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    Chapter 13 Question

    Spoke to an attorney today. I will have to file a chapter 13. We don't have a dollar amount for repayment yet but from what I am reading, it sounds like we will be just as broke as we are now. Is that your experience with Chapter 13 or are they able to put things in it (expenses) to allow for a little breathing room? The thought of never being able to buy a gift for my children is a littler more than I can deal with right now. I know that is the least of my worries but I would like to think things will be easier and not harder. Thanking you in advance for any insight you can provide.

    #2
    It depends upon what you call breathing room. If by that you mean, will you have enough for your normal living expenses, and normal life, plus a little left over? Yes, you should. However, if you're asking if you'll be able to afford to live if your monthly living expenses and such (without factoring in debt service) exceeds your available income, then you may have a problem.
    Latent car nut.

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      #3
      I echo what shipo posted. You won't be able to make impulse buys and you won't be able to purchase extravagant gifts. I went through Chapter 13 with 2 children and a spouse. The children had absolutely no clue. The spouse didn't even realize I was in a Chapter 13, although she "knew" the I filed. I did things to make life better for them. The budget was tight but manageable. The kids had everything that they needed and even things that they wanted.

      You have to think of a Chapter 13 the same way as having a fixed income with big expenses. You simply can't afford certain things today. You actually may be able to afford them during a Chapter 13 (because all the unsecured debt payments disappear). A lot depends on whether you are able to budget and stay on a budget. A Chapter 13 will never work for a debtor that can't or refuses to budget.

      Welcome to BKForum.
      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

      Any advice provided is not legal advice, but simply the musings of a fellow bankrupt.

      Comment


        #4
        The purpose of a chapter 13 is to pay every last dime to your unsecured creditors on top of taxes and living expenses, which will be tight, but not impossible going forward. So the trustee won't allow a buffer and you cannot create a buffer out of thin air. Many expenses such as food and household items are driven by IRS numbers for your area and cannot be exceeded. Furthermore, some expenses without IRS numbers have a low limit set by the trustee such as approximately $100 for entertainment for households of any size. The entertainment limit will make you get rid of cable real fast because you'll be borrowing from the entertainment budget to fund the kid's Xmas gift. Life happens during a five year chapter 13, and there is no buffer for that either. But you can modify the plan due to major life events like a car breaking down as long as your creditors are still paid at least the amount they would have received in a chapter 7.

        But you did free up some cash when you stopped making minimum payments. If you spent the money on eating out and gifts, that windfall will go to your unsecured creditors. If you spent the extra money on allowed budget categories with no suggested IRS amount, that is good. Some of the allowed budget categories without a low cap include reasonable charitable contributions, home maintenance, recurring medical and dental, a reasonable 401k contribution, etc. You will need to have a previous history of expenses and documentation with receipts or bills. That's why I said you can't create a buffer out of thin air. You had to be spending the former minimum payment money strategically prior to filing. Once you file, you are stuck with the budget you submitted and most people end up having their plan payment rise due to unreasonable expenses or lack of receipts to prove the budgeted expenses.

        I think most of us found that the plan payment is going to be a lot lower than the sum of the minimum credit card payments. The plan payment will be barely affordable while the sum of the credit card payments were not even close to affordable. While your plan payment is affordable, you cannot fix a cash flow problem by skipping a trustee payment, mortgage payment, car payment, or post-petition taxes. A missed mortgage payment is a material breach of your plan.

        Hopefully you will take complete ownership of the budget because it's probably the most important thing in a chapter 13. If you have a good lawyer experienced with 13s, he'll know what will fly and what won't. We can help here as well although what is tolerated varies from trustee to trustee. Most trustees will try to extract every last dime from you though.

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          #5
          There are obstacles in Chapter 13, but I will say it's worth the struggle because there was no way we would ever pay off our debt or paying on credit cards with interest that makes it so we could not ever get ahead. The stress under Chapter 13, paying back 100% is so much less and different than the debt before filing. It's wonderful to know in 5 yrs we will be debt free. After we filed I felt like a ton was lifted of my shoulders. Paying back 100% is not easy, but with my Catholic upbringing I relate it to penance! The struggle is real, but worth it in the end.

          Some people are able to save during Chapter 13 and some are not able to save. My frustration is not having an emergency fund.

          That being said we have enough to get by and are doing without somethings, but we have been able to live fairly the same lifestyle. Our biggest obstacle is one car needed major repairs that are too costly even under the best circumstances. There is a legal procedure to buy another car, but there's a lot of red tape.

          We have paid off our first mortgage so we should have more money, but then Covid happened and I lost my second job and my husband had some overtime which helped, but did not make up for my loss of income. Our stimulus checks either helped with our regular budget or helped with necessary things like new car tires and fixing a leaking toilet that was leaking for far too long since we had to pay cash.

          I will say that if we were not minimally helping our young adult daughter it would be easier on us. We do scrimp more since our values are to help her during this time of covid when her pay was cut. Now things are looking up and we will be giving her less financial assistance (helping with groceries) She lives in her own apartment and is moving in with her boyfriend so her finances are looking up. She had a pay cut during covid that's now restored and then will share expenses with her boyfriend. We have already cut back on the amount we were helping her. By summer it will be more like occasional help if needed or keeping her on the cell plan vs helping with groceries and household items (detergent, etc). And I think we will even start the process to buy another car. Last week I got an advertisement from a dealership that can help during "open chapter 13," but I want to check with the dealership I have used since 2002! We have 22 months left of our 60 month plan.
          I am not an expert. I just share my experiences in the Wonderful Wacky World of Chapter 13! Filed 3-30-18 Confirmed 7-11-18 Discharged 6-8-22

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