Interviewer: How much of the debt will someone have to pay when it comes to when they’re qualified for Chapter 13? How much will they have to pay?
Court Koehler: As far as the amount of debt that they have, there is actually a limit, but there’s not a minimum amount. There’s a maximum amount of debt that you can have and file Chapter 13 bankruptcy, but there’s no minimum. If you’re $5 behind, it wouldn’t really make sense for you to file bankruptcy, but you could if you wanted.
Interviewer: First of all, how does one qualify for Chapter 13? Could you go back on that?
Court Koehler: Well, one of the differences between Chapter 7 and Chapter 13 is that Chapter 13 is designed for people that have a regular income, whereas with Chapter 7, you don’t necessarily have that. In Chapter 13, you have to have some sort of means to pay the payment plan in order for your plan to get confirmed by the judge and accepted.
Really, the only requirement is that you need to have some form of income, so usually that means a job. A lot of times, you’re underemployed or you’ve taken a pay cut or something like that. Or maybe it’s a husband and wife and one of them has lost a job, so you still have some income but it’s not as much as it was before and you’re getting behind or something like that.
Interviewer: What would disqualify someone from being able to apply for Chapter 13?
Court Koehler: Well, if you have filed bankruptcy or if you receive Chapter 7 discharge within the past seven or eight years, then you can’t receive another discharge. You can still file a Chapter 13 bankruptcy and can be protected from lawsuits and garnishments and things like that. At the end of the Chapter 13 bankruptcy, you won’t receive a discharge. It’s less helpful, but it can help sometimes. There’s no kind of disqualification for entering a Chapter 13 plan unless you’ve done it recently.
Interviewer: How often can someone file for bankruptcy? Is it something they could do several times or is it just like once something only?
Court Koehler: Yeah, there’s no limit necessarily to the amount of times that you can do it. Like I said before, you can only receive a discharge every seven or eight years. I believe it’s eight years. I’m trying to remember. I think it’s eight years after a Chapter 7 discharge. Then for Chapter 13, I believe it’s a shorter period of time. I can’t remember what it is off the top of my head. The bottom line is there’s not necessarily a limit to the number of times that you can file bankruptcy, but you can’t receive a discharge if you’ve done it too often.
Client Morale & Reluctance to File
Interviewer: When you work with a client, are they generally understanding or are they hesitant about bankruptcy?
Court Koehler: Well, everybody’s a little bit hesitant just because it’s a really serious decision and it’s not something that people take lightly or that they should take lightly. It’s a sad thing to have to file bankruptcy. A lot of people are, I want to say, ashamed about it, for lack of a better term. They’re upset that they’re in that situation. They sometimes blame themselves. They’re apprehensive about the bankruptcy process in general.
Sometimes they have apprehensions about the Chapter 13 plan itself, like how much they’re going to be able to pay and for how long it’s going to last and things like that. This goes with the territory. At the end of the day, bankruptcy can really help you out, though, and when I take on a bankruptcy client it’s always because it’s a good thing for them and I believe that it’s going to help them out. As bad as they have to do it, it’s also a good thing, too.