Can we file for Chap. 13 Bankruptcy if our only income is Soc. Security, & Retirement. We have about $200 disposable income.

Asked over 1 year ago - Beaumont, CA

A new debt is what is causing us to look for some way out. We would like to restructure an existing debt and combine it with the new debt. If possible we would like to reduce the payment on the existing debt and add that amount to a new debt payment. Instead of $600/mo. on the existing debt we would have a $400/mo payment on each of two debts. We rent our home, Our cars are paid for, we only have normal living expenses except for the $600 debt payment.

Attorney answers (6)

  1. Dheeraj Kumar Singhal

    Contributor Level 13

    4

    Lawyers agree

    Answered . I agree with my peers. You might be able to propose a plan. Your best bet would be to sit down with an experienced Chapter 13 lawyer. My concern in cases like your is how close we are cutting it. Given the relatively tight numbers you have, items like attorneys fees and higher than expected proofs of claim could entirely throw off your case. Speak to a local attorney. That is your best bet.

  2. Adam Brooks Arnold

    Contributor Level 12

    3

    Lawyers agree

    Answered . Yes, theoretically it is possible for you to file a chapter 13 case. But you should sit down with an experienced bankruptcy attorney in your community for a discussion about the pros and cons of filing for chapter 7 vs. chapter 13.
    Good luck.

  3. Caroline Mary Reebs

    Contributor Level 2

    3

    Lawyers agree

    Answered . Yes, you would likely be able to file a Chapter 13 bankruptcy and reduce your debt payments-- however, based on the facts you provided, it appears a Chapter 7 filing may be more beneficial. A Chapter 7 bankruptcy, unlike a Chapter 13, is generally more rapid and less expensive-- you would be "in bankruptcy" for about 3 months, as opposed to 3-5 years for a Chapter 13 and you would not need to pay Trustee fees. The primary hurdle to filing a Chapter 7 is passing the Means Test, which compares your combined gross monthly income to the average income of a family in your jurisdiction. As one of the other contributors stated, social security income is not considered for purposes of the Means Test. Because one of your income sources is social security, you may pass the Means Test and therefore qualify for a Chapter 7. In Chapter 7 you can usually discharge all or most of your unsecured (i.e. credit card, medical, etc.) debt. Therefore, if the $600/month payments you referenced are for unsecured creditors, you could probably discharge them completely in a bankruptcy filing (under either chapter). Of course, the foregoing is meant only as general guidance -- please speak to an attorney in your area and request a detailed review of all relevant facts.

  4. Rex Tran

    Contributor Level 10

    Answered . Yes you may file a Chapter 13. However, with the facts you provided, a Chapter 7 would probably be a better fit for you. I would have to agree that you should consult with a bankruptcy attorney to determine whether there are any other reasons you should file one type of bankruptcy over another. Most bankruptcy attorneys will provide a free consultation to provide you with more information on what type of bankruptcy would benefit you the most. In some circumstances you may be able to file either a Chapter 7 or a Chapter 13. However, depending on you situation, one might benefit you more than the other. An attorney will help you determine what is in your best interest so you can move forward towards financial freedom.

  5. Linda Calderon Garrett

    Pro

    Contributor Level 12

    Answered . Something else to consider: you may be judgement-proof. While you say you have about $200 in disposible income, that may not be actually the case. Many times people don't include other "necessities," such as co-pays and deductibles, Part B Medicare, car maintenance, etc. It's very easy for the $200 to go towards other basic necessities--not just the ones you listed.

    This is important because you may not even need to file any type of bankruptcy. While many bankruptcy attorneys may disagree with me, I know that there are other alternatives. I know this because I have seen many clients use non-bankrputcy options to resolve their debt problems. For example, did you know that no regular creditor can touch Social Security benefits to pay off credit-card debt?

    Many times people consider bankruptcy because they think ther are no other options and/or because they are starting to get annoying creditor calls. There are many solutions--outside of bankruptcy.

    I have attached a link to an article entitled "What Are My Options for Dealing with My Overwhelming Debt?" and "Am I Judgment Proof" Hopefully after reading these articles, you may discover that you have other options.

    PLEASE READ--before emailing, commenting or calling: As a rule, I do not respond to "comments" that are designed... more
  6. Jay Steven Lowenthal

    Pro

    Contributor Level 5

    1

    Lawyer agrees

    Answered . Chapter 13 is supposed to be for "regular wage earners". And social security does not count as income for "Means Test" purposes. That being said, you should be able to propose a plan using social security and retirement income. This could be very state specific - or even more of a local practice. Your best bet is to make an appointment with a local bankruptcy attorney. There may even be other options. Good luck.

    Motor vehicle law and cases written about it comprise many volumes of material. There are weekly/daily updates... more

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