Chapter 13 Bankruptcy: Who Should File?

Recently I attended a luncheon to discuss issues affecting Iowa consumers filing for bankruptcy. Judge Lee M. Jackwig and Judge Anita Shodeen from the Iowa Bankruptcy Court for the Southern District of Iowa attended the luncheon as did bankruptcy trustees and local bankruptcy lawyers. Judge Shodeen asked me to speak on the state of Chapter 13 bankruptcy filing in Iowa.

For those of you who do not know the difference between a chapter 7 bankruptcy filing and a chapter 13 bankruptcy filing, here is my rule of thumb: If a debtor has the ability to pay back all or some of his debts, he most likely will need to file for protection under Chapter 13 of the bankruptcy code. If the debtor doesn't have the ability to pay his debts he will most likely file bankruptcy under Chapter 7 of the bankruptcy code.

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Judge Shodeen primarily wanted to know if I had seen an increase in individuals filing Chapter 13 and, if so, to what would I attribute the increase. I didn't know that I would be asked to present an opinion at this luncheon, so I hadn't researched the issue or prepared any specific remarks. All I could do was comment on my gut feeling and my personal observations from the day-to-day grind at the office.

I stated that I felt that I was seeing more people who probably qualified for Chapter 13 bankruptcy than I had in the past. Jim Snyder, Assistant United States Trustee, spoke up and agreed, citing the fact that across the country Chapter 13 filings were up 35% from this time last year.

Many members of the luncheon felt that it was most likely due to people wanting to use Chapter 13 to save their home. My observation was that the increase was due primarily to the fact that the people who are coming into my office who qualify for Chapter 13 are higher income earners and just can't manage their debt load any longer.

We continued the discussion and by the end of the luncheon a consensus emerged that we are seeing more people who have been struggling to pay their debts now being overwhelmed by the credit card industry's high interest rates.

These individuals did everything they were supposed to do but the credit card industry simply priced them out of the game. We agreed that many people who are in this position are pleased with what a Chapter 13 bankruptcy can offer and are happy to get some relief.

When considering whether to file for a Chapter 13 bankruptcy, you should consult with an attorney. When looking for an attorney to help with a Chapter 13 you should consider the attorney's experience. Chapter 13 cases require a significant amount of finesse that comes with experience.

A Chapter 13 can help a debtor in many ways. Likewise, there are ways that a Chapter 13 can be a miserable experience. If you're considering bankruptcy, you should contact a bankruptcy attorney immediately to discuss which option is best for your circumstances.

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