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What is the point of Chapter 13??

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    What is the point of Chapter 13??

    I just had a consultation with an attorney. I make too much to file Chapter 7. He was explaining Chapter 13 to me and I really just wanted to throw up and/or cry. I cannot believe I'm in this situation. Anyway, it sounds like the trustee will own me for the next 5 years, if I should choose to file. Am I missing anything? Ugh.

    #2
    Yes. The Trustee doesn't own you. In fact, I made all my budget decisions on my own and how, when, and where I spent money. I believe that a debtor has to think as if as strict budgeting with oversight (the Trustee is the oversight). I only talked to or receive info from my Trustee once a year (an annual report or sorts) and then on two other occasions initiated by me (motion to modify plan). That's the extent of their "control" over me.

    If you can't or refuse to budget, then a Chapter 13 can seem like a lot of control. The control is that you can't just go out and incur more debt, without permission, and must learn to budget and save. It is not easy, but it was 1000x's easier than I thought it was.

    Since you would be in a 100% plan, you should think about whether you are better off negotiating with hour creditors, since you'd pay them anyhow. The real reason to go into a Chapter 13 (100% plan) is that you're saving property (your home). I don't think that someone with sufficient income should go into bankruptcy to save a vehicle, but that's me. If you're not being threatened by the IRS with levy actions and liens or your home is not being threatened by foreclosure, I don't see the benefit of a Chapter 13 for someone that would be in a 100% payback plan anyhow.

    I don't know how much income you have, but you may want to think strategically. Such as stop paying for the car, save two months worth of those payments, and buy a dependable used vehicle. Start thinking about other ways to stave off the creditors.

    I won't have any magic formula for you.

    If you're in a 100% plan and your disposable monthly income (DMI) exceeds the amounts necessary to fund the plan, then you would just propose a plan that pays the 100% over the life of the plan. Do not pay your DMI as I think that's fatal. Just pay your plan base / 60 per month despite what your attorney suggests or your Chapter 13 Trustee seems to think. In a 100% plan you are more in the driver's seat when it comes to what you pay each month so long as it pays 100%. Now, if paying 100% is a stretch, then that could be an issue.
    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 am learning to budget. Right now, my debts exceed my pay (only paying minimum!) by about 700 a month (including my household expenses). I am trying to get another car, nobody wants to bother with me. I commute round-trip of 50 miles a day, so I cannot really get a beater car. My house is behind 2 months. I am the person who you commented previously on, I was using a DMP and cannot keep up. I have medical bills out the wazoo.
      What do you mean by 100% plan?
      I do have another consult this Friday with a more local attorney, the attorney today was from a larger bankruptcy center. Hopefully the one-man office attorney will help me understand better.

      Comment


        #4
        A 100% plan is where you are required to pay back all your unsecured debt over the life of the plan. That's usually required where if interest other factors removed, you could in fact pay a 100% premium to the unsecured creditors over the life of your Chapter 13.

        Budgetting is difficult because it seems, in my experience, that every month has a challenge! I love when there's a month with no special things creep up out of nowhere (like two new tires for the car... or even four!).

        If you're saying your home, then a Chapter 13 is exactly designed for that; protecting property. A Chapter 7 would have never fixed that issue.
        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
          The biggest thing a chapter 13 did for me was get rid of the horrible interest that I was paying on my credit cards. I was paying 20-30 percent interest. Now yes I could tried to negotiate with them but when I researched this it turned out to negotiate effectively usually you have to be behind on payments for 3 months or more and that will do damage to your credit anyway. Also there's no guarantee if you settle a credit card you have to keep paperwork and make sure they don't come after you for the rest of the debt and you have to pay taxes on the portion that's forgiven.

          In a chapter 13 you pay back all or some of the debt depending on your monthly income and expenses. I was in a 100% plan so I was suppose to pay everything back but two creditors didn't file so I didn't have to pay them and they can't come back later or if they do all I have to do is send them my discharge papers. Its a lot more official than a settlement.

          I also felt I needed to be forced to budget, and bankruptcy made it official, I knew I would be in trouble if I missed that payment. But everyone is different do a lot of research, talk to 3-5 lawyers don't just trust that first one maybe another one will have better advice.

          Comment


            #6
            Having been through a 5 year Ch 13 (successfully discharged nearly a year ago), you learn early on that the Ch 13 process is rigged against the debtor. Congress and the financial industry wanted to make it that way, sadly.Biggest reasons for filing a 13 are to save a home and you are behind on your mortgage or you are behind on our taxes. I was both and over 100K in unsecured debt when I filed. One way to make it successful is the become knowledgeable about the Ch 13 process. Read one of a number of books out there on how to file a 13. Read this forum often, because the books don't cover everything. For example, I have yet to find a good explanation/definition of a 100% plan in those books- It's 100% of all of your claims, not 100% of what you have left after expenses, which is why JB and others will tell you that you may have some $$ left over in a 100% plan. Visit your BK court's website and read up on the local rules. As JB and the others have said, the critical key to success is budgeting. Related to my first point is presenting a Ch 13 plan that accounts for your assets and expenses in a way that benefits you first and satisfies the trustee/court.

            Comment


              #7
              switch625 the 100% thing comes from how a plan is to be confirmed in section 1325 of the bankruptcy code (for Chapter 13s). It's legalspeak, but it says that the court "may not" approve a plan UNLESS a.) the debtor pays no less than the amount of the claims, OR b.) the debtor pledges all of their disposable monthly income to be paid to the unsecured creditors under the plan.

              Courts has translated that "no less than the amount" to mean 100%.

              Some Trustees and even debtor attorneys try to get a debtor to pay more of their DMI than is required to pay all the claims 100%. It's not required as the code has an "OR" in that part of the code on confirming (approving) a plan. It's not paying "ALL" the claims AND "ALL" your DMI.

              But, that's the history.

              I believe that the issue is budgeting but also making sure you have a feasible plan. Trying to save property when it's only putting you back in the same situation, will never yield the best outcome. I actually learned this 6 months into my Chapter 13 and dumped one of the properties that I had as a rental. Saving that property was not worth the trouble or the issues with trying to keep the property. Sometimes, we just have to let go of "things" to improve our life.
              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


                #8
                I met with an attorney this morning. I really liked him. He is going to try to get me into a 7, but it’ll be tight. I will go back to actually begin the paperwork toward the end of the month.

                Comment

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