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Chap13 voluntary dismissal after all secured debts paid

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  • Chap13 voluntary dismissal after all secured debts paid

    About 2 years ago our mortgage was foreclosed and a sheriff sale was scheduled. My wife and I filled for chap13 and have since been paying into the trustee and all secured debts have been paid including the arrears on the mortgage. The vast majority, about 75%, of the unsecured debts are for student loans which wouldn't be discharged anyways after the 5 years is done. We are considering filling a voluntary dismissal and resuming making payments ourselves on the remaining unsecured debt. The main reason for this is because following the chap13 plan would have us paying off the majority of our student loans by the end of the 5 years but but we have little left each week. Which makes saving up anything like a replacement car nearly impossible. I work 80miles from home and have over 300k on my car so a "new to me" car is inevitable before the next 3 years is done plus just found that boiler for the house is probably going to need to be replaced soon as well.

    My question is, what could happen if we do a voluntary dismissal? I understand we could be assessed back late fees and interest for the last 2 years which I'm pretty sure we can pay since we wouldn't have the $1500 a month trustee payment. But would they still foreclose even though the mortgage is fully caught up? I'd rather stretch my student loan payments out for longer than risk losing my job or not being able to heat the house.
    house.

  • #2
    Originally posted by Tachyon2u View Post
    My question is, what could happen if we do a voluntary dismissal? I understand we could be assessed back late fees and interest for the last 2 years which I'm pretty sure we can pay since we wouldn't have the $1500 a month trustee payment. But would they still foreclose even though the mortgage is fully caught up? I'd rather stretch my student loan payments out for longer than risk losing my job or not being able to heat the house.
    The lender can't foreclose if you are not in arrears, maintaining hazard insurance, and the taxes are current. Your issue would be with the unsecured creditors and, as you wrote, they can add on all the back accrued interest plus any contractual fees (such as attorney and collection fees).

    Do you understand that you can incur debt in a Chapter 13 in order to purchase a new/used car? It just requires permission from the Trustee and a simple motion to incur debt.

    Just make sure you run all the numbers backwards and forwards to understand what you'd be facing with a voluntary dismissal. Creditors may run to the courthouse to obtain judgements and then record the same judgement which becomes a judgement lien. You'll have to look at the potential impact of wage garnishment as well. Just because the creditor will charge you for the past due fees, compounded interest, and balances, doesn't mean that the creditor, or the junk debt buyer (JDB), won't just sue you immediately. It is very unlikely that the creditors would work out any payment plans (although a JDB may make offers and/or settlements).

    Why is your budget so tight? You say you're worried about heating the house or that you risk losing your job. What brings you to that conclusion?
    Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
    Status: (Auto) Discharged and Closed! 5/10
    Visit My BKForum Blog: justbroke's Blog


    I am not an attorney. Any advice provided is not legal advice.

    Comment


    • #3
      Thank you for the fast response.
      ​​​​​
      Without being able to save for a down payment financing a car would be unlikely. And replacing a boiler would be around $6k and I'm not sure how that would be financed unless i could still someone get a HELOC. Trustee payment is $750 every 2 weeks. After that and taxes, insurance, child support, we're left with about $1900/mo for mortgage, utilities, gas, groceries, repairs, etc. Before filing I had a garnishment and the most they could take was about $200 every 2weeks. Many of my unsecured debt is 8+ years old and may drop off soon anyways. For the student loans there are programs that cap payments to a percentage of income. It'll take longer to get out of debt but I think there will be more buffer from week to week.

      Comment


      • #4
        You do know that the unsecured debt's statute of limitations (SOL) are "tolled" during the bankruptcy? (Well, not actually tolled day-for-day, but if the SOL expires while in an active bankruptcy, the SOL is extended to 30-days past the expiration/end of the automatic stay.). That is why I suggested that the (smart) unsecured creditors would sue you immediately after your case is dismissed. Not all creditors are that smart or quick, so some may suffer the fate of the SOL.

        Are you speculating about replacing your furnace? Why is your Trustee payment $750? Did you have disposable monthly income (DMI) or is that secured debt payments (like a car)? Did you have a material change in your mandatory expenses after you filed? Your $1,900 seems low for two people (even for "just" the mortgage and utility allowances).
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment

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