Help!! I don't trust the Paralegals information

[lancer123]

Hello,
I am in quite a qundry and don't know what to do. I went to the lawyer to discuss filing a chapter 13. My wife and I make decent money (around 100k a year and take home about $5000 month). We also have a lot of debt. We owe approx 170k (40k student loans, 35k second mortage, 100K credit cards). The Paralegal ran our numbers through the means test and found that we have disposable income left over. Through some calculation which involved looking at our total debt and disposible income, she came up with a 70% payback. The payment came out to be $2700 a month. The payment includes all of our debt except for our house, property taxes, utilities, food, clothing, etc....

The problem: Our remaining expenses are as follows
mortgage 1214
property tax 225
association fee 90
utilities 400
food 400

As you can see, once I subtract the everything from the $5000 a month we bring home, we have less than zero left over. We are negative. The items which we need to pay are not luxury in my opinion. The items are necessary to keep our house and live (you got to eat and have heat).

The Paralegal advised that the courts don't care about our payment being beyond what we can afford. I was advised that our payment is calculated through the Means test and that was that. I was advised that no motions can be made to adjust our budget due to not enough money to live.

To me, this is crazy. I want to file chapter 13 so we can keep our house. However, the chapter 13 payment is so high that we can't afford to keep our house.

Is there anything that we can do? Are we going to have to loose our home? Do we have a bad attorney who is having the paralegal do the paperwork?

Last question (I promise)

I read in several places that the court will adjust the intrest rate on your car loan if it is too high. We have a car loan with a 17% interest rate. I asked the paralegal about this. I was told that the courts do not adjust the interest rates and I was wrong.

Please help me. I am truly getting depressed.

Lance

[rrockinggramma]

You need to see a couple of other attorney's and run the numbers by them also. If you are unsure about this attorney's advice, then follow your gut! Find another attorney.

[Dirk Squarejaw]

Nevermind, I need to brush up on the whole reading thing. I didn't see that you are paying other debts through the plan and I was trying to figure out why you were paying $162k over 5yrs (70% of $231k) when you only had 100k of dischargable debt that you listed.

[wooisme]

well actually we had a car loan we added into the plan. and what she is saying is NOT TRUE, actually what it is is that depending on how long you have had the loan with the car financing place determines if you can do this. i think it's 900 days, but maybe someone can double check that figure...you have to have had the car loan for 900 days..if so and if you owe more than what the car is worth, they can lower the payment to market value on the car loan.............for instance.......ours that we owed was $25,000 but it's only worth $13,000 today so that is what we are paying back on. we are paying back $13,000 at 100% payback and then the rest of the money left over from the 25,000 is being paid as an unsecured loan at 1% payback meaning we owe $$12,000 unsecured at 1% which is $120.00......much better than owing the full $25k the interest rate is at 9% when it was 13% for us...

so it depends on your car, how long you have had the loan and what you owe on it and what it's worth today.................so she's not telling you all that you need to know about that.

I would MOST definately check with another lawyer..........and you want a lawyer to do this,not a paralegal

[CindyLou]

can you break down that 2700 payment: for example,
car #1 ___
car #2- ____
unsecured creditors - ____

by the way, the 70% is to unsecured creditors. The secured creditors get 100%. Maybe this paralegal is not taking into account alll of your expenses???? I would certainly go to at least 3 more attorneys for advice. And insist on the attorney not the paralegal!

[wooisme]

wow that is a lot to unsecured creditors though..........i mean we are paying back secured creditors and unsecured JOINT creditors at 100% and the unsecured creditors that are NOT joint at 1% payback.

[CindyLou]

because the payment is all based on disposable income, the percentage really means nothing and somewhat of a nominal number in the whole scheme of things. The 70% could change to 100% if not all creditors file claims....or the 70% could change to 60% if all creditors file claims and the amounts are more----all the while the payment remaining the same.

In your case your disposable income was probably barely above what you owed to your secureds, thus resulting in the 1%....there are some that do 0% to unecured actually.

The OP should be more concerned with making sure all allowed expenses are accounted for by her attorney she chooses so that the diposable income is as low as possible.

[wooisme]

I surely hope this poor man gets more advice from different lawyers. would you believe i went to three lawyers before i made up my mind? i did the free consultations and went to the best one

[lancer123]

Can anybody comment if the courts will take into consideration the amount of money left over is not enough to live on? I want the plan to work for my wife and I but feel we are not going to be able to live with basic needs with the little amount of money left over.

If the total payment is based on disposable income only through the means test, the amount given for house, food, clothing, etc. is already calculated through IRS cost of living tables.

Everybodys situation is different. I don't understand how everybody can be lumped into the same catagory amounts when situations are different. For example, some folks have mortages with a $1800 payment and others have $1200.00. However, the IRS tables don't give you enough money for either one.

Can anybody comment on what we can do? Is there any flexibility in figuring out the payment using catagories other than what is on the means test?

Last comment, I promise:
I did go to a lawyer several months ago before we decided to go forward (not the same lawyer as now).

He explained that the means test was used to determine if we qualify for a chapter 13 or 7 and determine how long the plan is.

He also explained that the plan payment isn't based on the means test but is based on our budget which we create and the court validates. He advised that we could have a catgory for our pets (we have two Pugs). We could have a catagory for food, clothing, etc.

The Paralegal I saw yesterday advised that the above is true but only if you don't have any disposable income left when doing the means test.

Please help,
Lance

[rrockinggramma]

Your budget will depend on you and your attorney. That is why it was recommended you see a couple of others as well. Make a list of all of your monthly expenses, what you spend now for food, housing, insurances, utilities and figure out a monthly average. Take that to the attorney. Do not include any of the bills that would be discharged in the BK in your budget. All trustees are different and local practices vary. I filed under the old law so I am not familiar with the new IRS standards but I think they are guidelines and an attorney in your area should have a good handle on what the trustee's in your area are allowing and not allowing. Also, when you come to the point where you are filing a BK, (and this is just my own humble opinion as I have been there and done that) it is important to take a look at your lifestyle. When I filed in 01 my chapter 7, I was trying to maintain a lifestyle that could not be maintained, even with a BK. In fact, a chapter 7 really did me no good at all because I had just a year prior refinanced my house and paid off all of my unsecured debt. What I discharged in my chapter 7 was my house and 2 vehicles. However, thinking that I couldn't let all of my mess affect my kids, I allowed them to keep their cars, which of course I was paying the insurance on and making the car payments on. And of course, since I let the house foreclose, was now paying rent where if I didn't pay, couldn't stay. Well one by one, I couldn't afford their payments anymore and keep up on the rent and utilities so one by one, their cars were repo'd. They all ended up getting other vehicles, beater cars with no payments that they could afford to maintain, not me. We went through some really tough times as a family, with some finger pointing and anger. And also, 2 of mine were in college and I was also trying to help them out with those expenses. It was awful. I was depressed. But you know, as time marched on and my therapy started to work, I began to see that is was "ok" to let that all go. Of course that is why I am now in my chapter 13, to repay all of the past due rents (moved like 6 times ahead of the landlord) and all the deficiency balances on the repo'd cars (ended up being 3 total) plus paying off my vehicle in my chapter 13 just to keep it. But it wasn't until I was "ok" with the lifestyle change that things got better for me and my family. My 2 have now graduated from college and are on their own and both have learned what not to do with their money. LOLOL My youngest is still learning that it isn't smart to go shopping (she uses cash though, no credit) and then not be able to pay that cable bill later in the month. She is still figuring it out. But it is a process that she will have to go through. A chapter 13 is tough. But it is such a growing experience. I now can say that I have my priorities straight. So look carefully at your position. A chapter 13 will work if you are willing to make the committment to change.

[rrockinggramma]

Also, your payment should be "disposable" income. So take your budget, minus your income, should equal disposable. I am thinking the paralegal messed up on her math somewhere. And if your vehicle is more than 910 days old, you can cram it down. And you are right, if included in the BK, the claim filed will be only for principle. The trustee will set the interest rate. Mine set it at 6 percent. So see another attorney. This paralegal was in the dark!

[keepmine]

One other factor in setting apayment plan is, unsecured creditors can't receive less in a Chapter 13 than, they'd have gotten in a Chapter 7. Are any assetes you are trying to keep above the level your state exempts?

[lrprn]

Can anybody comment if the courts will take into consideration the amount of money left over is not enough to live on? I want the plan to work for my wife and I but feel we are not going to be able to live with basic needs with the little amount of money left over.

Lance, go through your living expenses. If you are filing Ch 13, you can list what is reasonable for the expenses that aren't required to be determined by the IRS tables. Only if you are asking for more than is reasonable will you be asked to prove your expenses. This is why having an excellent bk lawyer to guide you is so important. They *know* what the Ch 13 trustee in your court calls 'reasonable' and can help you structure a Ch 13 plan you can live on for 3-5 years. The court expects YOU AND YOUR LAWYER to construct the plan you can live on before filing it.

As others have already advised, this paralegal doesn't know his/her bk knowledge from a hole in the ground. Move on and make appointments with other bankruptcy lawyers in your area.

In Ch 13 this is NOT the time to automatically go with the cheapest option! You need to find out as much as you can about how Ch 13 works and where any potential problem areas are in your situation. Set up appointments with at least 3-4 different lawyers. Then go with the Ch 13 lawyer that understands the law and your situation best and you feel you can work with. Especially in Ch 13, this interview process is crucial! Don't take any shortcuts.