Interviewer: So, the whole process takes about 90 days?
James Logan: Yes, basically 90 days from start to finish. But once the case is filed, that’s when you get your immediate relief and that’s when most people feel happiest because all the calls stop, and the garnishment stops and all the harassment stops.
A Chapter 13 Bankruptcy Can Last from 3 to 5 Years Depending Upon the Facts of the Case
Interviewer: So, 90 days after, your debts legally are wiped out in a Chapter 7 and off you go?
James Logan: Yes Chapter 13 is a similar process. A case is filed, that’ll stop a foreclosure and 30 days or so later, we’ll go to the meeting of creditors. The chapter 13 trustee has a little bit different perspective. What they’re more interested in is how much of a payment can you afford to pay toward your debts. They’re going to look at your pay stubs and your expenses and try to figure out how much money is really left there which can be paid toward your creditors. In chapter 13, the pyments can last anywhere from 3 to 5 years
Most People File a Chapter 13 Bankruptcy to Save Their Homes From Foreclosure
Interviewer: So, you’re in bankruptcy for many years in chapter13?
James Logan: In chapter 13, yes, you’re in a bankruptcy for 3 to 5 years. And most people filing chapter 13 are doing it to save their homes, so they’re catching up the payments and basically taken their back payments that they have missed and spread them out over 3 to 5 years.
It is Possible For Someone to Know If An Individual Has Filed for a Chapter 13 Bankruptcy
Interviewer: If you’re in a bankruptcy for years, do you just go out and have your normal life and you’re making monthly payments to your creditors or what do you do?
James Logan: Your neighbor could be in a chapter 13 and you would never know it. No one’s coming to your house, no one’s putting a sign in your house and it’ll be never easy for anyone to know that you’re in a chapter 13. You’re just making your mortgage payments and making your car payments and you send off a check every month to the trustee and life goes on.
Most People Prefer to File a Chapter 7 Bankruptcy in Maryland
Interviewer: Wouldn’t everyone just want to do a Chapter 7 because you don’t have to pay back your creditors and in 13; what percentage do you have to pay them back?
James Logan: Most people do want to file a chapter 7. There are three main reasons why you can’t file a chapter 7. Number one is you’re behind in your mortgage payments and there’s a foreclosure and you’re just behind in the mortgage payments and you want to keep your house. If we file a chapter 7, that’s going to stop the foreclosure for a couple of months but then, you’ll be right back where you’re started: behind on the mortgage and facing foreclosure. So, people file the chapter 13 to catch up the mortgage payments. The second reason is they have assets that we can’t protect in a chapter 7. We get a lot of elderly people who have debts but they’ve got their house paid off, so if we put them in chapter 7, the chapter 7 trustee would sell their house to pay off their debts, and nobody wants that. So, we’d file a chapter 13 and just set up a payment plan to pay off their debts.
If An Individual Does Not Qualify Through the Means Test, then They Cannot File a Chapter 7
The third reason is if they make too much money. We talked about the 2005 bankruptcy reform, and the one of the changes they made is they added what they called the “means test”. If you make more than a certain amount of money, you may not be eligible to file a chapter 7. The means test is for household of 1 person, in Maryland, it’s about 58,000 and for two, it’s about $76,000 and it goes up about $10,000 per person after that. So, if your combined household income is above that limit, we may not be able to get you into chapter 7. Many times, we can still get you under chapter 7 because we’re allowed to subtract child support, we’re allowed to subtract mortgage payments, car payments, and things like that and get you back under the income limits. But sometimes, we can’t and you’re forced to file a chapter 13.