CH 13 instead of CH 7 originally filed, some ???s

[welovedis]

Hi all-
Our case was originally filed as a CH 7, the UST is involved and feels that we can pay back so we will probably end up as a CH 13. I have a couple of ??S if you all don't mind:
1--is there a site I can check on to see what the minimum percent of payback is for a particular district? I have seen something mentioned on here of a 10% minimum for some areas, are there areas that the minimum is more? On our Schedule J from the CH 7 we have $199 left a month so that is roughly slightly less than 15% of what we are trying to discharge (83,136.51 exactly). If that is all we have left each month we certainly can't pay more than that, correct?

2--if the debt is discharged under a CH 13 and I start making substantially more money if about 12 months (after graduation & passing RN boards), do I report that to the trustee and do they change the amt we are paying back?

3--Will they take out tax returns each year?

4--After discharge, if we have 2 life insurance policies with cash value, can we cash them in and use the money as we see fit? We have 2 policies and together they are worth about 8K. We need new doors for our house and a new septic tank and that would be the only way that it would get paid for so I am wondering if we can do something like that.

Thanks in advance for any help or suggestions!

Karen

[optimistic1]

1. Not sure about your district specific, I tried looking mine up as well, couldnt find it. Try a attorney in your area. Your schedule J with 199 should be what you will pay, but there are many complexities in a CH. 13 case, it could vary.

2. You wont be discharged until your on the plan for either the full 60 months, or atleast 36 to 60 months. If you start making a substantial amount of more money, then it would be wise to also look over your expenses, and increase them, this way the trustee wont snatch up all that extra money, pretty sure you could that by filing a motion to modify, but I might be wrong, the trustee might disagree with that scenario. If you cant do that, then any extra disposable income you have when that happens, is now for your plan payments.

3. I've read that some do, and some dont, possibly determined on how large the amount is. It would be wise, to utilize the IRS's Withholding Calculator, but change your withholding after you have a confirmed Chapter 13 plan. This way, you do not get a return, and instead your take home pay is more. Ive read that most people just claim 0 allowances before they file and then change it afterward. Not sure if that is "illegal" or not. Im just learning about all of this stuff as well.

4. I couldnt answer that, wait for HHM or Justbroke, they are the GURUS.

[justbroke]

First, optimistic1 has given you a good overview of what to expect.

1--is there a site I can check on to see what the minimum percent of payback is for a particular district? I have seen something mentioned on here of a 10% minimum for some areas, are there areas that the minimum is more? On our Schedule J from the CH 7 we have $199 left a month so that is roughly slightly less than 15% of what we are trying to discharge (83,136.51 exactly). If that is all we have left each month we certainly can't pay more than that, correct?

What you pay is Dependant on so many factors. First, if you are above median income, Schedule J is not used to determine what you'll pay to unsecured creditors. Form B22C decides what you'll pay to unsecured creditors if you're an above median income earner/household. Suffice it to say, that the disposable monthly income (DMI) calculation can be interesting. Some Districts don't like Plans that pay 0%. I can't tell you which ones. However, there's nothing in the Bankruptcy code that I can tell which states that you can't have a 0% payback in a Chapter 13.

2--if the debt is discharged under a CH 13 and I start making substantially more money if about 12 months (after graduation & passing RN boards), do I report that to the trustee and do they change the amt we are paying back?

A Chapter 13 plan of reorganization is what you end up in, the plan runs from 36 months to 60 months. During that period of time, any income increase may be subject to the Trustee applying the "disposable" portion to unsecured creditors.

3--Will they take out tax returns each year?

Varies by District. However, most Districts feel that a tax return is "disposable" income. Even in these Districts, some will let you keep the return if it's less than a certain amount.

4--After discharge, if we have 2 life insurance policies with cash value, can we cash them in and use the money as we see fit? We have 2 policies and together they are worth about 8K. We need new doors for our house and a new septic tank and that would be the only way that it would get paid for so I am wondering if we can do something like that.

You are going to have a hard time keeping a cash value (Whole Life) insurance policy unless you pay the unsecured creditors "at least" as much as the current cash value of the policy. So let's say you have two policies worth $10K today (cash value). Your Chapter 13 Plan would then need to pay at least $10K to those creditors.

Now, lets say that your disposable monthly income (DMI) is $100/month and your plan runs for 36 months. Since you'd only pay unsecured creditors $3,600 in this scenario, the Plan payment would have to increase to at least $277.78 so that you pay at least $10K to the unsecured creditors.

You'd also have to factor any other non-exempt equity you have in other personal property to pay to the unsecured creditors.

This is because the bankruptcy code provides that Chapter 13 unsecured creditors must receive at least as much as they would have received had the debtor filed a Chapter 7 and liquidated the non-exempt assets.

[welovedis]

First, optimistic1 has given you a good overview of what to expect.

What you pay is Dependant on so many factors. First, if you are above median income, Schedule J is not used to determine what you'll pay to unsecured creditors. Form B22C decides what you'll pay to unsecured creditors if you're an above median income earner/household. Suffice it to say, that the disposable monthly income (DMI) calculation can be interesting. Some Districts don't like Plans that pay 0%. I can't tell you which ones. However, there's nothing in the Bankruptcy code that I can tell which states that you can't have a 0% payback in a Chapter 13.

A Chapter 13 plan of reorganization is what you end up in, the plan runs from 36 months to 60 months. During that period of time, any income increase may be subject to the Trustee applying the "disposable" portion to unsecured creditors.

Varies by District. However, most Districts feel that a tax return is "disposable" income. Even in these Districts, some will let you keep the return if it's less than a certain amount.

You are going to have a hard time keeping a cash value (Whole Life) insurance policy unless you pay the unsecured creditors "at least" as much as the current cash value of the policy. So let's say you have two policies worth $10K today (cash value). Your Chapter 13 Plan would then need to pay at least $10K to those creditors.

Now, lets say that your disposable monthly income (DMI) is $100/month and your plan runs for 36 months. Since you'd only pay unsecured creditors $3,600 in this scenario, the Plan payment would have to increase to at least $277.78 so that you pay at least $10K to the unsecured creditors.

You'd also have to factor any other non-exempt equity you have in other personal property to pay to the unsecured creditors.

This is because the bankruptcy code provides that Chapter 13 unsecured creditors must receive at least as much as they would have received had the debtor filed a Chapter 7 and liquidated the non-exempt assets.

Holy cow, it just goes to show how much more reading up I need to do on the CH 13 paperwork & process. Thank you for spelling this all out and I appreciate the info. I didn't realize the Schedule J info is not the basis for what we would be doing under the 13, so it looks like I will need to wait until we see our attorney & go from there.

One thing, no one has said ONE WORD about our life insurance policies at all during the whole ordeal with the CH 7 filing. The whole life is worth $2K, the universal life is worth $6K and they haven't said anything on either. Wonder why?

[justbroke]

One thing, no one has said ONE WORD about our life insurance policies at all during the whole ordeal with the CH 7 filing. The whole life is worth $2K, the universal life is worth $6K and they haven't said anything on either. Wonder why?

Well, were they listed on your Schedules with that value? If they were never listed with a value, people probably ignored it.

Since it has an actual cash value (present cash value), I don't know why the Trustee didn't go after it.

Or, there is an exemption in your State which covers it. If there is an exemption, then you need not worry about what I wrote.

[welovedis]

Well, were they listed on your Schedules with that value? If they were never listed with a value, people probably ignored it.

Since it has an actual cash value (present cash value), I don't know why the Trustee didn't go after it.

Or, there is an exemption in your State which covers it. If there is an exemption, then you need not worry about what I wrote.

Yes, they were listed on Schedule B so I'm not sure why they didn't go after it either!

[justbroke]

Yes, they were listed on Schedule B so I'm not sure why they didn't go after it either!

It probably has an Exemption on Schedule C.