The Smith Law Firm, PC

How Do You Determine Which Bankruptcy Chapter Is Suitable For A Client?


While every person’s situation is different I advise a potential client that a Chapter 7 is commonly used when one has little property except for basic necessities like furniture and clothing, or you have little or no money left over after paying your expenses each month. If one has a lot of secured debt, I advise my clients you may want to consider a Chapter 13. Or a person may have significant equity in the home or other property and that one may want to keep. You may have more than one secured asset or more than one home you want to keep. If you have regular income and you can pay your living expenses, but you cannot keep up with your scheduled payments on your debts, a Chapter 13 may be the best option. So it just depends on the particular situation of each debtor.

Is Filing For A Chapter 7 Better in Terms Of Credit Score Than A Chapter 13 Or Vice Versa?

Chapter 13 and Chapter 7 will stay on your credit report for the same amount of time and that is about ten years. They both have typically the same effect on your credit score. However, where they diverge is, if you are applying for credit and a particular creditor is reviewing your credit report trying to decide whether to lend you money or approve a loan, they may look at a Chapter 13 more or less favorably than the other. For example, a creditor may be more willing to lend you money or approve a loan for you if you filed for Chapter 13, which is a payment plan which reflects that over three years or up to five years you have made consistent and timely payments.

Can You Discuss The Stigma Attached With Filing For Bankruptcy?

Although bankruptcy is a legal proceeding, it is a very emotional proceeding. Also, at one time it was looked upon as a bad or negative thing. The perception was that people got into this financial mess because you were irresponsible. This is the most common phrase you’ll hear people tell you when you find yourself in debt. A debt is much more than a person being irresponsible with their money. Sometimes people can get into debt because of situations they have zero control over. For example, getting a pay cut in the middle of rising costs of living, or getting divorced, or a sudden medical emergency. The emerging perception now is that it provides a ‘fresh start’ for those suffering and suffocating in debt. Bankruptcy provides for a major life improvement after you file. Just think about all the value one gets after they complete a bankruptcy. Such as relief from harassment from creditors who have engaged collection agencies and relief from seemingly insurmountable debt. One’s credit score can improve within twelve months of filing. It can provide for a better home life if there is a financial stress at home. It can save one’s home if they are going through a foreclosure. It can also motivate people, who are trying to improve their financial management skills which can truly give the debtor a comprehensive fresh start.

Many people like to scare debtors off from filing for bankruptcy, instead suggesting more borrowing to repay the amount originally borrowed or owed. This may not be the best advice. If you are borrowing more to repay what you originally owed, you are getting yourself into an even bigger financial mess. Debts are meant to be paid off by your income, if you cannot do so, it’s better to file for bankruptcy and start with a clean slate than to find yourself sucked into a vicious debt cycle.

General Human Reaction To Filing For Bankruptcy

Filing a bankruptcy may offer a peace of mind to people with a lot of debt. However, the decision to file bankruptcy for many can create what I like to call a moral dilemma. Someone drowning in debt can be emotionally overwhelmed which can affect ones emotional and physical health. The ability to stop a creditor’s collection efforts can bring psychologically relief after one files for bankruptcy protection. However, the emotional pull can be great on some even though they may get a ‘fresh start’ and often harbor a lot of guilt associated with filing for bankruptcy. Most times, bankruptcy is a last resort for individual consumers.

Have You Seen Any Success Stories In Regard To Filing For Bankruptcy?

I have seen many success stories after filing for bankruptcy. The relief from bill collectors constantly harassing you at home or at work or not worrying about having your wages garnished or being sued for a debt that may not be yours can really help improve one’s life. Bankruptcy can give the financial ‘fresh start’ to a person or a family and empower them to get back on their feet and lead a productive and meaningful life.

For more information on Feasible Chapters Of Bankruptcy, an initial consultation is your next best step. Get the information and legal answers you are seeking by calling (515) 817-1339 today.

The Smith Law Firm, PC

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