7 or 13?

[bkonyx]

Hello everyone,

I am stuck with a decision here that is troubling me.

My biggest debts are student loans, but I also owe about $15k in credit cards and medical bills. I currently have a garnishment for a private student loan. My income is low enough to file chapter 7 without a problem.

The first lawyer I consulted didn't hesitate on the chapter 7. She was confident that I could get a consolidation loan to cover the private student loans as soon as I was discharged so that it didn't go back into garnishment. I didn't care much for this lawyer though so I kept looking.

Lawyer #2...well, nothing good to say about him.

Lawyer #3 is fantastic. I met him last week and he was really great. Very knowledgable and took the time to really understand my case. He agreed that chapter 7 wouldn't be a problem for me. But he was not as confident about getting a consolidation loan for the student loans and thought maybe chapter 13 was the better way to go.

13 does make sense, it would put the payments for all of my student loans into my 13 payment so for at least 3 years, I wouldn't have to worry about the garnishments or anything.

But, chapter 13 scares me. I hate the idea of being so accountable to the courts for up to five years. If I get a better job, that money goes to them, right? My lawyer told me I'd need permission to buy a new car. And have to account for where I got the extra money to buy a new car. Let's face it, I'm driving a 7 year old chevy with over 100K miles, I'm going to need a new car within the next few years. What about savings? What about the wedding I'm planning and want to start saving for? What about trying to buy a house with my future husband in a couple of years? Am I going to have to account for every penny I make and/or spend for the next five years? Will marriage and our combined income affect my payments because I (we) have more money? What if we start a family (we plan to) and I have to buy diapers and pay for daycare?

I don't blame him for this at all, but my partner won't marry me until my bankruptcy stuff is taken care of. He doesn't want to be responsible for financial wreckage I caused years ago (I have improved my financial responsibility by about 500% in the past three years) and I understand that.

I guess I just saw Chapter 7 as a fresh start (even with the bad credit rating, etc) but I see Chapter 13 as a trap.

I know repaying my debts is my responsibility and that my student loans are not going away. I have no problem paying on those.

Anyone been in this situation? Any advice? I want to hire this lawyer and get started ASAP but just don't know which direction to go. Lawyer will let me make the decision but I'm just not sure which way to go.

Help!

~Onyx

[Photomom]

Why didn't you like the first attorney, if I may ask? If you qualify for a 7 why bother with a 13 then? I think the attorney gets paid more if it's a 13, could that be the reason the attorney is suggesting a 13 when you qualify for a 7? Idk, I am new to all of this....

[magua2]

My attorney assures me she will get my private student loans discharged. That's why I chose her, she says she has had private student loans discharged. No one else would touch them. Will any of those attorneys at least try to get them discharged?

[keepmine]

My attorney assures me she will get my private student loans discharged. That's why I chose her, she says she has had private student loans discharged. No one else would touch them. Will any of those attorneys at least try to get them discharged?

You better ask her how she plans on doing this plus, have her show you some of her cases on Pacer where private student loans were discharged.
BK reform in 2005 placed private student loans on the same footing as fedeally backed student loans whenit come to getting discharged in bk. It's near impossible.

[LadyInTheRed]

bkonyx,

If I were you, I'd file a 7 then try to do a consolidation or payment plan for the student loans. If that doesn't work, a garnishment may be just as good a way to get the debt paid off as a Chap 13. They cannot garnish more than 25% of your disposable income. If it somehow turns out a garnishment would be more than a Chap 13 payment, you can always file a 13 later to handle the student loans.

If you do end up in a 13, it is not the end of the world. I've been in a Chap 13 for 16 months and do not feel like I am in a trap. To the contrary, I have more money to spend than I did before I filed. I bought a car to replace my old car before I filed and the car payment is included in my plan payment. Once your plan is confirmed, you don't have to account for your spending. A trustee can request you provide detailed financial info at any time during your Chap 13, but I have yet to hear of anybody having to do more than send copies of their tax returns every year. Unless there are significant changes to your income and expenses, you just go on with your life and make your plan payment. A well drafted Chap 13 plan will allow you to save as long as you budget carefully. If you have permanent changes in income and expenses, your plan can be modified. Yes, if you get married and that increases your income, your plan may have to be modified to increase the payment. But, your household size would increase and only your spouse's contribution to the household would be included as income. It could end up being a wash. If your partner won't marry you until you get the BK out of the way, that doesn't seem to be an issue anyway. If you have a child while in BK, you can petition the court to amend your plan to include the expenses of a new family member.

Why didn't you like the first attorney, if I may ask? If you qualify for a 7 why bother with a 13 then? I think the attorney gets paid more if it's a 13, could that be the reason the attorney is suggesting a 13 when you qualify for a 7? Idk, I am new to all of this....

Attorney fees are higher for a 13 because a 13 takes more work. An attorney who posts here has said that oftentimes a 13 is less profitable. Because each case is different, I suspect that some 7s are more profitable than some 13s and visa versa. You should choose an attorney you trust, not one you think would advise a client based on his own best interests instead of the client's.

[BKAttyMI]

Some attorneys will tell you anything to get you to hire them. I also do cases in other areas, such as family law, I know I've lost potential clients because I won't tell them what they want to hear and they went to Joe Schmo down the street that told them they'd get exactly what they're asking for, who knows if they regretted their decisions later when that didn't come to be? Be very wary of anyone that guarantees you a result.

[bkonyx]

Thanks for the responses, everyone. I hadn't considered that the garnishment would be about the same as my chap 13 payment (almost to the penny, actually) so I'm leaning towards the 7. Thanks for giving me some things to think about!

~Onyx

[lillymarlene]

bkonyx, some attorneys will also let you choose between a 7 or 13 if it's feasible.

[bcohen]

Thanks for the responses, everyone. I hadn't considered that the garnishment would be about the same as my chap 13 payment (almost to the penny, actually) so I'm leaning towards the 7. Thanks for giving me some things to think about!

You didn't say how much the student loans are for, what kind of interest they are now charging, and what your salary is, but here's something else to think about. If these are private student loans which are in default, then you should be aware that private lenders and guarantor agencies often charge HUGE penalty fees, collection costs, and high interest. In Chapter 13, the court has the ability to reduce the fees and interest that are charged on the debt. Also, if your wages are being garnished for private student loans, then that means you were already sued and a judgement was granted. Therefore, in addition to having the 25% maximum taken out of your paycheck, you can also have your bank accounts levied, which means that money needed to pay rent, buy groceries, etc. can disappear in the blink of an eye. In Chapter 13, the creditor cannot take anything from you, other than the amount which the trustee pays them each month. They cannot hit your bank account or pursue any other collection activity.