A friend asked me my opinion regarding her financial situation. Ultimately the questions are
1) Should she file bankruptcy? I'm assuming Ch 13 is the only option.
2) How does the Trustee determine how much her monthly payment is?
3) If Filing 13 is her only option, is there any reason to file now as opposed to just stop paying her unsecured bills completely and saving up cash before she does it?
Thanks for any comments.
Here is a financial synopsis...
Financial situation....
Currently no cash in bank.
Salary $86k/yr
Current credit scores all mid 500s.
Up until 6 months ago, perfect pay history on all debts for 20 years. She's been trying to make partial payments the last few months on her revolving debt and she's about to break.
1) Mortgage
$150k balance
$1,629 is PITI
no late pays ever, current on mortgage
less than 10k equity in the home
Interest rate is fixed under 6% 30 yr loan.
(if Ch 13, she would want to keep the house)
2) Auto Lease
$17k is the balance (out of 20k at beginning)
$420 is the monthly payment
no lates pays ever, current on lease
4 years left on lease, Interest rate is low.
(if Ch 13, she would want to keep this lease)
Items 3-8 are the derogs (6 items)... was perfect on them for years until 6 months ago. All balances (in items 3-8) are very close if not over their limits by a few hundred dollars.
3) Revolving Credit Card- Bank
Currently 2 X 90 and submitted to Collections... their attorneys
Balance $78,000
Past Due $11,000
Monthly payment ???
Account closed by creditor last month
4) Bank- Line of Credit
Currently 2 X 90
Balance $43k
Past Due $3k
Normal payment $910/month
Account closed by creditor last month
5) Bank- Revolving Credit Card
Currently 1 X 90, 2 X 60
Balance $17k
Past Due $2,200
Normal payment $625/month
6) Bank- Revolving Credit Card
Currently 2 X 90, 1 X 60
Balance $9k
Past Due $600
Normal payments $200/mth
7) Department Store
Currently 2 X 90, 1 X 60
Balance $3k
Past Due $400
Normal Payments $100/mth
Account closed by creditor last month
8) Department Store
Currently 1 X 90
Balance $2500
Past Due $450
Normal payments $150/mth
Items 9 and 10 are open tradelines that have no derogatories
9) Visa (with the same lender that holds her mortgage)
no lates, account opened in 2004
$4500 balance/ $5k limit
$150/month payment
account current
10) Credit Union- Line of Credit
no lates, account opened in 1990
$1,500 blance/ $3k limit
$60/month payment
account current
She also has 2 department store cards with 0 balance, $10k credit limit on both of them, and perfect pay history on both. Accounts are both about 5 years old. Other than that she has a lot of old tradelines that are closed with perfect pay history.
She is single, no kids, makes $86k/year, 0 in retirement accounts, 0 in cash as of today. Thus her monthly gross income is $7,166.... net monthly income after taxes is $5200 ( I think this number has her health insurance taken out as well). I checked the means test etc and it looks like she would be required to file a Ch 13 as opposed to a Ch 7, if what I am reading is correct. In Texas the median family income for 1 is about $35k. I ran all her info through the means test and it looks like (if I did it correctly)...
Her standard deduction is about $900
Monthly taxes is about $2k
Internet and phone $100
Secured debts (car and house) $2040
Trustee multiplier is about 8.5% $170 (assuming about 2k is plan payment)
Does this look right? It looks like her disposable income according to State standards is $2k. She fell in the 5 year plan. so if she were to pay $2k for 5 years that is $120k in the 5 years. Is this the number (the amount of disposable income)? Or does the trustee look at it and determine a percentage? All her unsecured debt is about $160k... she she'll be paying back 75%. Is this right or will the trustee make her payment lower? Geez, what if she were to lose her job... that could happen anytime and being stuck with a plan to pay $2k/month is an awfully lofty requisite. So it's irrelevant whether she has $150k in debt or $1,000,000 in debt... the trustee payment is solely based on her income and disposable debt?
Back to my original questions...
1) Should she file bankruptcy? I'm assuming Ch 13 is the only option.
2) How does the Trustee determine how much her monthly payment is?
3) If Filing 13 is her only option, is there any reason to file now as opposed to just stop paying her unsecured bills completely and saving up cash-flow before she does it?
Expanding here a bit. If she were to just quit paying them, my sense is the 6 creditors she is delinquent with will ultimately file suit given they are such large balances? Bankruptcy or not, should I tell her to stop killing herself putting every $$$ toward her bills and just let them go for a while and save up cash? Are there any reasons to keep itmes 9 and 10 above current or should she just let those 2 items go as well? I.e. Is there any point in even having any good t/l right now if bankruptcy is right around the corner, everntually they get closed, right?
Thanks for any comments.
1) Should she file bankruptcy? I'm assuming Ch 13 is the only option.
2) How does the Trustee determine how much her monthly payment is?
3) If Filing 13 is her only option, is there any reason to file now as opposed to just stop paying her unsecured bills completely and saving up cash before she does it?
Thanks for any comments.
Here is a financial synopsis...
Financial situation....
Currently no cash in bank.
Salary $86k/yr
Current credit scores all mid 500s.
Up until 6 months ago, perfect pay history on all debts for 20 years. She's been trying to make partial payments the last few months on her revolving debt and she's about to break.
1) Mortgage
$150k balance
$1,629 is PITI
no late pays ever, current on mortgage
less than 10k equity in the home
Interest rate is fixed under 6% 30 yr loan.
(if Ch 13, she would want to keep the house)
2) Auto Lease
$17k is the balance (out of 20k at beginning)
$420 is the monthly payment
no lates pays ever, current on lease
4 years left on lease, Interest rate is low.
(if Ch 13, she would want to keep this lease)
Items 3-8 are the derogs (6 items)... was perfect on them for years until 6 months ago. All balances (in items 3-8) are very close if not over their limits by a few hundred dollars.
3) Revolving Credit Card- Bank
Currently 2 X 90 and submitted to Collections... their attorneys
Balance $78,000
Past Due $11,000
Monthly payment ???
Account closed by creditor last month
4) Bank- Line of Credit
Currently 2 X 90
Balance $43k
Past Due $3k
Normal payment $910/month
Account closed by creditor last month
5) Bank- Revolving Credit Card
Currently 1 X 90, 2 X 60
Balance $17k
Past Due $2,200
Normal payment $625/month
6) Bank- Revolving Credit Card
Currently 2 X 90, 1 X 60
Balance $9k
Past Due $600
Normal payments $200/mth
7) Department Store
Currently 2 X 90, 1 X 60
Balance $3k
Past Due $400
Normal Payments $100/mth
Account closed by creditor last month
8) Department Store
Currently 1 X 90
Balance $2500
Past Due $450
Normal payments $150/mth
Items 9 and 10 are open tradelines that have no derogatories
9) Visa (with the same lender that holds her mortgage)
no lates, account opened in 2004
$4500 balance/ $5k limit
$150/month payment
account current
10) Credit Union- Line of Credit
no lates, account opened in 1990
$1,500 blance/ $3k limit
$60/month payment
account current
She also has 2 department store cards with 0 balance, $10k credit limit on both of them, and perfect pay history on both. Accounts are both about 5 years old. Other than that she has a lot of old tradelines that are closed with perfect pay history.
She is single, no kids, makes $86k/year, 0 in retirement accounts, 0 in cash as of today. Thus her monthly gross income is $7,166.... net monthly income after taxes is $5200 ( I think this number has her health insurance taken out as well). I checked the means test etc and it looks like she would be required to file a Ch 13 as opposed to a Ch 7, if what I am reading is correct. In Texas the median family income for 1 is about $35k. I ran all her info through the means test and it looks like (if I did it correctly)...
Her standard deduction is about $900
Monthly taxes is about $2k
Internet and phone $100
Secured debts (car and house) $2040
Trustee multiplier is about 8.5% $170 (assuming about 2k is plan payment)
Does this look right? It looks like her disposable income according to State standards is $2k. She fell in the 5 year plan. so if she were to pay $2k for 5 years that is $120k in the 5 years. Is this the number (the amount of disposable income)? Or does the trustee look at it and determine a percentage? All her unsecured debt is about $160k... she she'll be paying back 75%. Is this right or will the trustee make her payment lower? Geez, what if she were to lose her job... that could happen anytime and being stuck with a plan to pay $2k/month is an awfully lofty requisite. So it's irrelevant whether she has $150k in debt or $1,000,000 in debt... the trustee payment is solely based on her income and disposable debt?
Back to my original questions...
1) Should she file bankruptcy? I'm assuming Ch 13 is the only option.
2) How does the Trustee determine how much her monthly payment is?
3) If Filing 13 is her only option, is there any reason to file now as opposed to just stop paying her unsecured bills completely and saving up cash-flow before she does it?
Expanding here a bit. If she were to just quit paying them, my sense is the 6 creditors she is delinquent with will ultimately file suit given they are such large balances? Bankruptcy or not, should I tell her to stop killing herself putting every $$$ toward her bills and just let them go for a while and save up cash? Are there any reasons to keep itmes 9 and 10 above current or should she just let those 2 items go as well? I.e. Is there any point in even having any good t/l right now if bankruptcy is right around the corner, everntually they get closed, right?
Thanks for any comments.