I love the Internet. Ask my wife. She’ll tell you I spend far too much time Web surfing. It’s a great source of entertainment and information. But I’m sure I’m not the first one to tell you that you can’t believe everything you read online. During my first time meeting with a potential client, he or she will inevitably say, “I read online…” There are a lot of good resources for people considering bankruptcy online, but the Internet can also help keep bad information alive.
Last week I sat down with someone who had obviously done her homework. She asked good questions and was well prepared, but she kept peppering the conversation with, “I read online…”. As I do during all of my initial consults, I talked to her about the differences between Chapter 7 and Chapter 13 bankruptcy. The more we talked, the clearer it became that Chapter 7 was her best option. When I finished explaining why I thought Chapter 7 was the path she should take if she was going to file, she asked how much she was going to have to pay her creditors.
I got the impression that I had bumped up against something she had read online (which was untrue at worst or misleading at best), but I also considered that I hadn’t clearly explained the differences between Chapter 7 and Chapter 13. So I backed up.
Chapter 7 will discharge, or eliminate, all of your dischargeable debts. Once your discharge order enters (approximately 90 days after your bankruptcy petition is filed), you are no longer liable for those debts and have to no obligation to repay them. Keep in mind that not all debts are dischargeable, for example child support, alimony, court restitution and others. Also, you may want to reaffirm a debt, like a car loan, which requires you to repay the loan if you want to keep the car. Even though your discharge order won’t enter for about 90 days, you can stop paying on your dischargeable debts as soon as you file your petition.
On the other hand, Chapter 13 requires you to repay some of your debts. Your repayment will be based on a calculation that takes into account your monthly take home income and allowable expenses. What’s left over is your disposable income. Your disposable income will be allocated to your repayment plan.
Once I backed up and made the differences more clear, I could tell that this woman was already feeling better. I’ll admit that I might not be able to blame her confusion entirely on the information she read online, but I do think it had misled her into thinking that she wasn’t going to be able to file bankruptcy, either Chapter 7 or Chapter 13, without having to repay some of her debts. Fortunately, all of her debts were dischargeable.
If you have any questions about bankruptcy, your best resource is a bankruptcy attorney. Most, like us, off free consultations. You’ll be able to talk about your personal situation and learn if bankruptcy is your best option. If you’d like to talk to a bankruptcy attorney, you can schedule a free consultation online or call 303.331.3403.
