Chapter 13 vs Chapter 7

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Dear Leon:
My sister lives in Chicago and was recently laid off of work and has finally found a new job in the Chicago area. She has many medical bills in California that total about 50,000 plus others. She has had some medical problems that have really drained her mentally and financially. She already filed bankruptcy in California 5 years ago. Is she eligible to file Chapter 13 in another state?
Signed,
Marisa

Dear Maris
A person is entitled to discharge most kinds of debt every 6 years under Chapter 7 Bankruptcy. It sounds like this is what your sister did 5 years ago. I’m assuming she has no valuable assets. If so, she can probably file Chapter 13 now, with a bankruptcy payment plan based on what she can afford to pay towards her debts over the next 3 years; whatever she can’t afford to repay gets discharged by the Chapter 13 at the end of her 3 year payment plan. Sometimes the court will allow a plan to extend as long as 5 years if there is a good reason. For persons with valuable assets, the 13 rules are much more complicated, and the repayment plan must take into account the value of property that creditors would have received if she was again under a Chapter 7 case. Bankruptcy is “Federal” law, so she can file it in the state where she now lives, even though her debts were made elsewhere. However, she needs advice from a qualified attorney in her state. Her lawyer might recommend that she just wait until the 6 years is up, and then file another 7. If she is being overwhelmed by debt collection, she can file the Chapter 13 now to have relief.

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