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A look inside a fee-only Chapter 13 bankruptcy

The details of a 2016 bankruptcy court ruling could help South Carolina debtors understand their options. In this case, a bankruptcy trustee had rejected an elderly couple's proposal to file for Chapter 13 and only pay attorney and filing fees along with small payments to creditors over 36 months. The trustee opposed the plan because the couple qualified for a Chapter 7 filing.

The couple chose Chapter 13 instead because this approach allowed them to avoid high upfront legal fees that totaled over $2,000. The circumstances of the couple motivated the judge to decide in their favor and grant them the ability to file a fee-only Chapter 13 bankruptcy, which would allow them to spread out costs with a $125 a month payment instead of high initial costs.

Both in their seventies, the man and woman deal with health problems, and they only had $2,100 in savings. They also care for their adult daughter who lives with them after being hurt in a car accident. Bankruptcy law exempted their monthly Social Security income of $3,461. Their other assets and debts included 13-year-old vehicles, $50,000 in credit card debt and a $93,000 mortgage.

People who are about to file for bankruptcy will need to document income and expenses and consider many details that could affect their long-term financial future. An attorney could help a person understand how the process could apply to their financial situation. If a person's income is high enough, then an attorney might suggest that a Chapter 13 bankruptcy would provide appropriate debt relief.

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