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fearnot 03-06-2010 01:40 PM

Bankruptcy...Chapter 7 or 13?
 
Well, after a couple of years of really struggling, It looks like my parents are going to have to file bankruptcy. They've seen a bankruptcy attorney but are still not clear on what option to choose.

Chapter 7 or Chapter 13.

They were told that with either option they will likely be able to keep there house and the car that they are upside down on.

Can you offer any input on the differences or why they should consider one over the other.

Thanks.

Drillchart 03-06-2010 02:17 PM

Chapter 13 is a restructuring of debt, they would still have most of their debt but the court would indicate monthly payments that would have to be paid and the creditor and debtor would have to accept these terms.

Chapter 7 is a liquidation of ones assets. The court orders the selling of assets through a 3rd party, creditors take what they can get, debts are settled to those creditors.

Here's some links, that should help clarify:

http://www.uscourts.gov/bankruptcyco.../chapter7.html

http://www.uscourts.gov/bankruptcyco...chapter13.html

GMC2500HD 03-06-2010 09:22 PM

Since the laws have changed they will still more than likely have to restructure their debt and pay it back some how. Sorry to hear that, it can be tough.

dmax3500 03-07-2010 12:22 AM

i thought you wanted to go chapter 11

fearnot 03-07-2010 09:55 AM

Quote:

Originally Posted by Drillchart (Post 3749587)
Chapter 13 is a restructuring of debt, they would still have most of their debt but the court would indicate monthly payments that would have to be paid and the creditor and debtor would have to accept these terms.

Chapter 7 is a liquidation of ones assets. The court orders the selling of assets through a 3rd party, creditors take what they can get, debts are settled to those creditors.

Here's some links, that should help clarify:

http://www.uscourts.gov/bankruptcyco.../chapter7.html

http://www.uscourts.gov/bankruptcyco...chapter13.html


Thank you.

They don't really have any assets. That's what make Chapter 7 even an option. They have very little equity in their house, saving is wiped out, a 1998 car that has 200k on it and a new car that they are upside down on. Besides furniture household stuff and clothing they really don't have much.

Mom has not been able to find work after losing her job and had to take SS at 62 and dad is only making $35k.

What makes things worse is that my wife's parents are in complete $$$ meltdown too. We're doing the best that we can to support them both.

cgreen 03-07-2010 10:12 AM

How far upside down are they on the car? See if you can sell it, then pay the difference with either cash or a small loan. Can your mom get a part time job at Walmart or something else? If they sell their house, how much will they have from the sale? Could they stay with you for a few months until they found a smaller house to live in? Can they sell the older car and use that to pay the difference in what they owe to the new car? They could then turn around and get a cheap beater for the both of them since your mom is not working. Sorry to hear about this, my wife's parents are in it up to their eyeballs with medical debt and her mom can't work because of her back.

dmax3500 03-07-2010 10:41 AM

going bk is the best thing to get this thing over ''right now'' and let them live in peace

RayK 03-07-2010 11:23 AM

I would go for chapter 7 and not a reorg.

fearnot 03-08-2010 08:04 AM

I talked to them about their numbers.

It looks like chapter 7 for them.

With living in the red for many months and having to cover the difference with credit cards, they've racked up $27k in credit card. There's no way that they could pay that off in a 5 year re-org.

There income is below the median, the 60 month formula for paying down the debt in a re-org isn't even close.

I am still trying to talk the wife's parents and my parents into selling all of their stuff and go in with us on buying one big compound that we can all live in. Like a property that has 2-3 houses on it. They are both in bad financial shape and we need to find a way to pool our resources to hunker down through this economic winter as well as for them to live long term in retirement.

Sucks. Thanks for your input.

stump_breaker 03-08-2010 04:13 PM

Quote:

Originally Posted by fearnot (Post 3751929)
I talked to them about their numbers.

It looks like chapter 7 for them.

With living in the red for many months and having to cover the difference with credit cards, they've racked up $27k in credit card. There's no way that they could pay that off in a 5 year re-org.

There income is below the median, the 60 month formula for paying down the debt in a re-org isn't even close.

I am still trying to talk the wife's parents and my parents into selling all of their stuff and go in with us on buying one big compound that we can all live in. Like a property that has 2-3 houses on it. They are both in bad financial shape and we need to find a way to pool our resources to hunker down through this economic winter as well as for them to live long term in retirement.

Sucks. Thanks for your input.

Sometimes yo have to do what you have to do. It's admirable you are willing to make the sacrifice to try and help them all stay a float. It can be very tough on all relationships. Once the bills go away, although it will be stressful from the start, it will allow everyone to start fresh. Might be good to check out some Dave Ramsey stuff. I don't live by the guy but them I'm not in a situation where I need to do so.


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