What to Expect?

[concerned]

Hi Everyone:

Our attorney is meeting with us next week and he guaranteed he would file us as Ch. 7 before the deadline. We are relieved, but now I am just curious as to what to expect. If we have outstanding medical claims, will our covered insurance not pay them. We don't have very many, but I have heard this might happen. Why? Also, we have literally $20 in our account right now and have to borrow the remaining fee to give the attorney on Weds. He will file prior to deadline. I know it looks better to not have money in your account when you file, and we didn't have to work at that since we really didn't have any, but...Do we have to be concerned about what we spend on our money on after the file date? At the 341, do they only look at where you money went up until you filed? We are getting very little info. from our attorney because they are so swamped right now. I appreciate any feedback on this.

My attorney said there isn't much difference between a 7 and a 13, but he would do a 7 if we wanted. He said it's only a matter of WHO we pay back. Is this true, or a line? I said we wanted the 7! With so little in the bank when we meet with him, will that be enough to guarantee the 7 or could he still force us into a 13?

[StaciMM]

The trustee may push for a conversion when he sees your figures. There is really no way to know ahead of time how he'll react.

On the bright side, if you file before the change, even if you end up having to convert it will be be based on the pre-Oct. 17th rather than post-Oct. 17th guidelines.

[concerned]

Thanks Stacie! Another quick question...

I just realized we had charges on our credit card that total over $1,000 within 60 days prior to filing; however, we also have purchase credits that bring this total below $1,000. I should also add that my husband received one time only vacation pay when he transferred jobs in June and we paid off this same card. All of these charges/credits occured prior to when we met with our attorney and realized we needed to file. We have not used the card since. Can we simply repay this? Does the fact that there are credits help? I just don't want our attorney to drop us. We gave him all of our bills and he never said a word to us about it. We answered all the questions asked of us on his paperwork. Is this something we can resolve at the 341? I didn't realize it was an issue until reading these posts. Our total credit card debt is minimal anyway. We're filing due to our house not credit cards. Shouldn't this help?

I kind of thought we could be pushed into a 13, although I'm still not sure I fully understand why. Our attorney said that our conservative budget shows we don't have any money left over. If we don't have any money on the the day we file, why would they say we need to repay someone? Is there a big difference with the 13 repayment now and with the new law? What's the difference?

Thanks,
Concerned

[StaciMM]

I think what your attorney is banking on is showing in your paperwork you intend to retain the house (which means your 1st & 2nd are part of your budget) yet if you don't sign to reaffirm, you can leave the house and not be responsible for any deficiency.

On the charges, it is up to the creditor to object to them. Worst case scenario, as I understand it, is that you might have to repay those late transactions.

[bezoar]

Make sure that he files THIS UPCOMING WEEK - the new laws put an end to the "ride-through", or RETAIN option. Beginning w/ cases filed 10/17, reaffirmation will be required.

(This may be challenged, but it will take a while to determine the outcome)

[concerned]

Oh thanks--this makes sense!

That must be why he was concerned if we were on time with our mortgage payments or not. I thought it was strange because initially he said to not make a mortgage payment, and now he is saying that we need to make a payment. I guess we may have to pay one with my husband's next check. This is our first late payment ever. The bill was due on 9/1/05 and we don't incur a late fee until 9/16/05. Our second mortgage was due on 9/1/05 also. Late fees start after 9/16/05. We aren't 14 days past due yet. Do you think we're ok?

The secretary we spoke with thought we misunderstood and that he just made a mistake, but I didn't think he had. Now, I'm guessing you're probably right!

[StaciMM]

I think we've figured your attorney out, LOL. Perhaps he told you to stop paying before he realized that your after BK budget w/ out the house would not work for a 7. (If you WERE listing on the petition that you were giving it up then being past due wouldn't matter.)

Be sure to include the apartment in the petition, if you don't plan on keeping it-just to make sure they can't come at you w/ lease termination penalties. Once it is safe to stop paying the mortgage & 2nd, you should have some time to save up $$ to prepare to move.

[concerned]

We do plan to keep the apartment. Will we still need to include it in the petition? I don't want to include it, especially now that I know (think) what the attorney's plan is. I leased it so that we would have something once BK went through. I wasn't sure if they would rent to me after the bk because they do a credit check. Will this be a problem with our petition?

Will we need to make our first & second mortgage payment this month? If yes, can we liquidate retirement funds for this purpose? My husband has some in a private 401 account, and I have a 403B I can borrow from. Our attorney said we will need to use the 403B funds to give approx. $5,000 to trustee for our cars. Does it make a difference if we liquidate the 401 vs. loan from 403B? Will this be a problem to take out the funds from either/both of these accounts now? We used all our money towards rent/attorney fees and we know we're not supposed to use credit cards so we won't be able to make high mortgage payments without liquidating these or borrowing from family.

When is it SAFE to stop making the mortgage payments? Does the apartment lease look sketchy in light of bankruptcy petition?

I'm upset because the attorney told us to look for another place to live. Now I'm concerned I took it too far in actually leasing and moving some of our stuff. Both my husband and I are barely sleeping we are so stressed out. Thanks for all the help!!! It has been a lifeline! Should we make sure to stay at the house for now??? We have been so far.

[StaciMM]

I'm really not sure regarding the retirement $$, etc. Most retirement accounts are exempt, and using the funds shouldn't cause a problem since you're not planning any extragavant.

If you're going to live in the apt, then not including it makes sense. If our theory is correct in how your attorney plans to get you a ch. 7, then the house payments need to be kept up to date at least until the 341. I'm not sure beyond that.

Good luck!

[concerned]

How long before 341?

Thanks again StaciMM! How long before our 341?

Will it look bad if we pay this mortgage late with a late fee, but make the next on time? Like I said, we will need to use retirement funds to pay the bill. I plan to check with attorney to make sure it's ok to use this $$.

[bezoar]

Probably won't be a problem regarding drawing out of retirement to pay mortgage. A local case here listed withdrawls of $2K per month (from an IRA) for an unemployed 55 y/o man to pay mortgage & expenses. He got his discharge - no evidence of any problems. How quickly can you get some out? You don't have much time...

You really must be up to date on the mortgage to make this work.

Keeping the apartment confuses me though.

[StaciMM]

The 341 won't be scheduled until you file-could be as short as 30 days after filing, but it just depends on how busy your district is. (I've seen people posting about 6-8 weeks wait for 341...)

I don't think late fees will matter.

[concerned]

Correction--StaciMM

The due dates I posted earlier are incorrect. Our second mortgage has been paid through Oct. I misunderstood. My husband paid this last month FOR OCTOBER. Our first mortgage was due 10/1/05 not 9/1/05. September payment was made (October 1 payment has not yet been made). We are set to file this week. Late fees won't incur until Sunday. Do you think it's ok if we wait until after he files to withdraw the funds and pay the mortgage? We will just have to pay the late fee.

Does it matter if we are not living in the house! We still own it and could move back in.

In reference to reaffirmation. Is it so many days we have to cancel and give back the house? Or, is it after the 341 meeting? I have heard it's 60 days, but what it the 341 doesn't occur for more than 60 days?

Thanks again!

Concerned

[StaciMM]

If you don't sign a reaffirmation agreement, then the house (1st & 2nd mortgage) would be discharged in BK. Many people who fully intend to keep their car or home don't reaffirm, and just keep making payments. After BK, if they reach a point where they no longer want or need the property or car, they can walk away-not owing anything. There isn't a time limit-it could be 2 weeks later, or 2 years later...

If you DO sign a reaffirmation, you have 60 days after signing it that you can change your mind. (And since you know you don't want to keep the house, just don't sign...) Regarding when to withdraw the IRA, probably not a bad idea to wait until after filing. You would run a risk of losing that money if its sitting in your checking account - such as if the check hasn't cleared yet - at the time you file.

Your situation is a little different from the standard-you were very upfront w/ your attorney, and my guess is he expects you to be less than honest w/ the 341. That puts you in a dilemma... If the trustee doesn't ask any awkward questions, you're fine. If he does, you have to decide whether you will tell the truth (and possibly hurt your BK case) or lie under oath, which if found out, could carry bigger problems than just hurting your case. (BK fraud is not a minor crime.) If the trustee knows that you're not living in the house-and that you don't intend to-he will likely not allow your mortgage expenses and recommend you for a 13. If you have to keep the mortgage current for the entire process, until discharge, that will likely make it difficult for you to keep the apartment rent in good standing. ***I don't know how long you'll need to keep the mortgage current.***

I'm not saying your plans include any fraud-I'm just suggesting that you make sure you know exactly what is on your petition, and what your attorney is up to. Pre Oct. 17, he isn't responsible for any problems in your paperwork.

[concerned]

StaciMM-How bad is a 13 pre Oct. 17?

If we have to repay something, that's fine. I'm just so afraid that we will have to pay thousands every month for 5 years. Maybe I'm worrying for nothing. I'm not sure how our attorney came up with the figure, but when we first met with him, he said we would owe the same amount if we filed ch. 7 or 13 now. He said for Ch. 13 now (I believe) you only have to pay .10 on every dollar you owe. Is this correct? It's my understanding that after Oct. 17, you have to pay 100% of your disposable income. Do I have it right. We will owe our secured debt ($20,500). Plus any unsecured debt from after the house gets sold (approx. $50,000--maybe more). (Do they wait for the house to sell to calculate this?) This would end up being $7500 or $208 per month. We could owe more depending on what the house sells for. He said for the 7 we would probably have to come up with $5,000 for our cars.

My question is: Do I understand the CH. 13 pre-Oct. 17 correctly? If yes, I am up for a ch. 13. If no, please explain the difference!

If they don't ask any of these questions at the 314, are we automatically ok?