2 Years into a 13 - Convert or stick it out?

[2bclear]

[lrprn]

While we wait for our attorney to tell us what is going on, is it possible for us to convert from a Chapter 13 to a 7 if our income hasn’t changed?

Since your husband is working a temporary job, then your income has changed because there's no guarantee going forward that the job he currently has can be replaced at the same income level as he has now. You may need to wait until after he sees what happens with the temp job to know what the right path is for you - an amended 13 or convert to the 7.

Whether you should stay in the 13 and amend it to match your increased mortgage payment or see if you can file a 7 depends on if you can qualify for the 7 and what you want to keep if you convert.

If you are able to file a 7, then to keep the house you must be current on your mortgage payments. Have you been making the mortgage payments since you filed the 13 or is your trustee? Are mortgage arrears being made up in your Ch 13 plan?

What happens if you decide to give up the house depends on which chapter you end up with. If you have to stay in the 13, then your lawyer can amend your confirmed plan to include the increased mortgage and the medical debts as new expenses. If you file Ch 7, you can walk away from the house and the medical expenses in full. Just DO NOT sign a reaffirmation agreement for the mortgages!

As far as the federal and/or state tax debt you owe, it will survive no matter what you do. However, if you file Ch 7, the IRS will work with you to come up with a reasonable repayment plan. If you stay with the 13, then they can continue to be paid within the plan.

Are you willing to give up the house or other secured assets to ensure you can live within your means every month? Is your combined income looking back the last six months lower than your state's median income for your family size?

You need to work with your lawyer to sort this all out and see what the best long-term solution is for your family. One thing for sure, at the very least you need to modify your current 13 plan because it sounds like you are going to crash when your ARM balloons (and I assume this is the reason your 13 payments are going up as well).

Be proactive - work with your lawyer NOW to figure out your options before you fall off the cliff. It's much worse to have your case dismissed by the court for non-payment and you should do everything possible to avoid that happening. Get going! Call your lawyer on Monday and explain everything that's going on in full. Good luck!

[2bclear]

Thanks so much for your reply. We have been (up until a few month ago) making our payments outside of the plan. We had no arrearage when we filed and just became late this year.

Rest assured, our attorney is aware of the situation and currently working to amend our plan to include the increased mortgage payment and increasing the medical expense line item in our budget. The issue seems to be that we may not have enough income to make that plan work. If the lender will do the modification at a fixed rate (which they were working on) we would be able to finish out our plan. While we are waiting for our attorney to tell us what the Trustee said about the plan and waiting for the lender to tell us if they will work the loan modification, I just wanted to gather infomration as to what is involved with a 7.

Also: I don't know if my husband's temp job status constitutes a change since he just got that job when we filed so that income is included in the plan. I was more curious about how one qualifies for a Chpt. 7 vs. a Chpt. 13 since when we filed we were told that we didn't qualify for a 7 b/c we were over the median income and there was too much equity in the house. Those things certainly have changed. Do you know where I can gather info about Chapter 7?

Thanks