Need CA BK help ASAP!!!! Urgent!!

[NorthernCA]

Hi everyone,

I'm new to the forum but I'm in desperate need of answers. Our lawyer is VERY unresponsive, and is just not making the effort to communicate with us during this time sensitive matter. I have called so many law firms, and bankruptcy hotlines, and their response is "sorry, we can't answer ANYTHING - you need to ask your lawyer". But our lawyer is not responding! He takes a week or more to respond!

Here's the scoop. Hopefully someone can help advise.

* We filed Chapt 13 in July 06. We saved our home and one of our cars. The total ALLOWED debt that they decided upon in our plan was $48K. Our plan was confirmed 11/21/06.

* Our payments are $3251 per month including the mortgage payments. This is HARD to do, but we are managing due to me making a sacrifice and driving my 4 kids 3 hours every morning, and 3 hours every evening to a job that pays enough to cover this plan and our regular utilities.

* However, we just received a letter from our first mortgage company stating that effective March 1, our interest rate will go up from 6.65 to 9.65, requiring us to pay an ADDITIONAL $600 every month! When I asked if this was, in fact, the case, or if our BK plan would protect us, the answer was no. We have to pay that new amount each month. Apparently, this is the agreement we went into when we signed for our initial interest-only loan in Jan 2005 (this is our 2 year mark).

This just isn't gonna happen. We are already doing everything in our power to pay the payment we have now, there's no way that we can do an additional $600.

* We can't refinance, because our loan-to-value ratio is not where it needs to be and our credit scores are at 490.

* We have decided to let go of our house once and for all. We've been there two years now, and have struggled from the beginning. We are tired of the problems that we've dealt with and no longer want the home at all. We are ready to relinquish the home and start fresh - rent for a year or two, bring our scores up and buy again later.

* Unfortunately, due to the slow market, our home is only worth what we bought it for - no equity in our home whatsoever, and the homes are averaging 90 days on the market. So not only will the sale of our home not bring us a profit, nor will it even pay off the BK debt, but we will have to pay the mortgage for the next 3 months while its on the market, including that extra $600. Not gonna happen.

* Oh, did I mention that I was working a temporary assignment and I lost my job on Monday? Fantastic!

* With all that said, my questions are as follows:

- Is it possible to change from a Chapter 13 to a Chapter 7 now? What are the stipulations? This would be the most beneficial choice for us, seeing that we can relinquish our home, it would be done and over with. Is this something that can even be done when you're already active in a Chapt 13 plan?

I know that Chapt 7 comes with income guidelines... so does that play a part? If so, our income is WELL below what we can afford, due to the fact that I just lost my job on monday and my husband is the only one working. However, I think with the new bankruptcy laws, they base it on the last 6 months of work wages. I'm not sure. Anyone know how this would work?

We are in a desperate situation and need answers fast. We need to make serious decisions or our bankrupty case will be dismissed and we will be foreclosed. We need to know if we should start filing rental applications, or what? We know what we need to do, but we have to square away this case before we can make any moves. So being that our lawyer is very lax and not responsive to us, I'm hoping that someone here can help.

Sorry for the long winded story, but we have a lot of issues to deal with and need help. If you've gotten this far, thanks. I really appreciate your concern.

[SinkingFast]

Welcome to the Forum, NCA!!

You filed New Law, so New Law rules would apply to your conversion.

You noted you have 4 kids, AND you used the term "We" so does that mean a family of 6??!! If so, the Median Income for CA for a family of 6 is $85,312/yr.

If you're below or close to that, you may be able to convert. You may be able to pick up some additional $$$'s on the Means Test due to Secured Debt on the one car you kept, if you're still making payments there.

Here's a link to the Means Testing info so you can look at your local costs as well:

http://www.usdoj.gov/ust/eo/bapcpa/2...anstesting.htm

And one more link,........... A quick and dirty Means Test Calculator:

http://www.legalconsumer.com/bankrup...means-test.php

Just enter your zip code, answer some questions, and you'll get a good rough answer on how the Means Test would come out for you.

Do you remember, when you filed, if you would have qualified for a Ch 7 and just went 13 to save your house??!!

[NorthernCA]

Welcome to the Forum, NCA!!

You filed New Law, so New Law rules would apply to your conversion.

You noted you have 4 kids, AND you used the term "We" so does that mean a family of 6??!! If so, the Median Income for CA for a family of 6 is $85,312/yr.

If you're below or close to that, you may be able to convert. You may be able to pick up some additional $$$'s on the Means Test due to Secured Debt on the one car you kept, if you're still making payments there.

Here's a link to the Means Testing info so you can look at your local costs as well:

http://www.usdoj.gov/ust/eo/bapcpa/2...anstesting.htm

And one more link,........... A quick and dirty Means Test Calculator:

http://www.legalconsumer.com/bankrup...means-test.php

Just enter your zip code, answer some questions, and you'll get a good rough answer on how the Means Test would come out for you.

Do you remember, when you filed, if you would have qualified for a Ch 7 and just went 13 to save your house??!!

Thank you! I am going to check out that site as soon as I respond to you.

We actually have 5 children, but I take 4 of them with me when I commute to work. So with my husband, we are a family of 7.

When we filed, I was unemployed due to a contract ending about a month prior to filing, so we would have totally qualified for Chapter 7. However, I guess with the new laws, they don't go by your current income, they go by the average for the last 6 months of income, and prior to becoming unemployed, I was making $31 per hour - which took us OVER the median for a Chapter 7. my lawyer told us we were right at the median income to be able to pay a 1% payback to our unsecured creditors. I guess if we were over the median for Chapt 13, we would have to pay back more to those creditors.

I have since been working, which was a requirement for qualifying for our hearing/confirmation and paying our plan, but just lost my contract job on Monday. Not to mention the extra $600 mortgage increase. So we're TOTALLY under the median income now - my husband only makes $22 an hour! But what I'm wondering is, will they base the Chapt 7 on the last 6 months of income, or where we are today?

I am desperately trying to find a job, so I don't know what our money will look like if I get one soon. I tend to make between $25-30 per hour at my jobs. I could seek out lower paying jobs if it would help with us qualifying.

BUT - I guess the main question here is... can we even change our BK plan from Chapt 13 to a Chapt 7?

And can you explain a little bit more about the $$$ for the car we're paying on? Is that a good or bad thing?

Thank you SO much. I'm starting to feel a little bit of relief already. Not knowing is the worst kind of stress! I'm going to go check out that website you posted. Hope to hear back from you soon!

[NorthernCA]

OK, I'm a little nervous - I haven't done the means test calculator yet but I just did the calculations and if they go by our last 6 months, for a family of 7, with my husband at $22 an hour and me at $30 an hour, we come up to $8320 gross income per month. The qualifying rates on here are:

California
(7 person household)

6-Month Avg:
$7,468 per month

6-Month Total:
$44,806

That's an $852 difference. Crap. Ok, I'm going to go take the means test.

[NorthernCA]

WOW, after calculating all of our expenses, this is what the bottom line summary was. I just hope that my lawyer (whenever he decides to respond) tells us the same thing:

Bottom Line
Based on the information you have entered so far, your income is above the state median for a household your size, but you still qualify for Chapter 7 because the means test indicates that your expenses will have leave you with no disposable income over the next five years.

Your average monthly income is $8,320 and you have entered allowed deductions totaling $9,714 per month. That would leave you with $-1,394 at the end of each month to pay into a hypothetical, five-year Chapter 13 bankruptcy plan. This would pay your unsecured creditors $-83,668 over the next five years, or -335 cents for each dollar of the $25,000 you owe them.

[SinkingFast]

CatchMeIfYouCan filed Ch 13 first and then converted. Recently.

Here's a link to CMIYC's timeline thread:

http://www.bankruptcyforum.com/showthread.php?t=11976

At CMIYC's confirmation hearing, the Judge all but told CMIYC to quit a part-time job so CMIYC would qualify for Ch 7.

Since you've suffered a job loss, conversion may be a viable possibility. You can't support the Ch 13 plan payments without your income.

[NorthernCA]

OK - here's the latest:

My lawyer FINALLY called me and left a message last night.

He said we have two options:

1) Convert to Chapt 7 - but if we want to keep one of the cars, they are going to make us pay whatever's due at this present time up front and hassle us. He also said that we will have to fight with the IRS (who is on our 13 plan for about $3K). Is this true? Can we keep the IRS on the Chapt 7 or no?

2) Modify our Chapt 13 - and take the house off, and he says all we'll be paying on is the car and the IRS, which should lower our payments significantly. So my question is in doing this, we are still paying the other unsecured creditors too, right? And what will our house show as? Foreclosed? What happens to the $20K that we were past due on the house?

3) So I would much rather do a 7. But he's pushing towards the modification. Do you think it's because he wants to make sure HE gets paid? LOL

Let me know what your thoughts are. I also asked him what the process is, how soon we can file, if we need to make anymore payments to the 13 as of now, and how soon we would have to move out. We have decisions that need to be made ASAP so I hope he responds.

If any of you have any thoughts on some of these questions, PLEASE respond asap!

Thanks thus far!!!

[SinkingFast]

Your attny should have already been paid out of your Plan payments, so his/her fee shouldn't be a question here.

In Ch 13's, the first "Creditor" to get paid out of the Plan is the attny. And the Trustee, of course, too.

The IRS adds a wrinkle. A fly in the ointment, so to speak. Generally speaking, you can work out a payment plan with the IRS. That's something you would have to do on your own. Your attny cannot do that for you. BUT, IRS payment plans can come with a tax lien being filed against some property of yours. If that happens, it's the kiss of death, almost, to getting any new credit until the IRS is paid in full.

The car could be a non issue. If you Convert to a Ch 7, you should be able to do a 722 Redemption Loan for the car. 722 is a section of the BK Code that allows filers to take a loan to "Redeem" property rather than surrender it. The only criteria is your attny has to agree the payments do not pose an undue burden on you, and the Trustee has to agree. If you're already making payments on a car, then that shouldn't be an issue.

If you let the house go, it will show as a Foreclosure in the future on your Credit. Any deficient balance becomes unsecured debt that get's discharged in the BK. But now comes the question of equity. Do you have any equity in the house, and if so, how much??

There's a discussion going on in another thread where this same subject is being hashed out:

http://www.bankruptcyforum.com/showt...8909#post78909

For future reference,............ Generally speaking, when a BK and a Foreclosure occur together, within a short period of time, prospective Lenders view the 2 incidents as one occurance.

Possibly your equity in your house could be the reason your attny is advising a modified Ch 13. Remember Creditors have to be paid as much in Ch 13 as they would have gotten in a Ch 7 liquidation.

It's really kind of hard for anyone here to say for sure, one way or another as we don't know all the facts.

[NorthernCA]

Whew! Sinkingfast, thanks for all of the information, AND the links. I was in and out today, so I didn't get a chance to take a look at them. I'm online for the next few hours so I'm about to dive in.

To answer your questions, we have NO equity in the home. We did, last year, but the market is so slow now, that it is worth what we bought for it. We bought a 4 bd, 2 ba for $310K two years ago, and now, in doing a market analysis, there is a 4 bd, 3 ba going for $309K - AND, it's been on the market for 68 days already. So, my realtor said that the most we could hope for would be $300K, possibly $310K. When we filed last summer, the market rate was about $375K, so it did look like we had some equity. I don't know if my lawyer knows that it's taken a downward spiral.

As far as my lawyer, we gave him $1500 upfront, and our records are showing that he has received $635 thus far toward the remaining. It is showing that we owe him $1375, and he's already made comments about how his colleagues are in their own Chapt 13 plan because they didn't get paid and their clients defaulted.

As far as the IRS, that does play a tricky role. However, we received approx. $8000 in refunds last year, and now that my stepson has spent the whole year with us, we expect possibly $10K. We have a really good tax guy. That being said, it's quite possible that we can just have the IRS take it out of the refund. At least that wouldn't hurt our pockets directly.

I'm wondering if the 722 plan for the car is even something we want to deal with. I mean, I just want to get this over with. Anything that will cause extra work or extra review of any kind... I'm not trying to deal with! These new laws have made this difficult enough to begin with... my husband would really prefer to keep his car, but if it's going to be a lot of extra work, then we need to let it go and just get another one later.

So... if we do the modification, we will still need to pay all of those unsecured creditors under our plan, correct? And if we take the house off, we will still need to pay at least a percentage of that $20K, correct?

This was his response, via e-mail:

following-up on my voice mail to you yesterday, I know you are concerned about time being an issue, and it is, but it is not nearly as urgent as you probably think. You are safely protected in chapter 13 for the time being. The next step is the trustee will send you a Notice of Default that gives you 30 days to either bring payments current, modify your plan, or convert to chapter 7. If you convert to chapter 7 and decide to keep the car, the credit union will likely require you to come current with all payments that have come due since you filed your case, less any amounts received from the trustee. All of your tax debt (including the penalties and interest) will be owing after the chapter 7 is over, and the IRS will go back and add on interest from the date you filed your case. If you stay in chapter 13 you can surrender the house back and pay the car and taxes through the plan on the favorable terms you received under chapter 13.

So, in regards to the notice of dismissal, does this mean that we should not make any further payments to our plan going forward? I want to be sure that this is the case. We have a large utility bill that needs to be taken care of, plus we will need to save for a rental deposit, so I want to be sure that this is the case before we utilize any Chapt 13 monies for that. So I guess I need to know if we will be making any further payments from now on - whether mortgage or otherwise. I don't want any problems when we get ready to make this change, like we dont qualify because we were "supposed to make some sort of payment up until we made this change", you know what I mean? My lawyer mentioned receiving the notice of dismissal, so I'm guessing that we are going to stop making payments.

Ok, sorry this is so long winded - but I have a ton of questions - I want to make sure that all T's are crossed and I's dotted so we don't mess this up! I can't take anymore bad news!

Thanks!

[NorthernCA]

One more question..

Let's say we are going to stop making payments, and take action once we receive the notice of default from the trustee. Obviously, he would be sending this to us this because we will have become past due in our payments and have a balance.

So.... if we decide to do a modification to our 13, what happens to that past due balance from our original 13? Is it wiped clean and we start fresh, or does it need to be brought current first... etc... ?

[NorthernCA]

Well, it's Monday and I still haven't heard back from my lawyer. Sigh....

[HHM]

Well, it's Monday and I still haven't heard back from my lawyer. Sigh....

It is a holiday!

[NorthernCA]

I know... but I contacted him last Thursday about this stuff... it is now Monday with no response. When this guy needed something from US, he called us at all times of the day, during the weekends, holidays, etc....

[NorthernCA]

Since I haven't heard from my attorney, does anyone here have any thoughts on some of the questions I asked in the last few replies? We need to make plans and decisions... and I just need to get an idea of what's happening right now and where we will go next. I need to get a job, and I need to know if I should keep passing up these jobs that don't pay enough for me to make my BK payment, or if I can stay in my area and take on these jobs because we won't be making anymore payments.

Thanks in advance! Our future is riding on this...