Having to pay all creditors...?

[fedupw/ccdebt]

I have a question on the possibility of having all my cc creditors filing claims on my wife and myself... Have $130,000 in unsecured debt (mostly due to medical issues). Am current on our mortgage, do not have any car payments (1999 Chevy Venture, '95 Nissan Infiniti, and '86 Crown Vic for my two sons) as our cars are old and all have over 120,000 miles on them.

However, I am wondering what would happen if all of our cc creditors did file claims on us. Would the trustee and judge make us pay the entire amount owed, or would they use a percentage since, according to the means test, we would have around $1,050 disposable income to apply to the debt?

I am worried that we would somehow be forced into a chapter 7, and I REALLY don't want to go down that road, for many reasons... Do they use the total amount of disposal income to figure out how much each creditor is going to get, even if they all file claims and I can't pay the entire amount over a 5 year period?

Any thoughts would be greatly appreciated.

[HHM]

All you pay is your disposable income for 60 months. Assuming you last all 60 months and receive a discharge (only about 30% of chapter 13's end in a discharge), any remaining debt owed, is discharged. Yes, your credit cards WILL file claims (most of them anyway). What you pay back to creditors is based on 2 factors, (1) the amount if your disposable income, (2) the amount creditors would receive if you filed chapter 7. Note, there is no set percent you have to pay back.

Thus, if your disposable income is $1,050 per month, you will pay back $63,000 over the course of your plan. Obviously that number is less than $130,000. Thus, any balance on your unsecured debt that is left over at the end of your Chapter 13, will be discharged (eliminated). The other factor, "creditors must at least receive the amount they would receive in a chapter 7" sets the minimum amount the chapter 13 plan must include. So, for example, if you had $50,000 of unexempt equity in your home, the Chapter 13 plan MUST pay back at least $50,000. Since you are paying back $63,000, this factor is a non-issue (and it is generally a non-issue in most chapter 13's).

[chloe0724]

HHM, then sau in my instance, I have no equity and if I were to do a chapter 7 liquidation (which I can't because of my income) the creditors would get nothing. This is part of the rule I don't get.

We are in debt up to our eyeballs, we are upside down on our house and the only thing we own is a 2002 acura with close to 100k miles on it. So there is nothing to get, but because we make over the medium income, we have to complete a 13. I am fine with that. Actualy feel better becaue I am repaying atleast a part of the debt owed. But it still doesn't make sense,

[HHM]

The liquidation value sets the "minimum" you have to pay back. In essence, you read the liquidation value as...."The plan must at least pay $xxxxxx" For most debtors, the liquidation value is 0. Liquidation value is the floor value of the plan.

Disposible income sets the the actual amount you will/can pay back.

The only time liquidation value comes into play is if you have very low disposible income, but have many non-exempt assets. (a rare situation).

For example, lets say a debtor, all things considerd, has $500 per month in disposible income; thus, that debtor would pay $30,000 over the course of 60 months, $30K is the debtor's plan base value. BUT, lets assume this debtor has $60,000 in NON-EXEMPT home equity. This debtors chapter 13 would be dismissed because the liquidation value ($60k) exceeds the plan base value ($30K).

For most chapter 13 filers, liquidation value is a non issue since usually their plan base exceeds liquidation value.