the unsecured debt. 11 USC 362 othewise stays all collection efforts. The debtors have to attend a 11 USC 341 hearing. They have to sign the petitions.In their condition, how could they perform those functions? The Bankruptcy Court may question the filing as an attempt by you to enhance your inheritance and not a valid bankruptcy filing.
Answered on Aug 22nd, 2012 at 12:30 AM
General Practice Attorney serving Crystal Lake, IL
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Bruning & Associates, P.C.
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Whether a debtor should file for a chapter 7 bankruptcy depends on a number of factors. If the debtor owns a home with equity, then filing a chapter 7 may not make sense in the state of Illinois, because the homestead exemption for an individual is only $15,000, and for a married couple, the exemption is $30,000. In a case with a $45,000 home that is paid off, that leaves $15,000 of equity unprotected for a married couple, so the trustee may try to seize the home to sell it for the exposed equity. A chapter 13 would allow the debtor to keep the home, and any other potentially exposed assets (such as cars with no car loans attached to them - which Illinois only provides $2400 per person, or $4800 for a married couple, to protect cars). The debts would be restructured so that they would be paid off in about 3 to 5 years, with a discharge of any unpaid balance at the end of the 3 to 5 years. A skilled bankruptcy attorney would need to determine how much the debtors would need to pay into a chapter 13 plan, as it would likely be determined by what kind of assets would be left unexempt in a hypothetical chapter 7.
Answered on Aug 22nd, 2012 at 12:27 AM
Daniel James Wilson
Your question is too complicated to answer in an e-mail. It sounds as though they may be able to file a Ch 7. In Colorado there is a homestead exemption of $60,000, $90,000 for elderly or disabled. Car exemption is $10,000. Please schedule an appointment with an experienced BK attorney.
Answered on Aug 22nd, 2012 at 12:26 AM
Bankruptcy Attorney serving Overland Park, KS
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The Smalley Law Firm, LLC
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It sounds like Chapter 7 would be the best option for them. They can keep their house and two cars since they are all paid for and they can discharge their credit card debt. However, I suggest you consult with a bankruptcy attorney to discuss the specific details of their situation.
Answered on Aug 22nd, 2012 at 12:26 AM