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Trying to decide and some questions..

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  • Trying to decide and some questions..

    I am contemplating filing. I make too much for a CH7. My income is $127k before taxes not counting an average $40k bonus which has been consistent last few years.. But not guaranteed of course.

    I have no mortgage (I rent a home). Total unsecured debt is around $175k across 20+ creditors, most of which was defaulted on 2.5 yrs ago now. Surprisingly, I have only been sued once thus far by a local credit union. They alone are $90k of this debt and I am on a payment plan with them.. $600mo for a long time to come. LOL. They already have one judgment against me.

    I also owe about $15k in student loans (in deferment) and $35k to the IRS (on an installment agreement).

    Given my income, I would assume I'd be 100% repayment. Does it make sense to file or would you "ride this out"? I know I am only 2.5yrs into my state's 6 year SOL, so I assume things will only get worse later as debt is sold, resold again, etc. I just prefer to be in control here and the uncertainty of future suits, judgments,. garnishments, etc. is unsettling and literally keeps me up at night.

    Couple other questions..

    1. Is CH13 basically financial purgatory? Meaning no more disposable income at all i.e. entertainment, vacations, etc? EVERY purchase scrutinized and judged? What about unexpected purchases? Or take my daughter who will need a car when she gets her license in January?

    2. I assume my yearly bonus will be taken?

    3. I will own a few assets outright by the time I would file... Motorcycle and UTV.. safe to assume I will lose those?

    4. I need to start working my on retirement, what leeway is there here?

    Appreciate any insight and advice!

  • #2
    Originally posted by revobasher View Post
    I am contemplating filing. I make too much for a CH7. My income is $127k before taxes not counting an average $40k bonus which has been consistent last few years.. But not guaranteed of course.

    I have no mortgage (I rent a home). Total unsecured debt is around $175k across 20+ creditors, most of which was defaulted on 2.5 yrs ago now. Surprisingly, I have only been sued once thus far by a local credit union. They alone are $90k of this debt and I am on a payment plan with them.. $600mo for a long time to come. LOL. They already have one judgment against me.

    I also owe about $15k in student loans (in deferment) and $35k to the IRS (on an installment agreement).

    Given my income, I would assume I'd be 100% repayment. Does it make sense to file or would you "ride this out"? Based on the limited info available, I would file, unless I could reasonably increase payments on debt and pay it off in 5 years. I know I am only 2.5yrs into my state's 6 year SOL, so I assume things will only get worse later as debt is sold, resold again, etc. I just prefer to be in control here and the uncertainty of future suits, judgments,. garnishments, etc. is unsettling and literally keeps me up at night. A Chap 13 will give you the control and certainty you desire. Even with no interest, it would take you 12 and half years to pay off the $90K debt at the rate you are paying. Adding interest significantly increases that time. As soon as you file BK, interest on unsecured debt stops. So, your 100% will include only the principal.

    Couple other questions..

    1. Is CH13 basically financial purgatory? No, but you should expect your budget to be tight. If you are correct that you would be in a 100% plan, then you should expect your plan payment to be about $4100 a month. I am including your student loan in that which could probably stay in deferment. I am also including a 10% trustee fee, which could be too high, but I didn't include any attorney fees that could be paid within the plan. Meaning no more disposable income at all i.e. entertainment, vacations, etc? You will be allowed a certain amount for entertainment when calculating your disposable income. EVERY purchase scrutinized and judged? No. Once your plan is confirmed, you spend your money however you want, including for a vacation, as long as you make your plan payments. The trustee will not look at your spending at all after confirmation unless you have the need to petition to modify your plan at some point. What about unexpected purchases? You spend as little as you can and put away whatever you don't spend so you have an emergency fund. Or take my daughter who will need a car when she gets her license in January? How about she gets a job and saves money to buy her own car? She doesn't have a car now. I am sure she can continue to survive without one after she gets her license. Being able to buy a car for your newly licensed daughter is a luxury that your plan payment will not include. But, as with any other spending, if you can do it without incurring debt and make your plan payment, there is nothing to stop you.

    2. I assume my yearly bonus will be taken? Maybe. If you have enough disposable income to pay 100% of your debt without the bonuses, maybe not. How bonuses are handled varies by plan and trustee. Make appointments to consult with a couple of BK attorneys. Most give free consultations. They will be better able to answer this kind of specific question.

    3. I will own a few assets outright by the time I would file... Motorcycle and UTV.. safe to assume I will lose those? Not in a Chap 13. Assets are liquidated in Chap 7, not in Chap 13. If you have assets that are not covered by bankruptcy exemptions, your plan must pay to unsecured creditors at least what they would receive if you filed a Chap 7 and those asset were liquidated for distribution to the creditors. If you are in a 100% plan, then that will happen regardless of the value of your non exempt assets.

    4. I need to start working my on retirement, what leeway is there here? Retirement savings won't be considered in calculating your plan payment, but if you can afford to save for retirement and make your plan payment, there is nothing to stop you.

    Appreciate any insight and advice!
    LadyInTheRed is in the black!
    Filed Chap 13 April 2010. Discharged May 2015.
    $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

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