Legal Question in Bankruptcy in Indiana

chapter 7 vs. chapter 13

We filed a chapter 13 in 2002. At the time of filing, the only thing we had of any value was our home, which we only had about $10,000 equity in. For the past year and the next two years, we will be putting every extra dime we make into this plan. Recently someone we know with similar circumstances filed a chapter 7 and it seems so much easier for her. She is free to spend her money however she wants and can probably start building up her credit rating again much sooner than we can. In the meantime, I can't take a vacation, spend money on x-mas presents or birthday presents for my kids or pretty much anything else. At the end of the plan we will have paid back much more than the $10,000 we had in our house. What I'm wondering is does it matter on your credit if you file a chapter 7 or a chapter 13? At least with a 13 you are trying to be responsible and pay some back, but it seems unfair that people who file a 7 can start building up credit much sooner because they are not stuck on a plan for a few years.


Asked on 11/19/03, 6:12 pm

2 Answers from Attorneys
C. David DuMond Law Offices of David DuMond

Re: chapter 7 vs. chapter 13

Most creditors are unable to evaluate the sincerity of potential customers. So they go by objective criteria: how much does the person owe, how much do they make, how well are they able to afford to repay the debt. Prior track record counts, but if you are in a Chapter 13, then that is still considered a bankruptcy. Furthermore - from the lender's point of view - a person who has filed a Chapter 7 can't do it again for at least six years. You, on the other hand, could convert your Chapter 13 case to a Chapter 7 at any time. So you are inherently a worse credit risk. Not to mention that the Chapter 13 trustee more or less owns your ability to borrow. Your attorney must have had some good reason for going along with your Chapter 13 program, so ask about that. If it was just to earn higher fees, then consider reporting the matter to the Indiana Disciplinary Commissions,

http://www.in.gov/judiciary/agencies/dis.html

or to the U.S. Bankruptcy Trustee on your case. Good luck.

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Answered on 11/20/03, 12:47 pm
Mary Ann Wunder Wunder & Wunder

Re: chapter 7 vs. chapter 13

The U.S. Trustee's office is in charge of all Chapter 7 and 13 interim and standing trustees for bankruptcy cases. Trustees are trained to examine budgets to encourage filers to be in Chapter 13 plans. The enforcement in this matter has delayed the pending legislation to compel all filers to be in a Chapter 13 type plan before being able to be in a Chapter 7. Your particular income and expenses are taken into account in determining which chapter you file under. It is not necessarily a matter of merely choosing chapters. Talk to your attorney about why you had to be in a 13 as opposed to a 7 at the time you filed. The considerations for a couple with 2 incomes is quite different than for a single with one income.

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Answered on 11/25/03, 8:52 am


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