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Advice on how I should so to prepare.

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  • Advice on how I should so to prepare.

    My wife was in a car accident last fall and ended up laid out long enough that she had to resign from her job. Then she was diagnosed a few months later with an auto immune disease compiled with on going migraines and spinal issues. Regardless I feel that we have a fairly sound excuse on why things spiraled downward. So since she has decided to go back to school and currently taking online classes for another degree that will give her closer job opportunities. And stave off the required 2 hour + drive each day downtown (only place her current job opportunities are / driving hurts her spine).

    So we lost 40k a year in income and were already (stupidly) in heavy debt. Although we were fine and doing OK month to month (no late payments in 8 years). Now that she isn't working we are screwed. The embarrassing part (and huge issue) is we had booked a trip awhile back and passed the cancellation date. So we went anyhow. We also (another stupid idea) ended up losing the student loan money distribution last minute as she just missed enough credit hours. Then owed instead, flipping us 6k shorter than we thought overall.

    Currently we both need to file as we carry about the same debt amount. I make good money and I am not sure if I can even qualify for Chapter 7. But figured chapter 13 would be better than nothing at this point. Considering however that last month we put our trip on a card I have come to realize I screwed up. So I have a few questions in regards to everything.

    1. If I keep making the payments on the card I charged our trip expenses on, then waited say 90 days or more will it make the chances go up of being able to discharge it?
    2. If they challenge it and I can not, do you pretty much just keep making your minimum payments?
    3. I keep looking up information on chapter 13 payments and come across that they take ALL your disposable income. I am guessing the calculations take into consideration living expenses? Food, gas, house, car, utilities etc?
    4. If you do file chapter 13 do they take into consideration house hold income or just the filers?
    5. I "might" be getting a settlement from my wifes accident. It won't be much, but if we do should I pay off some of my debt prior to filing? I am guessing if they see the money they will take it?

    I figure if your sinking chapter 13 still can keep you alive and will be better than nothing?

    I know people always post walls of texts with a bunch of questions (prob annoying) but I am hoping to get some simple insight on how to go forward. I just want to make it month to month until my wife works again. And I am completely fine paying off anything I can. But that's also another question, should I be paying some of the cards off if possible?

    Thank you very much!

  • #2
    Originally posted by Taipans View Post
    1. If I keep making the payments on the card I charged our trip expenses on, then waited say 90 days or more will it make the chances go up of being able to discharge it?
    There is usually not a lot of concern as things age. Chapter 13s usually don't have as much scrutiny as Chapter 7 cases so I don't think it's a big issue. Waiting 90 days is okay, but you are likely throwing good money away anyhow. It is very rare for a Chapter 13 creditor to complain (file an adversary proceeding) about "recent" charges.

    Originally posted by Taipans View Post
    2. If they challenge it and I can not, do you pretty much just keep making your minimum payments?
    This is very rare so i will not even address it.

    Originally posted by Taipans View Post
    3. I keep looking up information on chapter 13 payments and come across that they take ALL your disposable income. I am guessing the calculations take into consideration living expenses? Food, gas, house, car, utilities etc?
    There is a calculator at Legal Consumer known as the Means Test calculator. There are standardized amounts for things. These standards actually come from the IRS Financial Collection Standards and used by the United States Trustee as a tool to administer the bankruptcy program. The general expense allowances are at https://www.justice.gov/ust/means-testing. But remember that the Means Test is not the end of the inquiry. This is why you hire an attorney.

    Originally posted by Taipans View Post
    4. If you do file chapter 13 do they take into consideration house hold income or just the filers?
    Household income as it contributes to the debtor's expenses. For example, if only one spouse is filing, then the other spouses income is added 100%. Then the non-filing spouse's expenses (not based on Means Test, but actual expenses) are backed out. If there are other wage-earners in the household, then their income is not added, but their contribution is considered. For example, if you have a working child at home and they pay $400 towards food, you must figure out how much of that contribution is helping you; for food, it's probably not helpigg you but feeding them. But, consider a $400 contribution towards rent/mortgage. That would be helping you so you are required to reduce your expense for rent/mortgage by that contribution.

    Originally posted by Taipans View Post
    5. I "might" be getting a settlement from my wifes accident. It won't be much, but if we do should I pay off some of my debt prior to filing? I am guessing if they see the money they will take it?
    Well, "you" may be getting a settlement or is "she" getting a settlement? I would not pay off anything if you are filing! That is considered a preferential payment and is subject to clawback.
    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
      I really appreciate the response! Thanks for taking the time to address everything! As of right now my spouse is not working and will not be until she is done with school (2 yrs). So obviously they have nothing to take into account on that end. However if I do only qualify for CH13, does it get amended when household income changes? Also my daughter works part time, but does not contribute anything. So I am guessing her's wont be considered either?

      My wife would be getting the settlement, but you did mention household income. Not sure if that chunk of money in the bank account would be taken away or not? Or if we need to make sure it is kept separate from all of my stuff (like her own checking). We put off filing for now due to that situation. Although if we (her) gets money I was not sure if I should pay down something, use it to fix up the house etc. Not sure what would be a good idea (or even if we should worry about it if its under her). HOWEVER, considering we both carry a lot of debt she was thinking of filing as well. But if I am reading it right to qualify for chapter 7 they will still consider my income.

      Again thank you for the help!

      Comment


      • #4
        Originally posted by Taipans View Post
        I really appreciate the response! Thanks for taking the time to address everything! As of right now my spouse is not working and will not be until she is done with school (2 yrs). So obviously they have nothing to take into account on that end. However if I do only qualify for CH13, does it get amended when household income changes? Also my daughter works part time, but does not contribute anything. So I am guessing her's wont be considered either?
        To your question on whether future income is taken into account, the answer is it depends (and mostly by District and Chapter 13 Trustee). If your daughter contributes nothing, then she offsets no costs and her income is then "not" considered at all (to the extent that she contributes to household bills).

        Originally posted by Taipans View Post
        My wife would be getting the settlement, but you did mention household income. Not sure if that chunk of money in the bank account would be taken away or not?
        To the extent that it is her settlement, some property issues related to marital property (it really is hers though), and it's not commingled with marital funds, it should be something that you don't even need to mention (if she it not a debtor filing in the bankruptcy). Additionally your State may have exemptions which could exempt certain proceeds from accident settlements. I would certainly mention this during my 3-5 bankruptcy consultations while I searched for an attorney to represent me.

        If you decide to file Chapter 7 there would be some differences, but you may still be able to exempt the settlement funds.
        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


        • #5
          OK, so chapter 13 (don't mention it), chapter 7 it "possibly" could not be exempted. Last question, considering CH13 ends up either having a 3 or 5 month payment plan. Does that plan hold a total balance, much like a loan? If so, is it possible at some point just paying that balance off? Due to inheritance (which is at some point down the road), or due to say the side settlement my wife gets?

          And if my wife files I assume they take away the settlement amount she receives. Lets say she is awarded one but holds off on filing for a bit, could you use those funds for say home repairs, paying down the car loan etc?

          Comment


          • #6
            A Chapter 13 is typically 36 months (below the median) or 60 months. It is sometimes in between. The Chapter 13 has something known as a Plan Base which is the "minimum" amount that must be paid. There are other factors that could increase the Plan Base.

            As to whether you can pay the Plan Base and be done is fact specific to your District and Trustee. If you're not in a 100% plan you may be required to pay 100% of all allowed claims. That value is typically much larger than the Plan Base (because the Plan Base is based on your secured debt payment, remaining attorney fees, trustee percentage, and disposable monthly income).

            Whether or not a settlement from a liability case is exempt is also fact specific. It typically depends on how the settlement is parsed (which part is medical, suffering, punitive) and what exemptions are available in your specific State.
            Last edited by justbroke; 07-19-2017, 10:17 AM.
            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


            • #7
              Once again thank you very much for the help. I suppose at this point I need to talk with an attorney and get an idea on what I can and can't qualify for. The only two questions I have that I just thought of is the stopping of payments until the case has gone through. I know with a chapter 7 you stop paying on debts to be discharged right when you file. However I am not sure how it works with a chapter 13? And if you are suppose to stop, you obviously will have a bit of extra income during that period. I am wondering what you can do with it? If I had the extra amount I would get some things fixed on my house.

              Lastly (promise), do they calculate your income for both chapters based off of the past 6 months? I believe I read that somewhere. I have been ciphering money from my retirement to try and get into a better current situation. Of course at the end of the year that is factored into your income when filing taxes. So I was not sure if that got added onto your total monthly income.

              Comment


              • #8
                For a Chapter 13 something known as disposable monthly income (DMI) is calculated. It is based on your income less allowed expenses. Those allowed expenses are based primarily on the IRS Financial Collection Standards which have been modified for the United State Trustee (UST) Means Testing program (https://www.justice.gov/ust/means-testing). Most people that file bankruptcy have already stopped paying much of their debt and don't need to consciously decide to stop payments. As for "extra" money, that would depend on your DMI and how much you must dedicate to the Chapter 13 Plan.

                Yes, income is calculated the same using something known as the Means Test (which I mentioned briefly). You can try a sample Means Test calculator at Legal Consumer if you want to play around.

                Don't take this the wrong way, but stealing from your future to pay for your present almost never works out. Many of us here are guilty, myself included! It almost never works and what you end up with is a lot less money in your 401(k) and wondering if you'll ever be able to retire.

                Since your wife is expecting a settlement I highly recommend that you consult with 3-5 bankruptcy attorneys to review your options.
                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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