Ch. 13 questions & "paying outside the plan"

[kitters]

This may be a long post, but I'm a worry-wart & in a moderate state of panic....

Part I: I'm getting ready to file Chapter 13 soon. I went through Chapter 7 four years ago & am TOTALLY sickened about being in this position again (long story for another day & another post). I've been reading up on "life under Chapter 13" and absolutely terrified - is there ANY wiggle room in the plan or does the trustee take EVERY LAST DIME? What happens when a disaster hits & your budget can't be adjusted enough to cover it? And what about unforeseen problems such as my water heater blowing up or something serious happening to my car? Another concern is what's going on w/ the price of gas. Has anyone who set up their budget 2 or 3 years ago (before we had any idea how high gas might actually go) found themselves short on their budgeted amounts? Fuel costs have just driven the cost of EVERYTHING up. I know I'm letting myself get a little too worried about too many "what if's", but the thought of giving up that control over your budget is just so scary.

Part II: I've also been reading here & there about people who make payments "outside the plan" on things like mortgages or car loans. Does this just mean that these are not a part of the bankruptcy payment plan? I thought you had to include ALL debts. Is this a common option on Chapter 13, or does it pretty much depend on the trustee? I've got a medical bill that I am trying to pay off and if there is ANY way to keep it separate, I need to do it. I am afraid that if I include it in the BK, the clinic will no longer allow me to see my doctor and with my health issues, I really can't go without regular monitoring of my meds. While there is one health care facility in our town that is income-based (my income is too high for them, but waaaaay below the median), the other places routinely refuse to accept patients because of bankruptcy so I really cannot afford to lose my doctor.

Any advice or experiences to share would be greatly appreciated!!

[lrprn]

This may be a long post, but I'm a worry-wart & in a moderate state of panic....

Pretty much a standard state of mind for the majority of us here who went through the same awful stress right before filing

I've been reading up on "life under Chapter 13" and absolutely terrified - is there ANY wiggle room in the plan or does the trustee take EVERY LAST DIME?

The key to surviving Ch 13 is to have a good lawyer. Writing a Ch 13 plan with legitimate 'wiggle room' included for those inevitable emergencies is more an art than a science. You want to spend a ton of time meeting with at least 3-4 different bk lawyers in your area who have lots of experience filing Ch 13 plans before settling on one. Your lawyer can make or break you in Ch 13.

You'll never have a ton of cash just hanging around, but with steady saving habits and responsible constant budgeting, you can make it.

What happens when a disaster hits & your budget can't be adjusted enough to cover it? And what about unforeseen problems such as my water heater blowing up or something serious happening to my car?

Often you will need to be on a very strict budget, especially the first year, to save as much cash as possible. Unless you have generous family or friends who don't mind loaning you the money needed to handle these kinds of emergencies, there's really no other way to pay for things like this.

Another concern is what's going on w/ the price of gas. Has anyone who set up their budget 2 or 3 years ago (before we had any idea how high gas might actually go) found themselves short on their budgeted amounts? Fuel costs have just driven the cost of EVERYTHING up.

Thus the reason for sticking with the family budget and putting as much aside as possible. That fund helps you get through the lean months.

For short term extra costs that are on the more expensive side that's more than you can manage with your emergency fund, then your lawyer can go to your trustee and ask if you can skip a payment or two to use the money to fix your car, leaky roof, etc. Most Ch 13 trustees will listen to reason if the unexpected cost is a legitimate one. This option just pushes your plan completion date out farther - you'll still make the same total number of payments.

If your financial circumstances change significantly and will remain in place for some time (a job loss, divorce, or severe medical problems, for example), then it's possible for your lawyer to file an amended Ch 13 plan that accommodates the change.

I've also been reading here & there about people who make payments "outside the plan" on things like mortgages or car loans. Does this just mean that these are not a part of the bankruptcy payment plan? I thought you had to include ALL debts.

You are right - all debts must be included when filing Ch 13 as well as Ch 7. Paying inside the plan means the trustee makes the primary loan payment plus any arrears payments for an asset. Paying outside the plan means the filer makes the primary payment directly to the original lender for the asset. In both circumstances the asset debts are still included in the Ch 13 plan when it's filed.

A few Ch 13 trustees have strict rules about what payments the filer can make themselves, but most trustees allow the filer and his/her lawyer to set up whatever payment option works best in their financial situation. Most of the time the best option is for the filer to make their own primary payments directly to the lenders. Your lawyer can guide you about what's going to be best in your situation.

I've got a medical bill that I am trying to pay off and if there is ANY way to keep it separate, I need to do it. I am afraid that if I include it in the BK, the clinic will no longer allow me to see my doctor and with my health issues, I really can't go without regular monitoring of my meds.

Unfortunately if there is still a balance on this bill when you file, you must include it on your creditor list.

There's another issue you need to pay attention to here as well. If you pay any one unsecured creditor like your physician more than $600 total in the 90 days before you file, your trustee could decide that's a preferential payment and force the physician to give that money back to share among all your creditors.

Unfortunately since medical bills are a primary reason that pushes many into bankruptcy, most physicians are used to dealing with bankruptcy filings by their patients. Some physicians understand and are willing to continue the relationship after you file, no questions asked. For those who are reluctant, if you work with the physician privately to offer payment in full (or the full co-pay if you have insurance) before each appointment, most will then continue to see you while you're in Ch 13. However, each physician does have the right to decide whether he/she wants to continue your relationship with them after you file or not.

If you know you are going to file, discuss it with your physician beforehand to see first if there's going to be a problem - there may not be. Find out where you stand first so you can make sound decisions with facts, not guesses or assumptions.