Please Help Me Understand Chapter 13

[brokemomma]

My husband and I make almost twice the median income for our state. Although our attorney hasn't committed I'm almost certain we'll be pushed into a 13. The way I understand it is this, you add up all of your expenses minus your income. Anything left goes to the BK Trustee. Is this true? If so, are there expenses they will not allow or consider too high. For example, will we be denied the right to own cell phones? Will we be allowed to put some money aside for gifts for our children?
Could someone please help me understand how one survives with no disposal income? Thanks. As I get deeper into this the more terrified I'm becoming.

[lrprn]

My husband and I make almost twice the median income for our state. Although our attorney hasn't committed I'm almost certain we'll be pushed into a 13.

Chances are yes, with a high income you are likely to be in a 13. However, until an experienced Ch 13 bk lawyer does your required Means Test and Schedules to file, you can't rule out Ch 7 being possible. We have several high income filers here who were able to file Ch 7 - it all depends on how much disposable income shows up on your Means Test and Schedules.

The way I understand it is this, you add up all of your expenses minus your income. Anything left goes to the BK Trustee. Is this true?

Sigh.....if it was only that easy. Everything in Ch 13 depends on what amount of disposable income shows up on your Means Test and Schedules. Your Means Test calculates disposable income using a complex inter-related formula that uses a combination of required expense amounts that may not match your actual expenses and your own real expenses. The Schedules reflect your real expenses more accurately.

...are there expenses they will not allow or consider too high?

Yes. Most trustees have a range they consider acceptable based on the averages in your community or on the required amounts set in the bk law.

For example, will we be denied the right to own cell phones?

99% of trustees will not have a problem with you keeping your cell phones, although if you are in a very expensive package that includes luxury features, your lawyer may recommend that you strip those off before filing.

Will we be allowed to put some money aside for gifts for our children?

Yes, the entertainment expense can cover gifts. However, some trustees can be somewhat stingy in the amount you are allowed a month - as little as $25/month in some cases. Other trustees are more generous and will allow more. Once you retain your lawyer, he/she can tell you what to expect from the Ch 13 trustee in your local court.

Could someone please help me understand how one survives with no disposal income?

You survive by finding a really excellent Ch 13 lawyer who understands just how far he/she can push the lines of "normal for your neighborhood" and is willing to fight for you when it's necessary against the trustee and your creditors.

Finding a really good Ch 13 lawyer is the most important thing you can do for yourself when you have to file Ch 13. Creating a good plan that gives you a little 'wiggle room' and can still be confirmed is more an art than a science. It's that 'wiggle room' money that provides the extra you save in an emergency fund to cover the unexpected things when they happen (and they will).

Also remember that if something changes permanently after you file, your lawyer can amend your Ch 13 plan to reflect the new financial circumstances.

As I get deeper into this the more terrified I'm becoming.

You can fight the fear with knowledge. You came here to get that knowledge - good for you! Keep reading and researching Ch 13 - there are some excellent Ch 13 websites out on the net - you'll feel less anxious when you understand how Ch 13s really work. Hang in there and keep asking questions - we'll help you sort things out as best we can.