New to Ch 13

[fslady]

I'm new to the forum and to BK but I've been reading previous posts and hope forum participants can give me some insights. There are references to Ch. 13s lasting 36 months but in our first meeting my attorney said that my payments would be for 60 months. How is the length arrived at and what causes a "shorter" length of time? How does BK affect retirement accounts? mine is from employer "contributions" - no IRAs or other voluntary accounts.

There is no mortgage involved since I rent, I plan to keep my car since the payments are about $200/month but the credit cards add up to $50,000! Right now I'm current on the cc payments but I'm getting NSF/overdraft protection on some of my utility bills and other payments. I've read that some people stop making cc payments when the BK process starts - is that normal? It would be a great way to have a little more to pay legal bills - the attorney says that the trustee sets his fee ($2,500) and that it's paid through the garnishment.

Can anyone tell me if this sounds pretty normal and straightforward? Like everyone, I really want as few problems as possible and hope to get some words of experience here. Thanks.

[cso5@]

Above State Median?

Must be you are above the state median?

Or have debt that can't be discharged in a Ch 7, like taxes / penalties / interest?

My plan is for 58 months, but it includes 1st and 2nd mortgage arrears.

If you rent, you aren't trying to "save" a house....which leads me to think you are above the median income for your state?

They arrived at my payment by taking how much I owed in non-dischargeable debt -- mortgage arrears, taxes, and how much in dischargeable debt, unsecured stuff like credit cards and personal loans -- figuring how much disposable income I have, and calculating how long -- not sure exactly how, but there must be a formula. My unsecured stuff is being paid at 4.97%.

Hope this helps!

cso5

[lrprn]

Welcome to BK Forum, fslady! Glad you decided to come out of lurk mode! Let's see if we can answer some of your questions....

There are references to Ch. 13s lasting 36 months but in our first meeting my attorney said that my payments would be for 60 months. How is the length arrived at and what causes a "shorter" length of time?

The current bankruptcy law states that Ch 13 plans must last for 36 months or 60 months. Typically 36 month plans are reserved for filers who show just enough disposable income on the required Means Test schedules to be pushed into Ch 13. Pretty much everyone these days gets to go 60 months, especially if their income is well above their state's median income for the number of persons in their household.

How does BK affect retirement accounts? mine is from employer "contributions" - no IRAs or other voluntary accounts.

Both my husband and I have continued to contribute to our retirement accounts during our Ch 13, plus we are paying back six "loans" that my husband took out against his retirement over the last seven years to keep us going before we filed (which I would never recommend doing to anyone!). In our bk district we are limited to 5% annual retirement contributions each - ask your lawyer what the standard regarding retirement contributions is in your district.

I've read that some people stop making cc payments when the BK process starts - is that normal?

When you are certain you are going to file bankruptcy, planning ahead is always the best option. An important part of that planning is stopping payment on all your non-secured debts like credit cards. All of these debts will be discharged in your bankruptcy - paying anything towards them knowing you are going to file makes no sense. If you are worried about creditor calls, get caller ID and an answering machine. You are not required to speak to them no matter what they say - in fact, talking to them can hurt you because they are trained to do whatever they can to get you to pay them, period. Don't fall for it!

Can anyone tell me if this sounds pretty normal and straightforward?

Yes. You mentioned "garnishment" and paying the trustee that way. In Ch 13 you have a monthly payment to the trustee and his/her % for administering your bankruptcy is paid through that payment. Some districts don't require an automatic payment - some allow you to pay your monthly payment with a personal check or even electronically. Ask your lawyer about the monthly Ch 13 payment options in your district.

Again, welcome! Ask questions anytime - that's why we're here!

[SinkingFast]

About the attny's fee,...........

Typically attnys will have you pay a portion of the fee up front, in advance of filing. Probably in the area of $800-$1K. Plus your filing fee. The remainder of the attny's fee get's paid in your plan payments.

Attny's fees are the first thing paid out in a Ch 13 plan. Your first few months of plan payments will go to pay-off your attny's fee.

If you've only been to one Consult, you may want to schedule at least a couple more with different attnys. Get some different perspectives. Meet a few more people. Maybe find THE one you'll be comfortable working with.

[HHM]

Regarding the 36 month vs 60 month issue. Under the old law, chapter 13 payments plan were 36 months, and only went over that time if you needed them too. Under new law, 36 month plans are for those "under" their state's median income, but still need to file Chapter 13, otherwise, plans are 60 months (unless, the plan can pay 100% to unsecured creditors in a shorter time).

The attorney fee. What you lawyer means by "setting of fee", is that the BK district you live in has set the amount of a Chapter 13 for which an attorney can charge without having seek approval from the court.

It sounds like everything you were told by your attorney is accurate.

[fslady]

Thanks for the replies

it is really helpful to hear from people who have been through BK and are coming out the other side in better shape than before.

Yes, my income is above the state median which makes me even more disgusted at myself for getting in this mess. And in many ways I have nothing really to show for the debt! Meals, gasoline, impulse buys - they all add up. I've been reluctant (and ashamed) about filing but one friend in whom I confided reminded me that the restaurants, gift stores, etc. got their payments from the cc companies months or years ago and I'm still paying so stop with the shame. I did sign up with a DMP and it kinda helped until the other VISA account jumped to 29.9% interest because of the DMP. That pushed me over the edge - I am not behind with any cc payments but that last bump in interest is nothing but pure profit.

I did talk with just one attorney but he came well recommended and I felt comfortable with him. I gave him a spreadsheet of my fixed expenses (cc payments, rent, car payment, utilities, etc.) and he said that he thought it would mean a 100% repayment. When he realized that the spreadsheet did not include groceries, clothing, medical, and other allowed necessities, he said that it could possibly be less than 100% since all of my "take home" pay was spoken for.

I checked several books out of the library to read up on BK and go through the process with a little more smarts. Thanks again and Merry Christmas to everyone - and let's all have happier New Years.

[lrprn]

.

Yes, my income is above the state median which makes me even more disgusted at myself for getting in this mess. And in many ways I have nothing really to show for the debt! Meals, gasoline, impulse buys - they all add up. I've been reluctant (and ashamed) about filing but one friend in whom I confided reminded me that the restaurants, gift stores, etc. got their payments from the cc companies months or years ago and I'm still paying so stop with the shame. I did sign up with a DMP and it kinda helped until the other VISA account jumped to 29.9% interest because of the DMP. That pushed me over the edge - I am not behind with any cc payments but that last bump in interest is nothing but pure profit.

Your situation is very similar to ours. We tried debt management too - it was the credit cards all pushing their APRs to 29% while we were in the plan that killed us as well.

I did talk with just one attorney but he came well recommended and I felt comfortable with him. I gave him a spreadsheet of my fixed expenses (cc payments, rent, car payment, utilities, etc.) and he said that he thought it would mean a 100% repayment. When he realized that the spreadsheet did not include groceries, clothing, medical, and other allowed necessities, he said that it could possibly be less than 100% since all of my "take home" pay was spoken for.

Yes, including your living expenses in your Ch 13 plan is very important! Here's a good list of living expenses to check yours against - http://www.ca-bankruptcy-attorneys.c...alculator.html . Remember except for what is mandated as determined by the IRS guidelines by the bk law (transportation, housing, etc) you are allowed to list what is typical in your community. And also look back over the last year or two to catch those expenses that aren't monthly - property taxes, car repairs, neighborhood fees, etc.

I checked several books out of the library to read up on BK and go through the process with a little more smarts.

Be careful to check the publication dates on those books, fslady. Congress in its infinite wisdom (and in return for multi-year, high-dollar campaign contributions from the credit organizations), passed a new bankruptcy law in early 2005 that went into effect on October 18, 2005 and totally changed many aspects of filing bankruptcy. If your books were published before October 2005, then the information in them will be out of date. If you can scrape the money together, get the newest updated Nolo Ch 13 book - http://www.nolo.com/product.cfm/Obje...1/213/161/129/ . It will be the best $34 you ever spent!

Thanks again and Merry Christmas to everyone - and let's all have happier New Years.

Same to you, fslady! 2007 will be a better year for all of us!

[fslady]

another question re: cc payments

I meet with the lawyer, paralegals, whoever tomorrow and I'm assembling the pay stubs, etc. (fun thing to do on Christmas day!) and wonder what I should do with 3 small credit card balances - all retail stores. One has a $300 balance and the monthly payment of $15 is due tomorrow - I'm thinking about including it in the BK filing. But I have 2 others - one with a balance of $65 from a pair of boots, and another with a $52 balance. I'd really like to just go ahead and pay off both of them. Would the court look badly on paying off the 2 small balances? I would like to go ahead and close one account but I'd really like to keep the other - I've had it nearly 25 years and have never put more than $700 on it with a credit limit of $4000.

I'm planning on not paying the 1 DMP ($850) and the VISA ($325) that are due the first week of January.
Thanks for all the help - this forum really makes me feel more prepared for BK than if I hadn't found it.

[lrprn]

Generally speaking, payments of $600.00 or more total to an unsecured creditor made within 90 days of filing bankruptcy is considered a preferential payment. Since these amounts are well below that, it's highly unlikely these will be seen as a preferential payment by a trustee.

*However* if you are paying these two small balance cards off thinking that you will be able to leave them off your creditors list (which you can if the balances are zero) and then keep them activated after filing, that is not likely to happen. The major and store credit cards keep a centralized database of sorts that they share with each other, so even if you don't list a card, they will find out you filed anyway. Very occasionally a credit card will slip through Ch 7 or 13 and not be cancelled, but that is rare.

Remember getting a fresh financial start often means giving up things we have deep emotional attachments to, such as your long-standing credit card. It might survive, but please be prepared for it to be canceled, 25 year customer or not.

[HHM]

Also too, preferential payments are not too much of an issue in a chapter 13.

So paying off a card with less than a $100 balance will not cause a problem with your BK...but lrprn is right, even if those cards have a zero balance, odds are, those accounts will get closed some time after you file BK. Store credit cards are expecially notorious for closing accounts after they find out (usually by a routine credit audit) a customer has filed BK.