Her Divorce lawyer requested a bankruptcy analysis. The objective was to eliminate her credit card debt.

I quickly determined that she had about $500,000 of equity in her house, of which, her half would be about $250,000.  Under current New York Exemption laws, I could protect only $165,500 of that amount. Thus if she filed a chapter 7 bankruptcy, the Bankruptcy Trustee would sell her house to pay her $30,000 in credit cards!

An alternative would be a chapter 13 filing, to pay 100% of her debt without interest over five years.  Since it was obvious to me that she could not afford to pay the mortgage on the house after divorce, the house would be sold as part of the divorce, at which time the balance on the payment plan would have to be paid.  Thus, it did not pay to go through the time and expense to file a chapter 13 case.

I made some practical suggestions to her, and she left with a realistic assessment of her options. 

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