Memphis attorney Vincent Perryman discusses Chapter 13

Local attorney Arthur Byrd and Memphis lawyer Vincent Perryman discusses Chapter 13 bankruptcy and it's differences from that of a Chapter 7 bankruptcy. The ambiguity between the various forms of bankruptcy is sometimes difficult to understand.

Most people think of bankruptcy as a court taking your assets, selling them, and then using the profits to pay your creditors, this is a Chapter 7 bankruptcy. Chapter 7 bankruptcy tends to be a very short and quick process.

A Chapter 13 bankruptcy is referred to as a "wage earner". This means that if you make a regular income, you will take your disposable income at the end of the month and use that to pay the court system, which will in turn pay your creditors. A Chapter 13 bankruptcy lasts anywhere from 3-5 years, and during that time you will pay your creditors as best you can with your disposable income.

The court determines if you are eligible for a Chapter 7 bankruptcy through a "means test". This test determines if your income is above the median income for your geographical area, you will not qualify for a Chapter 7. This is due to the fact that you have disposable income.

A Chapter 13 bankruptcy has it's benefits. One reason someone might opt for Chapter 13 is that they want to save their house from being seized. On the other hand, someone might wish to have their bankruptcy over and done with quickly, which a Chapter 7 does.

Local attorney Arthur Byrd continues his discussion on bankruptcy with Memphis lawyer Vincent Perryman. Together, they elaborate on the steps that are required to start the process of filing for bankruptcy.

Steps required to start a Chapter 13 case:

• Gather all the required financial information.
• File a petition to make a motion for bankruptcy. On the day that the petition is filed with the court system, an automatic stay goes into place. This causes all collection activity to stop, which can save people from having assets seized.
• On the day that the petition is filed, there must be a first meeting of creditors. This is usually scheduled for approximately 3 weeks later, but can be as much as 50 days. During the meeting, the attorney and the debtor meet with a trustee who will ask the debtor questions under oath to see if the information that was provided is true and accurate. The trustee also looks over the proposed amount to repay and how quickly it can be repaid.
• After the first meeting of creditors there will be a confirmation hearing a couple of weeks later. This meeting is for the court to look at the proposal, see that all involved parties are going to be equally cared for, and approve the plan.
• The debtor will usually be assigned a wage garnishment. This is due to the difficulty that can arise from making payments to the trustee for 60 straight months and never being late or missing a payment.

Local attorney Arthur Byrd and Memphis lawyer Vincent Perryman discuss the possibility for someone to change their Chapter 13 over to a Chapter 7.

The first step in this process is to go back to the "means test". If someone is already in the process of their Chapter 13 and their income changes to the point that they are no longer above the median income for their geographical location, they can then switch over to a Chapter 7. This would allow for the debtor to discharge their unsecured debts and medical bills in 4-6 months. However, as a caveat, it also depends on why Chapter 13 was filed in the first place. Converting to a Chapter 7 is a good idea if the only reason you filed for a Chapter 13 is that you were evaluated as making more money than the average person via the "means test".

However, if the reason you filed for a Chapter 13 was in an effort to save your house it is not a good solution to convert. One reason that someone may opt for filing for bankruptcy is to prevent being evicted. This is not going to prevent eviction if the landlord already has an eviction judgement against the debtor. If however a bankruptcy is filed prior to an eviction notice, the debtor does have options.