Should I file Chapter 13 or 7??

[JillFC]

We went for a free consultation last night and feel that filing is our only option. We are about 35000 in unsecured debt plus a truck we are paying on with a payoff of about 17000. I own a condo that I would like to keep and a 2nd mortgage on it that I would continue to pay. My question is would it be better to file a chapter 13, our payments would be just a little more than the truck payment (and include the truck payment) or can we file chapter 7 but keep the truck and the condo? If we file a chapter 13 and the lawyer told us payments would be a certain amount, what are the chances they would be significantly higher and what happens if they are and we can't afford it?

[keepmine]

Your lawyer should have answered these questions. What sort of equity do you have in the condo and truck and, what amount does your state exempt? Also, are you current on this secured debt?

[CindyLou]

If you can file a 7 and keep your assetts then I see no reason why you would want to file a 13. If you qualify for a 7 then I would say that is your best route. But of course I do not know all of the circumstance of your situation.

Good luck and keep us posted.

[JillFC]

I qualify for both. I have a condo and a truck that we are paying on that I want to keep. I am a pregnant stay at home mom and my husband is in the military. Our truck payment is 490, our lawyer said we could file chapter 13 including the truck for 525/mo for 56 months. He seemed to be pushing us towards this, but did mention that we do qualify for chapter 7. It cost about 5 times as much to file ($1900 vs $439). I just don't understand which would be better. We would be paying $490/mo for the truck for the next 3-4 years if we file Chapter 7, if we file Chapter 13 it's going to be $525 for an extra year or two. Do creditors look more favorably on a Chapter 13 because you are repaying them or is it better to file a chapter 7 and have the bankruptcy discharged sooner?

[HHM]

If you qualify for a 7, you are current on your payments to your truck and condo, AND you can continue to afford truck and condo, then this decision is a no brainer, you file Chapter 7.

You only file 13 if you HAVE TOO, you would not just arbitrarily choose to file a chapter 13.

I suppose the other caveat maybe the equity in your condo or car, but if you have a 1st and a 2nd "on a condo" (very bad move, by the way, to own a condo with 2 mortgages, unless you are in a high-end market, Florida, New York, etc), your equity, if any, is probably exempt)

[JillFC]

Oh yeah, there is no equity left in the condo with the 2nd mortgage, I am not living there but have a renter who is taking care of mortgage, hoa dues and the 2nd mortgage. I want to keep it so that I am showing some kind of consistent payments on my credit. The truck payments are current also, we just have about $30,000 in credit card/loan/medical bills. I guess I just wasn't sure if creditors looked more favorably on the chapter 13 because you are attempting to repay them. Or if it was better to file a chapter 7 and have it discharged sooner.

[woeisme]

If you are in a CH 13 for 56 months, it will take you a year or two after CH 13 is discharged to get your credit back on track. So you have at least 6 years before your credit is out of the toliet, minimum. Yes, if you file CH 7, the creditors might look at that more poorly for the short term, but if you keep making the truck and morgage payments after discharge (maybe 3-6 months total, depending on your district to get discharged) I'd say in 2 years you will have re-estabilished yourself as credit worthy, especially if you are pro-active about cleaning up your credit reports and get a few small credit cards and use them very wisely in the meantime. So CH 7 is still the way to go, even if you are worried about your future credit-worthiness, because you can get the slate wiped clean faster so can start re-building your credit years before you will be able to in a CH 13.

The question your post raised with me is why the $490 per month truck??? Doesn't sound like a good vehicle choice if you have kids already and another on the way (not to mention the cost of gas for a truck these days!) and $490 a month for a vehicle payment just seems really over the top to me. (My mortgage is only $100 more a month than that!) If it were me, I'd be looking at a more economical vehicle, so I would have a couple hundred more a month in my pocket, but that's just me.

[JillFC]

I totally agree with you about the truck! Since I stay at home my husband drives our paid for Camrey and it pretty much stays in the driveway. The only thing is we are upside down in it and won't be able to get what it's worth. I am seriously thinking about trying to just get someone to 'take over payments' but then we are without a car for a few months until we can afford a cheaper vehicle...being pregnant and with an 18 month old I can't really go without a car, and my husband drives about 30 minutes at 5:30am so me taking him to work and picking him up isn't really an option.

[HHM]

Having a paid for Camry could complicate things unless your state provides enough of an exemption to cover the value of that car.

Incendently, if you are renting out the condo, what are you doing for your own residence.

[JillFC]

The Camry is not in our name, my father gave it to me and it is still titled in his name, and he is paying the insurance!

My husband went active duty with the marine corps so we moved from my condo and are renting close to base. We get BAH (Basic Housing Allowance) to pay our rent here.

[HHM]

Then you should have no trouble with a chapter 7, assuming you otherwise qualify. As was already stated, chapter 7 is always the 1st choice when your main issue is unsecured debt...you only file chapter 13 if you have too or are forced too.

[JillFC]

Thank you, that's what made sense to me, aside from it costing $1500 more to file...but our attorney was pushing chapter 13 for some reason...do they get paid more for that in the end?

[kornellred]

I am assuming that the posting title "Should I file a Chapter 13 or 7?" comes from someone who qualifies for Chapter 7 and would like to maybe file Chapter 13?

Because if you qualify for Chapter 13, the issue is out of your hands. You cannot file Chapter 7.

[JillFC]

Our attorney said we qualify for both? We can do the below median Chapter 13 or Chapter 7...is that not right?

[kornellred]

I guess there are optional circumstances which, if exercised, can actually put a debtor in a position to file either of the Chapters.