An expensive car repair during bk13

[shipo]

Thanks justbroke, those numbers make sense and kind of line up with my gut guess. I was "forced" into a Chapter 13 because there was no way I would have qualified for a Chapter 7 here in New Hampshire. The Chapter 7 vs. Chapter 13 thing is interesting as both have benefits and drawbacks if you just happen to be on the borderline of being able to file for either. I think the single biggest benefit of a 13 is the 7-year window before it falls off one's credit reports.

[justbroke]

This thread is interesting, does anybody know what the percentage of Chapter 13 filers is who are protecting property or other assets, versus those who simply pay back some or all of their unsecured debt? I ask because I didn't have one red cent of secured debt, mine was all of the unsecured variety, and it seems like I am definitely in the minority here.

I would say that at least 50% of Chapter 13 filers do so to protect property. I would say that 10-20% are "forced" into a Chapter 13 because they didn't know that they can't meet the provisions of a Chapter 7.

Here's some more interesting (actual and real) data for 2019...

• a total of 152,226 reaffirmation agreements were reported as filed in 481,471 chapter 7 consumer cases closed during the 12-month period ending December 31, 2019.
• For Chapter 13 completions, of the 43 percent of the cases closed (121,248 cases), the debtors received a discharge after completing repayment plans, down from 45 percent in 2018.
• Of the 121,248 chapter 13 consumer cases in which debtors completed repayment plans, 27,294 (23 percent) had plans that were modified at least once prior to plan completion, up from 22 percent in 2018.

Source: BAPCPA Report of 2019

https://www.uscourts.gov/statistics-reports/bapcpa-report-2019

[shipo]

This thread is interesting, does anybody know what the percentage of Chapter 13 filers is who are protecting property or other assets, versus those who simply pay back some or all of their unsecured debt? I ask because I didn't have one red cent of secured debt, mine was all of the unsecured variety, and it seems like I am definitely in the minority here.

[justbroke]

As for contributions to the 401k, if the debtor shouldn't borrow from it, how can they pay for emergency breakdowns , like furnaces and car transmissions without access to cash in their bank (or savings) account?

You can borrow from it. You just need to 1.) ask your attorney if you can borrow for a bonafide emergency, and 2.) make sure that you can actually afford the payroll deduction. I have done it.

In my experience, the court doesn't usually side with creditors. I have won against creditors 3 times. I went up against creditors 4 times. While it is a pay-to-play system, that payment is to leverage the court to keep creditors at bay.

The bankruptcy code is designed to help debtors and protect the debtors. A Chapter 7 is the perfect example of how the system works. What happened with the BAPCPA of 2005 was to make sure that the laws were applied consistently when it came to Chapter 7 versus Chapter 13. They messed up with that mess called the Means Test but they were trying to take the decision making away from the judges when it came to Chapter 7 versus Chapter 13. Some debtors actually need a Chapter 13 -- as I did -- so the code changes were only to force those that could afford paybacks into a Chapter 13.

I will also be the first to admit that a Chapter 13 is not a panacea for every financial issue. Like Chapter 7, it addresses the issues at the time of filing. While a Chapter 13 can deal with post-filing issues, the debtor's specific income, secured debt, and disposable monthly income, play a big part in whether post-filing issues can be managed. This is exactly why I converted from Chapter 13 to Chapter 7 because I realized that keeping the property was not worth it in the long run.

That's why you will find that some debtors are perfectly happy with their Chapter 13s, despite even some shortcomings. They leverage the protections (foreclosure, repossession, lawsuits) over the tight budgeting restrictions. Others find it burdensome because it doesn't account for life. Believe me, even the judges have opined on the issues of a Chapter 13 for debtors that later find themselves with financial difficulty. While there is an out -- conversion to Chapter 7 or a hardship discharge -- it comes with a price.

The pre-BAPCPA was no better. For those that chose Chapter 13 to protect property, the rules were similar but the court -- and Trustee -- would calculate your payment. The BAPCPA codified all of that while setting the guidelines on who should qualify for the quick Chapter 7 discharge. But that doesn't apply to the voluntary Chapter 13s who file to protect their property.

Life happens. A Chapter 13 may deal well with the first life event, but doesn't necessarily deal well with post-filing difficulty. In the end I can only fathom that without the Chapter 13, it would have been worse (foreclosure for me).

[Barbisi]

I agree with you Carmella -IMHO BK13 is not consumer friendly and seems to be less so since the "great 2005 reform".
Of course we never filed prior to 2017, but were in a CCCS DMP from 1999 to 2004, which was not at the time punitive -we were able to keep a few CCs open and active, we relocated (with the help of my late mother and the remaining CCs) after my husband's first job lay off to the NE before we were able to pay the remaining DMP balance off. And our credit improved over time to such a high level, we had a credit line of approx. 200K when we filed BK13 after the fixer upper fiasco.
We never had enough income to repay 100% of our debt, so I can't quite fathom others being compelled to pay such a high amount back, especially if there is clearly too much struggling going on - it appears a too high payment was set up by the court and nothing can be done at this point.
As for contributions to the 401k, if the debtor shouldn't borrow from it, how can they pay for emergency breakdowns , like furnaces and car transmissions without access to cash in their bank (or savings) account? It seems counter intuitive to not be permitted to use small accumulations to pay car repair bills or replace aging furnaces.
And as jb noted, naturally the court will usually side with the creditors because in the pay-to-play mode, they must always come before every thing else.
The law as every one surely knows, like life, often isn't fair!

[justbroke]

Congress did consider the savings and allows contributions into a 401(k) or ERISA account. Those are "protected" from the bankruptcy so it seems fitting to put the money into one of those accounts to help build the debtor's future.

In the end, the bankruptcy courts have found, time and time again, that a debtor should not put their savings, wants, desires over that of the creditors to whom they promised to pay.

The say to save it through the 401(k) or retirement account which is allowed.

[Carmella]

To take this one step further, it is in the Trustee's best interest if those in Chapter 13 can in fact save some money for the proverbial "rainy day". Why? Because that gives the Chapter 13 it's best chance of success.

I know BK is BK and a legal thing. But I wish it was a little friendly and more helpful. Wouldn't it be grand if we were allowed or even forced to have some savings. Even if we paid back 90% instead of 100% and had that 10% locked up until we had true need to keep us afloat.

I do understand BK is not really something to help us, but to get the creditors paid back. But I think it would help with success and wouldn't it be better for creditors if some of those who default might pay up instead. And some people might learn about savings so after 5 yrs they would be more apt to save than borrow.

[shipo]

aw bummer. At least it's behind you.

Yup, I'm currently where you will be this time next year, in limbo between Discharge and having the Chapter 13 fall off your record.

[Zombie13]

aw bummer. At least it's behind you.

[shipo]

Dang that must've been some refund then!

Well, sort of, we had a lot going on that year what with my wife losing her job and then getting a different, much lower paying, job and then a promotion and a couple of bonuses to me from my company, and I really had no idea how to estimate for W4 purposes. Obviously I screwed up because my return was something over four-grand, much to the joy of the Trustee.

[Zombie13]

Dang that must've been some refund then!

[shipo]

During the run up to getting a bankruptcy approved, the Trustee has a wide range of powers to look at things to make sure there is no fraud in the filing; however, as I understand it, once the petition is approved, the Trustee is limited to what is spelled out in your agreement, and unless you do something to rock the boat, that is where his or her powers stop. Here in New Hampshire, my trustee was allowed to ask for my annual tax return, and then if/when something seemed amiss, he could then dig a little deeper. The only question which ever arose was in either 2018 or 2019 when I got a sizeable tax return, he wanted all but $1,250.

[Zombie13]

Thanks shipo, good point. When we started the process back in 2016, we had to send 6 months worth of bank statements for review. We had just sold the old house within that timeframe, and just bought the next one, before filing. So the attorney said, the trustee asked/stated: "You had $15,000 that you spent in one transaction... what did you do with that money?!?!?!?!" Sounded like a shout actually heh, the way it read. The 15K value, is an estimate; I don't recall the exact amount. Because of that, I have wondered, if they have authority to monitor, or get notification, on any kind of transactions, on any account, be it checking, savings, money market, loans, lines of credit, etc. For the record, the transaction was for a down payment on the current house.

[shipo]

Thank you for your insights, everyone, all valid points.
$5k is not realistically achievable at this time; if it were, it could possibly be enough to be confiscated by the trustee. This is why we would rather not involve the attorney/trustee unless absolutely necessary. Based on prior experience over the past 4 years, we've learned it's best to minimize communication with them. The small amount of funds we are currently accumulating are all part of the total income the trustee is already aware of. The modification was done in October 2020. So, the funds we currently have, should not be a 'surprise' to the trustee.

I don't understand the concept of a trustee confiscating savings; that is, at least here in New Hampshire, a complete non-starter. Heck, at one point during my Chapter 13 I had over $10,000 saved up, which is how I bought my "new" car (which was 11 years old a the time) when my then current car died due to corrosion. The fact is, a Trustee has zero ability to look into your bank accounts, or under your mattress for that matter, to determine if you've managed to cut corners here and there and skimp save. To take this one step further, it is in the Trustee's best interest if those in Chapter 13 can in fact save some money for the proverbial "rainy day". Why? Because that gives the Chapter 13 it's best chance of success.

[Zombie13]

Thank you for your insights, everyone, all valid points.
$5k is not realistically achievable at this time; if it were, it could possibly be enough to be confiscated by the trustee. This is why we would rather not involve the attorney/trustee unless absolutely necessary. Based on prior experience over the past 4 years, we've learned it's best to minimize communication with them. The small amount of funds we are currently accumulating are all part of the total income the trustee is already aware of. The modification was done in October 2020. So, the funds we currently have, should not be a 'surprise' to the trustee.