Chapter 13 repayment plan?

[sydneynoel]

Hi- I'm new and I was wondering about the chapter 13 repayment plan (even though I believe we will be filing chapter 7). My question is this, once the repayment plan has been calcaluated for the 5 years can it be changed based on your income and disposable income changing? how often is it re-evaluated? thanks

[arkienurse]

Hi- I'm new and I was wondering about the chapter 13 repayment plan (even though I believe we will be filing chapter 7). My question is this, once the repayment plan has been calcaluated for the 5 years can it be changed based on your income and disposable income changing? how often is it re-evaluated? thanks

Yes it can be changed. You are required to report any increases in income to the trustee. However, you could also reqest a payment change if your income goes way down. Generally speaking, your payment amount is not re-evaluated once the payment amount is agreed on.

[sydneynoel]

An attorney I met with yesterday (who was pushing chapter 13 even though we qualify for 7) made it sound like we would be re-evaluated every year and have to supply new income tax returns to show our income every year for five years. I really don't want to go the chapter 13 route.....if I'm going to file BK it would be nice to have it all discharged in chapter 7. I have one more question about chapter 13? actually 2- how is it determined whether or not you qualify for a 3 yr. payment plan or a 5 yr. payment plan? And also, how is the payment plan computed? thanks for the help.

[lrprn]

I really don't want to go the chapter 13 route.....if I'm going to file BK it would be nice to have it all discharged in chapter 7.

Unfortunately you don't get to choose which chapter you get to file. Your required Means Test and (if Ch 13 is involved) your Schedules determine if you have sufficient disposable income to support a Ch 13 plan. If you show at least $100/month disposable income on the Means Test, then it's likely your trustee is going to consider pushing you into a Ch 13. If you show more than $160/month disposable income, then you will definitely be filing Ch 13, not Ch 7.

how is it determined whether or not you qualify for a 3 yr. payment plan or a 5 yr. payment plan?

Under the current bankruptcy law, only filers that are very close to the median income for their state and have disposable income close to $160/month get 3 year plans any more. Almost everyone gets five year plans these days.

And also, how is the payment plan computed?

Your monthly Ch 13 plan payment is calculated using a complex set of cross-comparisons between your last six full calendar months of income before filing compared to mandated IRS expenses for housing, utilities, and transportation plus your own real expenses. It's not for the faint of heart. And to make things more complicated, there's variation between how different bankruptcy districts, trustees, and bk lawyers interpret the current bk law.

[sydneynoel]

Thank you very much- I appreciate the answers. Here is my situation. We are just barely below the median average income. We are a family of five in Missouri. The average median monthly income is $6,067 and our monthly average is right around $6,000! Talk about cutting it close!!! Our biggest problem (other than massive credit card debt) is we pay out $1200 a month in child support. So in reality, that brings our true income down to apprx. $4800/month for a family of five. I know they won't let us subtract our child support payments from our monthly gross earnings (except they allow for that deduction in the means test). Our attorney seems to think that since we are "so close" to the cut off we should just go ahead with the chpt 13. I disagree, because if I can honestly pass the means test (which i did after taking it at legalconsumer.com) then I think we should go for it regardless if the bk trustee wants to scrutinize us. I spoke with a 2nd attorney and it sounds like he's on the same page as me. He says, if you fall below the median income (even if just barely) then file chapter 7. I'm just so confused and don't know which way to go. I've had 2 different opinions. I just don't see the benefit for us to file chpt. 13 and go through a payment plan for five years. I think that alone .......dragging it out will drive me nuts.

After doing the means test we have a disposable monthly income of about -$500 a month. Will they even let us file BK with such a low disposable income? Won't they wonder how were going to survive off a negative income? Honestly, I think we can because I don't think we spend $1700/month on food and household (which was the IRS standard deduction) we actually spend around $1100. If we can file chapter 7 and continue making car payments for just one more year both vehicles will be paid off and that will free up $1,000/month extra income. Any thoughts or suggestions would be appreciated....I'm at a loss what to do and I need to decide soon. I haven't stopped paying creditors yet and if I'm really going through with this BK then I need to stop this week...bills are due. Also, just one more question what is PACER? I have read a lot about it on here but I don't understand what it means. Sounds like a website that will let me compare similar BK cases to mine? Is that right? If so, can someone direct me to the correct website. Thanks a bunch.

[lrprn]

We are just barely below the median average income. We are a family of five in Missouri. The average median monthly income is $6,067 and our monthly average is right around $6,000!

In Missouri for a family of 5 the median income is $72,809. Is "about $6000/month your family's gross income or is that your family's take-home net income?

I've had 2 different opinions. I just don't see the benefit for us to file chpt. 13 and go through a payment plan for five years. I think that alone .......dragging it out will drive me nuts.

If you feel that lawyer #2 was competent and familiar with the current bk laws, I'd go with #2. You can convert to Ch 13 if your Ch 7 case runs into a snag, although you will probably have to pay lawyer #2 more to file the 13 for you.

After doing the means test we have a disposable monthly income of about -$500 a month. Will they even let us file BK with such a low disposable income?

The reason to file bankruptcy is to wipe out your NON-SECURED debt. If you don't have to pay credit cards and unsecured loans, this should free up enough income that you will be in much better financial shape after discharge.

If you stop paying your unsecured debt and still can't live off what you make without further borrowing or credit card use, then filing bankruptcy by itself isn't going to solve your financial problems. You either need to surrender one or more assets, find a much better paying job, or cut expenses drastically.

If we can file chapter 7 and continue making car payments for just one more year both vehicles will be paid off and that will free up $1,000/month extra income.

This is the kind of financial thinking that gets most of us into trouble. If both your car payments equal $1,000/month now, I'm assuming your cars are both worth a lot less than the loans on them. Am I right? Why are you hanging on and paying off cars that are worth less than you owe and probably paying back thousands in interest you don't need to pay?

Also, just one more question what is PACER? I have read a lot about it on here but I don't understand what it means. Sounds like a website that will let me compare similar BK cases to mine? Is that right? If so, can someone direct me to the correct website.

Public Access to Court Electronic Records = PACER. Website is https://pacer.login.uscourts.gov/cgi-bin/login.pl

To understand how PACER works and how to sign up for your free account, be sure to read all the FAQs here - http://pacer.psc.uscourts.gov/faq.html . PACER membership is free but checking on different accounts including your own costs $.08/page. Your bill can climb quickly into $40-50 if you don't know what you're doing, so be careful!

Also check the Forum PACER sticky at http://www.bkforum.com/showthread.php?t=1011 for how some of our members use PACER to check on their cases and others.

[Boscoe]

sydney - If you are below the median, but closely, you do qualify for a chap 7. But, you should include every little expense you can think of when filling out the schedule J.

And if the US Housing standards says $1700/mth for a family of your size, USE IT!. I am sure you are forgetting some food related costs. Get yourself down below disposable income of $100 a month and you can definitely do a ch 7 filing.

Don't let the attorney talk you into a 13 when you qualify for a 7. Think about everything you do each day. Cleaning supplies, kids haircuts, maintenance items for your home and on your home, gas for lawn mowing, beauty supplies for the women, magazine subscriptions, etc. etc. Believe me, you have forgotten SOMETHING in there.

[sydneynoel]

lrprn- Our GROSS monthly income is right under $6,000 a month, so based on that we will qualify for chapter 7 unless we run into a snag. I agree with what you're saying about keeping both vehicles that will cost us $1,000/month for another year. We are currently thinking of letting the Durango ($600 month) go in the BK and purchase a cheap $1200 chevrolet prism to get us by along with our other car that we are wanting to keep. I just don't know if we can make a purchase of $1200 for a used car 3 months before we file BK. It's so we will have a more reasonable budget once we file BK. That will put our disposable income at $100 month instead of a -$500. Which might in fact bounce us in chapter 13 anyways. It's kind of a weird system they got going right now. I can't have too much dispoable income or I get thrown into chapter 13.....and if i have a big negative disposable income......then i can't file chapter 7 because it benefits nobody according to the courts.

[lrprn]

and if i have a big negative disposable income......then i can't file chapter 7 because it benefits nobody according to the courts.

Not true. Lets look at both sides of the debt coin....

If most of your debt is in secured asset loans that you intend to keep paying after filing, then it's true that filing bankruptcy won't help much in that circumstance. You had a large portion of your income tied up in paying for the assets before filing and still will have a large portion of your income tied up paying for those same assets after filing. You gain very little income in this situation.

However, if most of your debt is in non-secured credit cards and loans, then filing bk can help a great deal because then you won't have to pay those credit cards and non-secured loans any longer. That frees up all that money for your family to use.

So if you have lots of unsecured debt to wipe out in bankruptcy, then filing bankruptcy can be a huge benefit to you and your family.