Has anyone had a 0% payback in Chapter 13?

[tigergem]

Thanks for your response. Any idea on what is considered "UNSECURED PRIORITY" vs 'UNSECURED"?

Yeah, income tax owed without a levy or lien issued is unsecured priority. Maybe student loans. Not sure what else might go in that category, but those are some examples that I am aware of.

Unsecured is like your doctor and credit card bills.

[Bkq]

I'm guessing he is referring to the four debt classes.

Secured
Secured Priority
Unsecured Priority
Unsecured

Unsecured creditors get paid after everybody else gets paid, so they would logically be 4th class creditors.

Thanks for your response. Any idea on what is considered "UNSECURED PRIORITY" vs 'UNSECURED"?

[tigergem]

I am totally unfamiliar with the different classes of unsecured. Can you tell me what they are? Thanks!

I'm guessing he is referring to the four debt classes.

Secured
Secured Priority
Unsecured Priority
Unsecured

Unsecured creditors get paid after everybody else gets paid, so they would logically be 4th class creditors.

[Bkq]

0% somewhat depends on which district you find your self. If you are under median, 0% is possible. The nature of being under median means you are presumed to have no DMI. If you are over median, you generally must show something going to unsecureds. Keep in mind, we are talking about class 4 unsecureds. Even it is a token amount, usually something has to go to class 4 if you are over median.

I am totally unfamiliar with the different classes of unsecured. Can you tell me what they are? Thanks!

[ladyjenn]

My understanding - confirm with your atty before filing of course - is that if the amounts fall within the IRS standards then you should not have to prove them. Afterall, its normal for people to avoid things they need because they simply can't afford them leading up to a bankruptcy. If you have areas where you actually need to go over the IRS guidelines - keep records. Medical documentation for someone with special dietary needs, for example, if that leads to higher than usual grocery bills.

I don't think I'd go with that as a $200/misc per month. Instead I'd factor that into the grocery bill and/or entertainment. The pizza dinner especially is food, afterall.

Congrats on cutting out the smoking. Would love it if Hubby could. We spend about $120/mo on his cigarettes. (Better than some perhaps.) Blend it into our grocery though I've heard some explaining it straight out and not having a problem.

Thanks again!

[SMinGA]

My understanding - confirm with your atty before filing of course - is that if the amounts fall within the IRS standards then you should not have to prove them. Afterall, its normal for people to avoid things they need because they simply can't afford them leading up to a bankruptcy. If you have areas where you actually need to go over the IRS guidelines - keep records. Medical documentation for someone with special dietary needs, for example, if that leads to higher than usual grocery bills.

I don't think I'd go with that as a $200/misc per month. Instead I'd factor that into the grocery bill and/or entertainment. The pizza dinner especially is food, afterall.

Congrats on cutting out the smoking. Would love it if Hubby could. We spend about $120/mo on his cigarettes. (Better than some perhaps.) Blend it into our grocery though I've heard some explaining it straight out and not having a problem.

I am still in the mindset of skimping. Like I said, I didn't include any extras, such as clothing, entertainment...etc. I did include a misc. expense of $200, which includes dinner (pizza) once a week and some spirits from the wine and spirit store. i quit smoking almost 3 months ago, so i dont even have that to add in anymore.
If I do add these expenses, do I have to prove that I have spent money on them (since they are on my expense list)? I haven't had a monthly budget for clothing in I can't tell you how long, let alone buying some.

[ladyjenn]

Probably not. $600/mo means you have money enough to fund a plan payment. I think the limit is around $100 or so, don't know exactly but know $600 is too much for ch. 7.

Key question: when you do the budget and arrive at $600/mo extra are you counting reasonably all needs? Or are you still in the mindset of skimping on needs due to not being able to afford them?

I am still in the mindset of skimping. Like I said, I didn't include any extras, such as clothing, entertainment...etc. I did include a misc. expense of $200, which includes dinner (pizza) once a week and some spirits from the wine and spirit store. i quit smoking almost 3 months ago, so i dont even have that to add in anymore.
If I do add these expenses, do I have to prove that I have spent money on them (since they are on my expense list)? I haven't had a monthly budget for clothing in I can't tell you how long, let alone buying some.

[SMinGA]

Items for liquidation value would be anything you owned that was above the exemption limits.

Personally, we may end up being over the exemption levels on our vehicles. In my district - they're insane and go by the NADA retail value. In other words, they value vehicles at what it would cost if I were to buy them now, not what I could get for selling them. We have one w/ a $11.6k balance owed which is valued at $16.5k. One that is a problem because there is no NADA retail value for a vehicle with heavy body damage. And I intend to buy a used car in the very near future with a hefty downpayment, meaning we'll owe about $8k and have a value of $18k. So:

veh 1: 4.9k equity
veh 2: 1-2k equity potentially, I may need to fight on this as anything higher is insane
veh 3: 10k equity

Total 15.9-16.9k

GA allows (married, joint) $7k exemption, and we'll combined have $1.2k wild card. Leaving $7.7k-$8.7k non-exempt equity in vehicles. If that were the end of the story, we'd have to pay a minimum of that amount into the plan. I'm not sure if that would be the minimum to unsecured???

Its not the end of the story for us, because I expect to be able to use up to $10k unused homestead exemption as an additional wildcard.

Hello LadyInTheRed,
What would be items that would be liquidation in a chapter 7? Would it be our home and cars? How can I figure out the dollar amount. Sorry for my confusion-I have a hard time understanding all this.

[SMinGA]

Probably not. $600/mo means you have money enough to fund a plan payment. I think the limit is around $100 or so, don't know exactly but know $600 is too much for ch. 7.

Key question: when you do the budget and arrive at $600/mo extra are you counting reasonably all needs? Or are you still in the mindset of skimping on needs due to not being able to afford them?

Here is where we are at...since we stopped paying CC's we have roughly
$600/month left now. We have no assets to speak of, a house with no equity is that counts, so there would be no liquidation in a CH 7. Is is possible that we can file CH 7 with that much left without the cc payments?

[SMinGA]

I don't think so.

Consider 2 scenarios.

Scenario 1: you're making credit card payments as best you can, and that means you are skimping on areas where you should spend money. Groceries, vehicle & home maintenance, clothing, etc. Doing without things you NEED. There is no disposable income, because spending all the $ you have is still not enough - due to the credit cards - to buy the things your family needs. So you go without.

Scenario 2: you're not making credit card payments. Your ch. 13 budget includes reasonable amounts for groceries, medical out of pocket, maintenance, clothing, etc. You are able to spend what your family needs on those categories. The disposable $ each month in the amount of $X goes to the trustee. And here & there, when you're able to cut back in small ways on some of those needs - you can set aside a little cash to build an emergency fund.

SO the way I look at this is, you would be where you were to begin with, since you will have no extra money after all is said and done?

[sheilaE]

Hello LadyInTheRed,
What would be items that would be liquidation in a chapter 7? Would it be our home and cars? How can I figure out the dollar amount. Sorry for my confusion-I have a hard time understanding all this.

[ladyjenn]

No, it doesn't. You will pay all of your DMI to the trustee during your plan. Your DMI is your DMI, regardless of the precentage the unsecured creditors get. Your DMI is based on your income minus your expenses during the life of your plan, not the amount of debt you have (but, sometimes it is necesary to decrease your expenses in order to have a DMI high enough to fund a feasible plan that pays as much to the creditors as they would receive in a Chap 7 liquidation). Your secured and priority debt get paid first. What's left of your DMI during the 36-60 month plan goes to unsecured creditors, regardless of percentage. The percentage shown on your plan may not be the percentage they actually get.

The bankruptcy code does not prohibit a plan that pays 0% to unsecured creditors. However, in many distritricts, the trustee will object to such a plan. That doesn't mean the plan won't eventually be approved. It just might get more scruitiny.

Here is where we are at...since we stopped paying CC's we have roughly
$600/month left now. We have no assets to speak of, a house with no equity is that counts, so there would be no liquidation in a CH 7. Is is possible that we can file CH 7 with that much left without the cc payments?

[sheilaE]

That's true. When our atty told us we would be paying back $1300.00 per month, I couldn't believe it because that was about what we were paying out in credit card payments every month and the reason we got into this mess. We never had that much left over to pay, so we'd use credit for gas and groceries. How we're going to make that payment every month for the next 5 years is a BIG worry right now. We don't have extra's that we can let go of either-like health club memberships, boats or big toys.

[LadyInTheRed]

I've read the thread re: % Payback (it doesn't matter). But I don't get it because it does matter.

No, it doesn't. You will pay all of your DMI to the trustee during your plan. Your DMI is your DMI, regardless of the precentage the unsecured creditors get. Your DMI is based on your income minus your expenses during the life of your plan, not the amount of debt you have (but, sometimes it is necesary to decrease your expenses in order to have a DMI high enough to fund a feasible plan that pays as much to the creditors as they would receive in a Chap 7 liquidation). Your secured and priority debt get paid first. What's left of your DMI during the 36-60 month plan goes to unsecured creditors, regardless of percentage. The percentage shown on your plan may not be the percentage they actually get.

The bankruptcy code does not prohibit a plan that pays 0% to unsecured creditors. However, in many distritricts, the trustee will object to such a plan. That doesn't mean the plan won't eventually be approved. It just might get more scruitiny.

[ladyjenn]

A plan payment SHOULD be your DMI. Meaning net income less bills & expenses. If that amount is only enough to cover trustee fees/atty fees/priority debt/mortgage arrears/etc. - then the plan should be set up as 0% to unsecured. Just because it starts that way, however, does not mean it will end that way. I anticipate filing a plan with a very low amount (under $2000) to unsecured. But in my district, the trustee takes tax refunds even though I claim exempt & my federal refund is JUST due to child tax credits... So that will result in more money to unsecured.

I think some attorneys may be nervous about filing a plan with 0% aimed to unsecured. But then, the attorneys should know a bit about the district/trustee and whether or not to expect trouble.

SO the way I look at this is, you would be where you were to begin with, since you will have no extra money after all is said and done?