Am I too poor to even file a Chapter 13?

[MJJ3767]

Here's my story and I need some advice desperately.

I filed Chapter 7 in May of 2002, it was discharged.
In October of 2005, I let my car go back to the bank. I no longer could afford the $580 payments. This car was purchased after my Chapter 7 - 22% interest rate!
A few days ago I received a summons, now I am being sued for this debt - $14,000. My wages are sure to be garnished over this which I can't afford to let happen.
My other debts, (credit cards) have all been current for the past 4 years. The total debt is approximately $5000.
I owe the IRS around $9000 from 2001. ( I had to take out my 401K to live on) The IRS has this in "non collectable" status due to my low income. They never bother me.
My pay right now is approximately $25,000 a year, less taxes and insurance. I bring home $890 twice a month. My rent and utilities run $1668 a month. My auto and life insurance run about $140 a month. As you can see, I am in the hole every month!
I have been living on payday loans. (Yes, I am very ashamed of that fact but I had no choice)
I do not own my home. I drive a used car with $120,000 miles on it and 3 bad tires. I own household furnishings and that is about it.
I am a single mother, work full time, go to school full time and have 2 kids in college.

My questions -

I read that you have to show the courts you have enough money left over at the end of the month to make the Chapter 13 payment. Obviously, I don't. Will they even allow me to file? (I don't even have the money to file but will have to borrow it from somewhere. Maybe take out a title loan.)

I've considered dropping my health insurance and let the wage garnishment go through. The garnishment isn't a sure thing yet but I am trying to get a plan together because I feel that it will happen. I am trying to avoid a wage garnishment by filing Chapter 13. In May of 2010 I would convert it to a Chapter 7. (new law)

I am so down right now. I just feel that I've got nothing left to give to society. I feel so worthless. If it wasn't for my 3 great kids I would be gone.

Any advice?

[lrprn]

I filed Chapter 7 in May of 2002, it was discharged.
In October of 2005, I let my car go back to the bank. ... A few days ago I received a summons, now I am being sued for this debt - $14,000.

If this car loan was discharged in your 2002 Ch 7 case, then the lender cannot legally pursue this debt. Make a copy of your Ch 7 discharge papers listing this debt, then include the copies with with a letter sent registered return receipt to the lender stating they have no right to collect this debt.

If the lender still continues to demand payment, then you MUST go to court on the designated day and time and present this evidence to the judge. That will stop the case.

Your wages cannot be garnished if the lender does not win the case in court. And they can't win the case if you prove the debt was discharged in your Ch 7 bankruptcy six years ago. However, if you don't appear, it's quite likely the lender will win their case by default which will open you up to wage garnishment. Appear in court with your discharge papers listing this debt and the attempt to illegally collect this debt will be thrown out.

I have been living on payday loans. (Yes, I am very ashamed of that fact but I had no choice)

You are doing a very, very dangerous thing here. Payday loans are extremely difficult to pay off. You can very quickly get in way over your head.

What are the major financial reasons you need to get payday loans?

I read that you have to show the courts you have enough money left over at the end of the month to make the Chapter 13 payment. Obviously, I don't. Will they even allow me to file?

You need to show sufficient disposable income to support making monthly payments to the trustee to file a Ch 13 case. There's no way to know if this is true for you until you sit down with several experienced bankruptcy lawyers who frequently file Ch 13 cases and run your numbers. These initial consultations are usually free so there's nothing to worry about there. And if it is possible to file Ch 13, most of the fee will be rolled into the Ch 13 plan, so you don't have to have much ready cash to file Ch 13 either.

I've considered dropping my health insurance and let the wage garnishment go through. The garnishment isn't a sure thing yet but I am trying to get a plan together because I feel that it will happen.

As I explained above, you have other options. DON'T BE PASSIVE HERE! You can stop this potential garnishment case in its tracks if your car loan was discharged in your 2002 Ch 7 case simply by sending your discharge papers to the lender.

I am so down right now. I just feel that I've got nothing left to give to society. I feel so worthless. If it wasn't for my 3 great kids I would be gone.

First, don't allow your depression and fear to freeze you into inaction. YOU have the power to change this situation yourself by doing two simple things - (1) sending a letter with a copy of your discharge papers to the lender then (2) appearing in court with those same papers to show the judge if the lender is stupid enough to continue the case.

And believe me when I say your kids love you no matter what. They understand you are doing your best in this most difficult situation. They need you and you need them so please no more talk about "gone". You can weather this latest mess and emerge on the other side without fear if you just take a few simple actions now.

Hang in there - we'll all rooting for you to succeed. And you can! Keep coming back for support and advice - we'll help you every way we can. You are not alone.

[MJJ3767]

If this car loan was discharged in your 2002 Ch 7 case, then the lender cannot legally pursue this debt.

I guess I left out a very important fact. This car loan was not involved in my 2002 Chapter 7. It was purchased a year AFTER my Chapter 7. Hence the high interest rate. I wish it was as simple as bringing my papers in.

Your wages cannot be garnished if the lender does not win the case in court. However, if you don't appear, it's quite likely the lender will win their case by default which will open you up to wage garnishment.

I understand this but also see no reason to appear. What can i say? I dont have the money to pay and let a judge laugh in my face? This was a summons with no court date. It only said I have 20 days to respond.

What are the major financial reasons you need to get payday loans?

To get the rent paid in time, to keep the electricity on etc. If there is a such thing as using them "responsibly", that is what I've done. I've used them short term and paid them off in full within a month. I don't buy needlessly and blow money.

Hang in there - we'll all rooting for you to succeed. And you can! Keep coming back for support and advice - we'll help you every way we can. You are not alone.

Thank you. I just don't know where to turn right now. The last thing I want my kids to know is what is going on. That would only prove to them what a loser their mother is.

[BigJohn]

As for your insurance, I would keep that. If they garnish your wages, the insurance premium may off set the garnishment.

As for garnishing your wages, what State are you in? Maybe they can not garnish.

Is your rent and utilities all in one bill?


If you plan on bankruptcy, I would not take any more money out of your 401K plan.

I suspect your main question is "Bankrupt Chaper 7 in October 2005, can I file Chapter 7 or 13 now?" Is that correct?

[MJJ3767]

I suspect your main question is "Bankrupt Chaper 7 in October 2005, can I file Chapter 7 or 13 now?" Is that correct?

No, I know the answer to that question. Because of the new laws, I can't file Chapter 7 right now, I would have to do a Chapter 13 and then convert to a Chapter 7 in 2010. My main goal right now is to try to hold off a wage garnishment which is going to happen. Yes, they can garnish in my state (AZ) up to 25% but it can be lowered by the judge to 15%. My rent and utilities are all separate bills. My 401K is gone......there is nothing left to take out. That was cleared out in 2001, thus the tax debt that I owe.

[rrockinggramma]

you would have some disposable income because ALL of your current credit cards would also be thrown into the pot when you file a chapter 13. This will put you back at square one. However, your other choice will be just as detrimental to your credit etc.

So I would go ahead and file the 13, stave off the garnishment. At best all of your creditors would get minimal amounts based on your expenses and available disposable income.

And then you can really start over again.

I have been there also. So you are not alone with multiple filings. Sometimes life happens.

[woeisme]

I know that my state of Ohio can garnish up to 25% of wages, but it also depends on income. Double check to see if that is also the case in AZ. You might be making such a low income that they would not be able to garnish, even if garnishment is generally allowed in your state. I know in my state it can't exceed 25% of DISPOSABLE income, not just income (unless income exceeds some amount beyond minimum wage, but probably won't be the case for you.) See what AZ considers DISPOSABLE income, and what the actual garnishment rules are for your state. At your income level, I seriously doubt they could garnish as much as 25%.