Ohio consumers who decide to file for bankruptcy protection may choose between Chapter 7 and Chapter 13 bankruptcy if they are eligible. While many people opt to file under Chapter 7, there are some situations in which Chapter 13 is a better option. A case decided in August shows that it is possible in some instances for debtors to file fee-only Chapter 13 plans, which are plans that pay for the attorney fees over the plan’s life while paying little towards the unsecured debt balances.
In the Kansas case, an elderly couple whose income consisted of Social Security retirement benefits totaling $3,461 per month filed for Chapter 13 bankruptcy protection. At the time that they filed, the couple had $2,100 in the bank. The couple owed $93,000 on their mortgage and also had credit card debts that exceeded $50,000. The couple proposed a plan through which they would pay $125 per month for attorney fees, the filing fee of $310, court costs of $360 and $480 earmarked for their unsecured creditors.
The trustee objected, but the court upheld the couple’s proposed plan. The court found that the plan was made in good faith and that the couple had special circumstances warranting its approval. Since the couple was judgment proof, the court found that the amount they proposed paying was more than they would otherwise have been obligated to pay.
Chapter 13 bankruptcy can help by allowing debtors to repay a portion of their debts through manageable payments. In the couple’s case, they were unable to afford the attorney’s upfront flat fee for Chapter 7. People who are interested in learning about whether or not a similar solution would work for them may want to consult with a bankruptcy attorney.