When I meet with Oregon debtors for the first time in our Portland and Salem offices, I cannot help but notice that many of them are concerned that they will not qualify for Chapter 7 Bankruptcy. For many of them, the worry is that they will be forced to pay back all their creditors. They have been told somewhere along the way that Chapter 13 is simply a reorganization of all their debt; that Chapter 13 is simply a mechanism for paying back all their creditors. In fact, nothing could be further from the truth. The fact is many Oregon Chapter 13 Bankruptcy filers end up paying back less to their creditors than Chapter 7 Bankruptcy filers do.
First, Chapter 13 Bankruptcy normally means that you pay back what you can afford to pay back. Let’s say you owe $380,000 and you can afford to pay back $200 per month. At the end of the three year Chapter 13 payback period, you would have repaid $7200. Though you would have only repaid a small fraction of the $380,000, the entire balance would be eliminated.
Second, Chapter 13 Bankruptcy enables you to pay back any IRS, ODR or child support arrears back at zero percent interest over a three to five year period. This feature simply does not exist in Chapter 7 Bankruptcy.
Third, Chapter 13 Bankruptcy enables you to reduce the rates of interest on your car loans and often enables you to reduce the balances on your car loans. It is not at all uncommon for a debtor to walk into our Salem or Portland office with a $500 car payment and a ton of debt and walk out with a $300 plan payment that pays off both their car and all their other debts. This feature is not available in Chapter 7.
Finally, Chapter 13 simply costs a whole lot less to get filed than Chapter 7. We are willing to file a Chapter 13 for as little as $100 down and $185 of the court’s filing fee. You can’t beat that.
The fact is there are a number of other benefits of filing Chapter 13 that are not available in Chapter 7, but this article is long enough. Call me if you have any questions, I could talk about bankruptcy all day long.