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Every time we launch a podcast we provide a written transcript that covers the questions that were asked and the answers from Cecilia Chen. Here is the transcript from our first podcast located here:

Q. What is the difference between Chapter 7 & 13 bankruptcies?

A. Chapter 7 bankruptcy by and large allows debtors to discharge all of their unsecured debts (credit card debts and medical bills) within a 4 month period. Chapter 13 offers a debtor the chance to restructure their debts and catch up on areages and back taxes over a 3-5 year repayment period.

Q. What are the pros and cons that you’d discuss with a client before they declare bankruptcy?

A. The main and obvious con that I discuss with a client declaring bankruptcy is the negative impact on their credit. However, with the right counseling, credit repair is possible. There are different advantages and disadvantages associated in chapter 7 and 13 bankruptcy. In a Chapter 7 case, the main advantage is that by and large most debts will be eliminated and the case is often over in about 3-6 months, allowing a person to get out from the burden of debt quicker and truly start over. On the other hand, in a chapter 7 case, it’s possible that a debtor will lose some assets that are not covered by the exemption statute and lien stripping is not an available option.

In a Chapter 13 case, a debtor gets to keep all of their property, exempt and non-exempt. It is also possible to strip away your second and third mortgage liens if the second and third mortgages are no longer secured by the value of the property. However, unlike a Chapter 7 case, the debts will linger during the repayment period rather than eliminated right away and a portion of unsecured debts will have to repaid out of your disposable income, which is calculated by subtracting all of your necessary living expenses from your income, tying up your cash over the repayment period.