Chapter 13 Not Worth It?

[Empty Wallet]

I recently consulted with a lawyer on Chapter 13, I went in not totally blind and did my research online. I have approx $45K in unsecured debt (credit cards) that's it. Due to my income I have to file Chapter 13, I have a monthly take home income of approx $3,500.00.

I have no other loans or outstanding debt, just the usual bills and rent.

I asked for an estimate on what I would expect to pay over 5 years, because I would not qualify for the 3 year plan. It came out to roughly $1K a month (estimate) so that leaves me with a total payout of $60K at the end of 5 years.

I also reviewed the means testing and found the numbers a little low compared to my high cost of living area, not too mention what food and gas cost now the tables are very inaccurate.

My question is, why should I file bankruptcy if I'm going to pay out more then what I owe? After discharge I then have 2 years leftover on my credit report and then the lifelong scar of it effecting any future loans and/or etc. Granted you never really can erase a bankruptcy and it can indeed haunt you later.

My other options are DMP which I haven't even looked into, I can't imagine the interest paid out being any worse then what Chapter 13 will pay. I was told that CCCS is my best legitimate option.

I'm still confused if Chapter 13 is the right direction, I really could not get a straight answer if I would have to pay 100%, because after monthly expenses and rent, I calculated I have $1,200.00 a month to cover this, that's a $200 over the estimated kinda cutting it close.

Thanks

[ruggal]

You may want to check with another attorney.

The maximum payout on a Chapter 13 would be 100%, and keep in mind the interest does not accrue during that time.

So based on what you're saying, it looks like you would have a 45 month plan, give or take, depending on the number of creditors that file claims (and they may not all file), and the trustee's fee.

[2ndChanceTx]

If you were to amortize 45K out over 60 months @ 18% it would be a payment of $1142.70. If you can make that payment and have the discipline not to continue charging, it might be a good option for you not to do 13. If you do a 13 it would be 45,000/60month = $750/month. You might have to pay some interest, but it wouldnt be at the CC rates...

[Empty Wallet]

I may consult with a another lawyer, I did not understand why I would have to pay $60K over 5 years instead of the $45K?

I stopped using the cards a while ago and been on a cash only basis, I have some great interest rates on a few of them, but within the last month I have not been able to make the minimum payments on a couple as they raised them for no reason (I was never late and paid slightly above the min), but now I'm past due on a couple and need to pay a large amount to get back on track.

I worry about universal default and a couple of creditors may not honor a good interest rate which will snowball my debt out of control even more.

I found a Chapter 13 Calculator, is it accurate?

https://secure.cnchost.com/mdbankruptcylaw.com/downloadcalculator.asp

It's telling me $750/month for 60 months + $120/month (trustee %)

$870/month for 60 months

Total payout = $52,200

Add in Lawyer's $1K and any other misc fees.

Not sure how well that works for my area? Means testing and other adjustments?

[MajorMike]

You never pay more then you owe. You DO put in your expendable income but then you don't pay into the BK for 5 years. You only pay until your debt is cleared. The advantage to this is all your interest stops and you're only paying principal.

[lrprn]

Definitely meet with at least 2-3 more experienced bankruptcy lawyers who file Ch 13s often in your area. Most give free or low-cost initial consultations.

What you've been told by MajorMike and ruggal is true. You cannot be asked to pay more in Ch 13 than you owe. Also no interest is charged for non-secured debt in Ch 13 - what your creditors state you owe on the day you file is all you can be asked to pay back.

You asked about the online Ch 13 calculator. There is such a wide variation between how the bankruptcy districts, local courts, and individual trustees interpret the current bk law, a calculator like this is not reliable nor accurate.

Creating a good Ch 13 plan is more an art than a science. Your time is best spent looking for the best bk lawyer you can find. That is what will keep your payment at a level you can survive until your creditors are paid only what they are entitled to receive and leave you enough to handle the unexpected financial emergencies that are the nightmare of every Ch 13 filer.

[chloe0724]

Also,

The calculator doesn't take into account only paying a percentage of creditors back. I have over 75k in unsecrured debt, but I truly have no way of paying a monthly amount over 5 years to do 100% payback. I'm in this situation because of leaving beyond my means and not planning for bad things that can happen in life.

[rrockinggramma]

In addition, not all creditors will file claims. Even if you end up at 100 percent payback, lets say that only 20,000 of your cc debt files claims. AT 1000 a month, you are paid off in less than 3 years and debt free from the rest.

[nojusticehere]

Here's my situation. I bring home around $4000 per month. I owe $61000.00, ($45000 unsecured and $16,000 secured) I just completed my 341 and payment plan. Without going through all my allowables, rent, etc., I'm paying my car payment $410 outside of the plan (would have been arounjd $300 inside for 60 months but opted to pay outside the plan) and then $431 inside the plan. So I send a payment of $431 per month to the court. Had I paid all inside the plan, I would be paying approximately $841 per month for 60 months. So I'm now paying inside the plan a total of 25860 which is far less than I owe on my unsecured. But it's based on my disposable income.

Go see an atty. Just because you bring home $3500 a month, doesn't mean you will be paying $1000 a month. By the way, I tried CCCS several years ago. I found them to be crooks in my case, paying them monthly fees and not getting anywhere. Alot of times they couldn't account for money I sent them (I guess it just vanished) Besides, they also report on your credit reports and you'll find (for the most part, at least I did) that no one will give you credit anyway. Just my experience. So here I am several years later filing for BK. Go talk to several atty's and find out what you're payment would be. You may be pleasantly surprised. Good luck.