Attorney says file Ch7, then 13

[katrina03]

My husband and I went to an attorney to seek advice about filing Ch 13 in Ohio. Our house is in foreclosure and we have lots of credit card debt. We haven't been able to pay on anything due to my husbands underemployment situation for the last year. We want to save our home, but thought we had too much equity to file Ch 7. The lawyer said when you add in attorney fees and interest to our mortgage balance, our equity is probably exempt. She said I should file Ch 7 first to hold up the house sale (sale is probably in 6weeks). Then my husband should file his Ch 7 (to delay even longer); then we should file Ch 13 to get the house back on track. All of this to buy time so he can get a better job. Has anyone done anything like this? We also have 2 cars that are almost paid off. She said nothing would happen with the cars until my husband files his Ch 7 because the titles are in his name. (but the loans are in both our names). Then we would have to pay back the equity to the court in order to keep them. Does any of this make sense?

[poorme]

Hopefully, some of the experts here will add some thoughts, but since your home is going to be sold soon ya'll need to act pretty soon. Doing a 7 & 13 is what's referred to as a 'Chapter 20' and I believe the bk rules changes may have modified the conditions where that's favorable. Basically, in a '20' you discharge all of the debts you can in the 7, and reorg the remaining (smaller) balance in a 13.

I am a big fan of using the laws to forestall/delay the eventual relief from stay that your mortgage holder will ask for and get. I was able to push out the foreclosure sale of my house by nearly three months using several tactics that probably drove the mortgage co's lawyers crazy, so do that if you have to. Oh, and one other thing - unless you feel solid with your attny - DO get a free 2nd opinion!

[HHM]

The problem with the so called "chapter 20" under the new law, is that the mortgage company can now move pretty fast to "lift the automatic stay" that prevents the bank from foreclosing (they can get the order lifting the stay within 30 days).

I would have to check the "discharge" provisions of the BK Code, I don't have them in front of me and I don't remember off the top of my head...but, there may be a restriction on when you can file a chapter 13 after a chapter 7 discharge. Under the old law, there was no restriction. Your attorney may know better...

but also consider this...the attorney you spoke with has turned 1 bk, into 3 bk's, which means she will receive fees for 3 cases instead of 1. I would suggest consulting with a couple more attorney's ASAP.

The other problem with Chapter 20's is the means test. If you can qualify for a chapter 7, that means you have little to no disposable income...so if you have "some" disposable income (even if you can still qualify for a chapter 7), odds are, your unsecured creditors would not get anything, or very little, in the chapter 13 anyway, so it's a moot point to file chapter 7 first.

[katrina03]

Thanks, HHM and poorme. My husband and I are going to get another opinion or 2. I really don't want this to end up being 3 bk's--she even said we could do the two 7's and then two 13's if we want! Yes, she will make some bucks off us if we did that.

[SinkingFast]

In an effort to discourage Chapter 20s and similar forms of serial filings, the Act states that Chapter 13s may be filed only once every two years, and three years must pass between the filing of a Chapter 7 and a subsequent Chapter 13. The period allowed between Chapter 7s has also been extended from six to eight years."

http://www.nysscpa.org/cpajournal/20...ntials/p36.htm

So what that attny told you cannot be done now under New Law.

[joepepper2005]

In an effort to discourage Chapter 20s and similar forms of serial filings, the Act states that Chapter 13s may be filed only once every two years, and three years must pass between the filing of a Chapter 7 and a subsequent Chapter 13. The period allowed between Chapter 7s has also been extended from six to eight years."

http://www.nysscpa.org/cpajournal/20...ntials/p36.htm

So what that attny told you cannot be done now under New Law.

just wondering if they are filing under different names then can they do it, since the wife is filing first then the husband does it mean they both have wait or is it a seperate bnkr and then after they both filed seperatly then they both wouuld have to wait?

wife files then she has to wait but then the husband should be free to file
since he was not in on the first one and it would be his first?

[HHM]

just wondering if they are filing under different names then can they do it, since the wife is filing first then the husband does it mean they both have wait or is it a seperate bnkr and then after they both filed seperatly then they both wouuld have to wait?

wife files then she has to wait but then the husband should be free to file
since he was not in on the first one and it would be his first?

They can probably file separately in a non-community property state, but that is only advisable in rare circumstances...the problem in this case is there is no longer a way to do a "follow-on" chapter 13 in a timely manner.

I am thinking what this attorney "probably" suggested, and the OP didn't describe it correctly, is that 1 spouse file a chapter 7 (the spouse with the most unsecured debt), then, after that spouse's BK is discharged, the other spouse file a Chapter 13 to save the house.

What is probably untested, is whether 1 spouse can file a chapter 7 while the other spouse files a chapter 13--at the same time or before the chapter 7 is discharge. The reason this couple might have to do that is based on what I said earlier, the bank can move pretty fast to lift the stay in a chapter 7, so this couple probably could not wait for the chapter 7 discharge before filing the subsequent 13. But the glaring problem is, how can one spouse not have enough disposable income for a chapter 13, yet the other spouse does. Remember, in income/expense on BK, you have to include ALL sources of income...so even if only 1 spouse files, the income of the non-filing spouse is still a factor in the filing spouses income calculation.

I really can't imagine there would be any circumstances where each spouse would file concurrent chapter 7's, separately.

The only way for this to work (assuming the US Trustee and the BK Court would allow it in the first place) is...
1. The foreclosure time line in your state would have to be fairly long, more than 3-4 months, preferably at least 5 months from start, to Auction.
2. The spouse that will file a Chapter 7, needs to file BK at the very start of the foreclosure process...that way, that spouse puts at least an additional 30 days on the foreclosure clock and you hope that the bank is slow in moving on their Motion to Lift Stay.
3. Thus, if the foreclosure process is more than 4 months, and the chapter 7 adds another 30 days, the filing spouse should have enough time to get the chapter 7 discharge before the house is actually auctioned (assuming there are no problematic issues with your BK)
4. As soon as the chapter 7 is discharge, the other spouse files a chapter 13.
5. THE PROBLEM...by this time, you have incurred at least 5 missed mortgage payments, plus any fees etc and the debts of the filing spouse, and if your income is such that you are already on the bubble between 7 and 13 (i.e. because 1 spouse did qualify for a chapter 7), you could run into feasibility issues with your chapter 13 payment plan, i.e. not enough money to fund the plan.

The other, and preferable, option would be an APO, Adequate Protection Order...if you are not that far behind on payments (i.e. 1-2 months), then both spouses can file chapter 7, and provide the bank with an APO. The APO will provide a payment plan for making up the missed mortgage payments, usually over 6-9 months and you can discharge all unsecured debt.