What is life in Chapter 13 like?

[alice0427]

My DH and I are filing Chapter 7, but because of an asset of mine, we may have to convert to 13. My mom bought a c-store in 1994 and listed me as a 10% shareholder. I contributed no money to the purchase, have received nothing since, and if the store were sold, I'd get nothing. However, my atty said the Trustee will see value in the asset, and it's possible that he'd want to liquidate it. If he does, we'd have to convert to 13 to keep the asset because I can't let my mom's way of life be sold. She'd be screwed! If we were in Chapter 13, I don't know how we'd make the payments. We barely scrape by as it is.

I'm terrified of life in Chapter 13. I'm not working right now because I have a baby, and with day care, incredibly low wages in this area, etc., it's not even worth it for me to work. I would like to go back eventually, but wouldn't being in Chapter 13 be an invitation for me to sit on my butt for 5 years? Why would I go back? Wouldn't every extra dollar we make be funnelled into our plan?

In Chapter 13, what if you want to travel to visit family? Can that expense be justified? My DH is in the Navy, and my whole family lives in Montana. I would die if I didn't see them.

What if we have another child?

For those of you who are there, what's life like in Chapter 13? Does it royally suck, or is it not as bad as people make it out to be?

I'm really going out of my mind with fear.

[HHM]

Ok, first off, I wouldn't worry too much about your mom's c-store and your 10% stake.

1. Is the business incorporated, (I hope it is). Otherwise, it might be considered a default partnership, which is probably not a good thing. If its incorporated, then the only asset are the shares, themselves, not the underlying assets of the corporation. If the business is not incorporated, you may have a problem because than you have a direct interest in the assets of the business. But since you refer to yourself as a 10% sharehold, I will assume the business is incorporated and that you own shares.

2. but I digress, there may be some value in c-store, but there is probably no market for it. Since the only asset the trustee has access to are your shares, the trustee cannot sell the store, he can only sell your 10% stake in the store. The job of the trustee is to liquidate assets to cash in order to pay creditor claims. Thus, the trustee would have to go to the trouble of trying to find someone to buy your 10% stake in a business that you claim is making no money and has few assets.

As to chapter 13's, I really don't understand the fear because they are 9 times out of 10 a much better alternative than doing nothing. Sure, a 13 is not as good as a 7, but consider the alternative, continue to make high minimum payments, having collectors pursue you etc. You should really think of chatper 13's like a 3 year debt consildation loan. You pay back your creditors "what you can afford to pay", let me say that again, you pay back "what you can afford to pay". If you have disposible income, that is all you pay. In essence, you decide what to pay back to your creditors, no one else. There is no other program like it, not consumer credit counselting, no debt consildation, not debt settlement, etc. In a chapter 13, you figure out how much money you need to live, and pay the rest to the chapter 13. Once you are done, any remaining balance owed to your creditors is discharged (i.e. eliminated). Its really a good deal in the long run.

[Lightning]

Visits to your family are not allowable expenses in a Chapter 13 plan. You'll either need to cut expenses after you submit a plan or have your family pay for your travel expenses.

[alice0427]

Thanks for your replies. I feel like a big, fat DUH is in order. Yes, the store is an S-corporation, and my total ownership is 10 shares of stock...it is worthless, as you said.

I don't know why I didn't realize this. I'm normally a smart person, but fear of my own situation is making me stoopid!

I know that Chapter 13 would be better than no action. My biggest problem at this moment is psychological in that I don't know what the final outcome of our case will be. I handle uncertainty about as well as I handle having needles poked into my eyes. NOT WELL!

Thanks so much for putting this into perspective to me. I've been paralyzed with fear all day, and for no good reason!

Amy M.

[HHM]

On the flip side, in order to get converted or choose to convert to a chapter 13, you have to otherwise qualify, if you have no disposible income, then you have no disposible income, so what could you pay in a chapter 13.

[alice0427]

We definitely don't have disposable income. On our bankruptcy paperwork before I quit working we only had about $200 per month. At the beginning of August, I left my job because my employer wanted me to work during the week, and I don't have a daycare provider. Now, we're about $300 short per month.

[Jman30]

Amy K,

I was in your shoes almost exactly a year ago. There were times during the intial few weeks as we were deciding whether or not to file a 13 and then during the process of actually filing that I thought I was going to have a heart attack. I am a Type A person and having to give up control of all my financial assets and having my paycheck garnished was one of the most difficult and heart wrenching things I have ever done. I swear, my high blood pressure is due to all the worrying and crying my wife and I went through during the early weeks.

But that being said...it was one of the best things we ever did for our family. We were in way over our head and would have lost the car and probably the house by now. Looking back on it, I realize it was the best (and really the ONLY) option we had to save our home and cars and dig ourselves out from the debt we incurred. We are only 1 year into our payments but the lessons I have learned AND the committment I now have to never let this happen to my family again is worth all the pain it took to get to this point.

So don't get discouraged, there IS light at the end of the tunnel.

[WhenThePawn]

Amy K,

I was in your shoes almost exactly a year ago. There were times during the intial few weeks as we were deciding whether or not to file a 13 and then during the process of actually filing that I thought I was going to have a heart attack. I am a Type A person and having to give up control of all my financial assets and having my paycheck garnished was one of the most difficult and heart wrenching things I have ever done. I swear, my high blood pressure is due to all the worrying and crying my wife and I went through during the early weeks.

But that being said...it was one of the best things we ever did for our family. We were in way over our head and would have lost the car and probably the house by now. Looking back on it, I realize it was the best (and really the ONLY) option we had to save our home and cars and dig ourselves out from the debt we incurred. We are only 1 year into our payments but the lessons I have learned AND the committment I now have to never let this happen to my family again is worth all the pain it took to get to this point.

So don't get discouraged, there IS light at the end of the tunnel.

This describes me, too! Talk about a control freak. It still hurts to look at my garnished paycheck, but I have not felt as awful as I did right before I filed. As soon as the plan started, things have gotten easier. Yes, of course I still worry about money, but now I can see an end in sight to my debt (two years from now!).

Best of luck to you. If you're like me, once all the initial paperwork and filing is done with, you'll be so relieved and wish you did it much sooner!