Chapter 13 - is it always 100% payback?

[dscurlock]

I am sorta confused, and conflicted with this...is chapter 13 always a 100% repayback...that hardly seems fair, since chap 7 filers seem to get off 100% scott free, and when I read on 13 it seems its 100% payback...

I have very good disposable income, and a nice savings, but if I have to give up all that, and still pay back 100% - at this point, I see no incentives of filing anything. it does not make sense to give up all my dis income, and savings, and have to pay back 100% so i can eat beans and rice over the next 5 years, and still have bad credit for years to come...

over the years, I am sure creditors have already written this debt off, and enjoyed the
tax benefits that I am sure they probably get from the govt....not too mention, they are
selling and reselling my debt all the time, I keep getting letters of the latest debt collector
that purchased my debt...

does that make sense to anyone?

[justbroke]

I am sorta confused, and conflicted with this...is chapter 13 always a 100% repayback...

Absolutely not. A Chapter 13 is based on your ability to pay. So they perform a calculation to determine just what your "disposable monthly income" is... or how much you can afford to pay.

I have very good disposable income, and a nice savings, but if I have to give up all that, and still pay back 100%

If you can afford to make settlement offers and pay them off in one lump sum, then it's always better to negotiate and pay it that way.

However, a Chapter 13 offers free refinancing of certain debt (like cars) over 36-60 months while reducing the interest rate. Plus, a Chapter 13 offers you interest free payments to pay off unsecured debt. You can't get from under unsecured debt when you're paying 30% interest!!!

- at this point, I see no incentives of filing anything. it does not make sense to give up all my dis income, and savings, and have to pay back 100% so i can eat beans and rice over the next 5 years, and still have bad credit for years to come...

If you have that kind of money, then go for the settlement route. Otherwise, you're only kidding yourself.

over the years, I am sure creditors have already written this debt off, and enjoyed the
tax benefits that I am sure they probably get from the govt....not too mention, they are selling and reselling my debt all the time, I keep getting letters of the latest debt collector that purchased my debt...

All that is irrelevant to the fact that you owe the money.

Note: In some circumstances, where you want to keep a lot of non-exempt property, you may need to pay 100%.

[jkb]

We felt the same way. But we thought that at least in 5 years it will be over. And we aren't paying for any more interest, late fees, etc. We also figured our credit was bad before we filed, can't make it much worse after we filed. I can say that since filing, we are in better financial shape than we were before. We have a nice savings account, pay for everything with cash and finally feel like we have some control of our money. It took us longer than 5 years to get where we are so if we can get out in 5 years, all the better.

[dscurlock]

Well, I do not have that sort of money that I can just make lump some deals..
I might get one creditor paid off and that is it...

I have about 100k in debt...part of it is 2 repo'd vehicles..I have $106k home that has been valued between $85-90K which I do not want anymore since I have not
lived in the house for 2.5 years, and it just starting to go past due (I am attempting to do a short sale on the property) and I have one car which is current in payments. I need a car, so I guess I would need to keep it.

so lets say I have $2k a month in dis income, does that mean they take
every bit of that? does that mean they take the $20k/year bonus?
and all tax refunds?

and no, I am not kidding myself. in this day and age, any of my creditors
should be so fortunate to get anything back much less 100% - surely
not at the price of me having to eat beans for the next 5 years.

I can surely do nothing for the next 5 years and eat lobster, and watch
it all fall off or disappear, and watch my savings get fatter, rather
then having nothing to save over the next 5 years...expect for the house
as that is the more recent...

I would like to do something that can benefit all parties, but not at the
tune of 100% and leaving me somewhat broke when I should not be.

[dscurlock]

We felt the same way. But we thought that at least in 5 years it will be over. And we aren't paying for any more interest, late fees, etc. We also figured our credit was bad before we filed, can't make it much worse after we filed. I can say that since filing, we are in better financial shape than we were before. We have a nice savings account, pay for everything with cash and finally feel like we have some control of our money. It took us longer than 5 years to get where we are so if we can get out in 5 years, all the better.

my overall concern now is - I am in financial good shape now...
but if the trustee takes mostly of what I have now, then I
will not be in good shape, and no fall back nestegg...if I have
to give up my savings and bonus, is the trustee going to take
care of me if i lose my job...? I doubt it...

[jkb]

I guess your situation is different than ours in the fact that we didn't have anything in ways of saving prior to filing. There was nothing for them to take. I know we are in a 100% payback plan but I know others who are not. They do take most of your dis. income, however you tell them what you spend in food, housing, entertainment, clothing, etc so - within guidelines - you won't lose it all - but I won't kid you, they do take a lot of it. And you are right, no one will take care of you if you lose your job, however, you can go and get the plan amended if that happens and possibly even convert to a chap 7.

[justbroke]

Well, I do not have that sort of money that I can just make lump some deals..
I might get one creditor paid off and that is it...

I wish we all could!

I have about 100k in debt...part of it is 2 repo'd vehicles..I have $106k home that has been valued between $85-90K which I do not want anymore since I have not lived in the house for 2.5 years, and it just starting to go past due (I am attempting to do a short sale on the property) and I have one car which is current in payments. I need a car, so I guess I would need to keep it.

Good plan not to keep the home. If you file... just forget about any short sale... just let it be included in the Bankruptcy.

so lets say I have $2k a month in dis income, does that mean they takeevery bit of that? does that mean they take the $20k/year bonus? and all tax refunds?

Yes. Yes. Yes. If you're actual calculated "disposable monthly income" comes to be $2K, then that goes to pay your creditors. However, you state that you only owe $100k to unsecured creditors. That means you'd only need to commit $1,667/month over 60 months to pay it (check my math... I guess at the number). That means your bonus and tax refunds are your since you'd be in a 100% plan at $1,667/month.

and no, I am not kidding myself. in this day and age, any of my creditors should be so fortunate to get anything back much less 100% - surely not at the price of me having to eat beans for the next 5 years.

Well, they can and probably will start suing you. They'll drain your bank accounts, and attach to any real or personal property that you have. All lenders are not going to sit by why you eat lobster. As a matter of fact, most of them don't care if you're already eating beans.

I would like to do something that can benefit all parties, but not at the tune of 100% and leaving me somewhat broke when I should not be.

Chapter 7 Bankruptcy is for those who can't pay anything based on a Congressional formula that we all lovingly call the Means Test. Chapter 13 Bankruptcy is for those who can afford to pay something back. That payment is also calculated based on your "means" using allowed expenses deducted from your income. What's left... is disposable. To the extent that the disposable income pays 100% to the unsecured creditors... it is what it is!

Bankruptcy is not about having and certainly not about keeping a nest egg (unless it's in a protected account like a 401(k), or in real estate that has exemptions that cover it). Even in a Chapter 7, they'll take all your non-exempt savings.

[dscurlock]

Well, they can and probably will start suing you. They'll drain your bank accounts, and attach to any real or personal property that you have. All lenders are not going to sit by why you eat lobster. As a matter of fact, most of them don't care if you're already eating beans.

doubtful...they are not that ambious...most of the debt is like 3 years old already.
If they were going to come after me then they most likely would have by now. the more time they let slip away, then the worse it is for them. The only letters i get anymore are the letters saying that we bought your debt..ok, so...? Makes no difference to me since they are not the original creditor...


the point of this entire discussion is that I do not want to pay them
back at 100% - chap 7 gets off scott free...I am not saying that
I want off scott free, but I am saying I do not want to repay at
100% - the more I have to repay back, the more that is taken
out of my disp income = less for me to save or spend.

wow..i can get rid of the car I am paying for now (owe $9000)
I can get rid of it for next to nothing...

what happens to the other 2 paid for cars that I have?

now if i were to be told that my payback would not exceed
$1000/mo then I may consider that, but with 2 in the family,
I could not conceive giving up almost an entire paycheck.

[falken]

If you have tons of disposable income and lots of assets, then by all means, wait until you are sued then try and settle.

You are saying that you have thousands of dollars worth of disposable income, high bonuses, savings, assests, etc. You want to keep all of that, and only repay a little bit of your debt. Bankruptcy doesn't work like that.

[dscurlock]

If you have tons of disposable income and lots of assets, then by all means, wait until you are sued then try and settle.

You are saying that you have thousands of dollars worth of disposable income, high bonuses, savings, assests, etc. You want to keep all of that, and only repay a little bit of your debt. Bankruptcy doesn't work like that.

I do not have any assets I want to keep...other then
maybe two used vehicles. I do not consider old cars
much assets of any value...

whats the point of having a lawyer to work
with the trustee then...? if they are just
going to end up taking it all, or most of it...

and paying a little bit is much more then they
deserve. Chap 7 doesnt pay anything...so
whats the problem in paying a little bit?

I am just saying why 100%? why not 50%,
or 75%? afterall, If I do nothing, they get 0%...

for them to get back 50%, or 75% of debt
that is 3-4 years old is far better then getting
nothing at all....

[sharina]

It's all income and budget related. Chapter 13 is not for anyone who is not willing to stick to a budget. My research tells me that any plan that is submitted at less than 70% payback is severely scrutinized. The advantage to paying 100% is that you may be able to submit a plan that does not require you to submit all disposable income - just that the plan pays all creditors in the full amount within the 60 months. (Recent Ruling on this in the Illinois District).

[oldhack]

...so lets say I have $2k a month in dis income...

I don't get this part. Are you saying that you have $2,000 a month that's currently not obligated, or is being spent at your own discretion? If so, the obvious question seems to be, "why aren't you paying your debts with it?"
Or, are you just picking a number of the air as an example?

[justbroke]

whats the point of having a lawyer to work with the trustee then...? if they are just going to end up taking it all, or most of it...

To make sure the Trustee gets the minimum. To make sure that any property that you want to keep, is protected form the reach of creditors! To make sure that the creditors don't take advantage of your with the claims they file! To make sure that you have a Plan that works!

and paying a little bit is much more then they deserve. Chap 7 doesnt pay anything...so whats the problem in paying a little bit?

Because a Chapter 7 debtor doesn't have the means to pay anything. That's why they can discharge immediately. A Chapter 13 is really no different. However, to prevent abuse, Congress created the BAPCPA amendments that require a person with disposable income (about $110/month or more), or a person who wants to reorganize some debt, or cure arrears on property, states that to get the Chapter 13 discharge, you must commit your disposable income to the unsecured creditors for a certain period of time. That time is 36 months to 60 months (or less if you can prove certain things). After getting through the plan period, you get your discharge... just like a Chapter 7 debtor. As a matter of fact, the discharge in a Chapter 13, actually covers more things than the Chapter 7 discharge.

I'll repeat it here. A Chapter 13 can save you lots of money, especially in interest payments... even if you're in a 100% plan!

I am just saying why 100%? why not 50%, or 75%? afterall, If I do nothing, they get 0%...

It's not based on what you want to pay. You can blame those who came before us... as Congress created a very mechanical formula for determining what you pay in a Chapter 13. This changed in 2005 as part of the BAPCPA.

for them to get back 50%, or 75% of debt that is 3-4 years old is far better then getting
nothing at all....

Well, you should just settle then. If the debt is 3 years or more, and the Statute of Limitations in your area is 4 years, and you haven't paid one penny to them, or told them you want to pay... wait for the SOL to expire. Or, take your hand at being sued and then deal with it that way. Let me tell you that getting a judgment, could be bad as a judgment can attach for up to 20 years in most States (after one or more renewals)! Getting a Judgment, unless you live in Texas, could mean wage garnishments and bank garnishments for up to 20 years! Even if you're the so-called judgment-proof, you better be so for 20 years! Plus that judgment stays on your credit and no-one will lend you money.

So, you don't have to file Bankruptcy. It's not a right, and you certainly have the option to attempt to deal with your creditors individually.

[oldhack]

...It's not a right...

Actually it is, enumerated in Section 8 of the Constitution, which stipulates that Congress has the power to pass uniform laws regarding it -- by implication, saying that Congress has no power to do away with it.
What it is NOT is a requirement -- each of us may choose to claim it, or not, at our own discretion and circumstances. But Congress has no power to eliminate it without the consent of the public, via Constitutional amendment.

[justbroke]

Actually it is, enumerated in Section 8 of the Constitution, which stipulates that Congress has the power to pass uniform laws regarding it -- by implication, saying that Congress has no power to do away with it.

I'll stand by what I wrote. Receiving a discharge under any section of Title 11 of the United States Code... is not a right, fundamental or not. There is no implication that it's a right. This has gone to the Supreme Court on whether receiving a discharge in a Title 11 case... is a (fundamental) right. It is constantly referred to the Kras case and several others that reference Kras.

See United States v. Kras, 409 U.S. 434, 93 S.Ct. 631, 34 L.Ed.2d 626 (1973) (...because bankruptcy did not rise to the level of a fundamental right...). Local Loan Co. v. Hunt, 292 U.S. 234, 244 (1934) (the Bankruptcy code gives a new opportunity of life, to an honest but unfortunate debtor).

Other Cases... In re Robinson, 256 B.R. 482 (Bankr. S.D. Ohio 2000) ("relief under the Bankruptcy Code is a privilege, not a fundamental right").

What it is NOT is a requirement -- each of us may choose to claim it, or not, at our own discretion and circumstances. But Congress has no power to eliminate it without the consent of the public, via Constitutional amendment.

Likewise, while the Constitution provides for Bankruptcy, it is not granted as an absolute right. There are many things codified in the Constitution that are not rights, implied, absolute, or explicit.