It sounds like in that scenario; the feds are in your corner instead of the banks corner.

It’s the weirdest thing, every once in a while, they do something for you.

Let’s talk about the difference between chapter 13 and chapter 7.

In any type of bankruptcy, the goal is to pay what you can afford to repay and to not pay what you can’t afford to repay so generally speaking, you have two ways to pay for stuff either by selling things you have, or from future income, you can afford certain amount per month, then you’re in a payment plan. If you have a bunch of stuff that you don’t need or don’t want, we’ll sell it we’ll pay some debts and walk away from everything else. The way I think about the difference is kind of dumb, but it’s easy to talk about, tell my clients that we’re going to split everything up and we’re going to put in one of two buckets bucket. One is stuff we want to keep like your house or your car and things.

We have to pay like taxes. Bucket two is everything else. That’s the credit cards, medical bills, the personal loans and payday loans and all that stuff. Chapter seven is the type of bankruptcy that lets you just dump out bucket two right now and deal with bucket one on your own. If you want to keep the house and cars, that’s fine. Just keep making the payments cause that loans attached to it goes with it into bucket one. I’m stuck with taxes, stuck with child support. That’s all bucket one also. Now, if you need help with bucket one, or if you have enough income that you can afford, at least some of bucket two, then we look at a chapter 13, a chapter 13 bankruptcy is the type that we use, to help a bucket, want to get rid of some buckets too. So we set up a payment plan and that payment plan pays the taxes.

It pays the child support and it gets you current on the house and pays off your car. If there’s money left over after all of that, then that money goes towards bucket two. Anything that’s left in bucket two that has not been paid by the time bucket. One’s happy. Whatever’s left and buckets you gets dumped out and goes away. Just like it would have been a chapter seven. So people look at a chapter 13 if either they can afford some of bucket two, they have some money left after paying their ordinary living expenses or they need help with bucket one. I’m behind on my house. I’m behind on my car. If I just had a little bit more time, if they would just work with me, I could do it. That’s what chapter 13 is. It makes everyone sit. Still puts you in control of the payment plan to pay back what you can afford. Get the house current, pay off the car at a lower interest rate get your taxes and child support squared away. Whatever you can afford a bucket to, even if you can afford nothing, none of the credit cards and medical bills and personal loans. That’s fine. Pay what you can afford above the one. Everything else in buckets goes away.