Parents will (likely) both be on early retirement this fall (Sept and Oct respectively). They're looking at debt problems. Can they file for Chapter 13 while only drawing social-security? The packet they got from a financial ad visor says that social-security isn't/can't be claimed as income for the sake of Chapter 7 or Chapter 13.
If your parents have sufficient income when they retire to fund their normal monthly living expenses and make payments into a Chapter 13 Plan then they could file Chapter 13. Social security is not counted on the means testing for Chapter 7 or Chapter 13, but that does not mean they cannot file a Chapter 13 if they can afford the Plan payment. In the Middle District of Tennessee where I practice a 1% Chapter 13 plan can be approved if the circumstances warrant. It really comes down to the math and what assets your parents may own that could affect the Chapter 13 plan payment which is what is called the best interest of the creditors test. Hope this helps. Be sure your parents talk to a good bankruptcy attorney for further advice.
In our jurisdictions, the Court cannot require that a debtor use his/her SS income to fund a plan, but a debtor has the right to use SS income for that purpose. The only requirement to qualify to file a chapter 13 is to have regular monthly income and that income must be sufficient to pay normal living expenses and pay the amount needed to fund the plan. I have clients that are in chapter 13 plans paying less than $100.00 per month and others that the minimum amount that my clients must pay to keep their home, their two autos and other debt that must be paid results in a payment of substantially more than $1,000.00 per month, some a lot more than double that amount .
The info you have given is insufficient to know if the SS income that your parents have will be sufficient. Thus, the best way for them to find out is to take advantage of a free initial consultation with an experienced bankruptcy attorney that handles chapter 7 and chapter 13 cases. Become educated on all the issues involved and related to your current economic situation, find out the advantages and disadvantages for filing under each chapter and use an attorney that can help you make the right decision for you. Many of my clients come into my office thinking they need to file a chapter 13 and decide to file for relief under chapter 7. Other clients come into my office believing that the need to file a chapter 7 an with the knowledge of how everything works, they decide to file for relief under chapter 13. Most bankruptcy attorneys will meet with you at no charge for the initial appointment. You can use the Avvo "Find a Lawyer" link at the top of this page to search for an attorney.
Answers and comments provided are for general discussion only. My comments are not to be considered legal advice and they do not create an attorney-client relationship.
Easy: Yes. You had bad advice. Simple as that. But the real issue is should they file a ch 13 and why not a ch 7 instead. Other issues and facts can affect our advice to a client. As a result, I will point out several of those for you now also!
But go by what a bankruptcy attorney advises, NOT a financial advisor that does NOT know how to carefully explain each of the things your parents need to know..and be accurate.
You need and want to enjoy your fresh start also. But the most important thing is to meet with an attorney as you asking this question means you have not. You care about 2 goals: keeping everything you have equity in and discharging all your debts. If you don't have any of the exceptions to discharge you will obtain that goal; most exceptions are set forth in 11 USC. 523 (Google it) like child support, some income taxes, traffic (in a ch 7) and criminal fines , and presumption of student loans. But some debts are dischargeable in a ch 13 but NOT in a ch 7 so you want to make sure and your attorney will discuss any such types with you also!
Your exemptions depend on what state you have lived in in the last 2 years and thus if in your state, then your states exemptions will apply. Most persons filing keep everything they own but your attorney will confirm that with you when they learn everything you own and the equity thereof!
Some secured debts like homes, vehicles, other secured debts an attorney will discuss your options on also as you must list any debts; but that does not mean you will lose them unless you have too much equity or are in default on paying for them! Discuss those options if they apply with your attorney too.
But other issues can arise that can greatly harm your case. Just one example: If you paid back a relative $3,000 11 months ago and now file bankruptcy next week, the trustee can SUE that relative to retrieve that $3,000 (under what is called a preference) for the benefit of the bankruptcy estate. As a result, most attorneys don't charge to meet with them the first meeting so meet with one no matter what.
Many great attorneys can be found right here on AVVO in your state so look, call, and meet one as soon as you can.
You should also want to know when to file: is there an advantage of waiting versus filing now and who should you pay between now and then! Good luck and enjoy your later fresh start.
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