George wants to know whether it is better for him to file a Chapter 7 petition or a Chapter 13 petition. The following facts apply to George’s case:
Car loan by CREDIT UNION: $8,000.00
Credit Cards: $30,000.00
Other Pertinent Information:
Disposable Income: $300/month
Nonexempt Equity: Zero
Chapter 7 Analysis
Relief under Chapter 7 will provide George with the following advantages and disadvantages:
$30,000.00 in credit card debts will be discharged (i.e. forgiven)
None of George’s property will be sold for the benefit of his creditors
If George wants to keep his car, he will need to continue making payments to SMALL BANK, the creditor having a lien on his car.
The lien remains on the car, although George’s personal obligation to repay the promissory note he signed when obtaining the car loan will be discharged, unless he signs a reaffirmation agreement.
Chapter 13 Analysis
A Chapter 13 case would serve no useful purpose for George. He can obtain a discharge of his credit card debt in Chapter 7 with less strain on the Bankruptcy System than would a Chapter 13 case.
In George’s case, a Chapter 7 bankruptcy appears to be the wiser decision.