Help!!! I'm new here.

[cjsgac]

Hello!

Never posted before. We are planning on filing Chapter 13 in the next couple of weeks. Here is our situation: $115,000 credit card debt, 2nd mortgage of 76000. Attorny told us we could strip the 2nd mortgage and it would count as unsecured debt. We would continue to pay on the cars and the house (1st mortgage) . Our attorney told us we probably wouldnt be eligible for a Chapter 7 because our income is too high ($137,000 gross last year and about $7000/month take home). So my questions are:

how is net disposable income calculated?

how restrictive is the budget? ie our two kids play hockey and there is scholarship potential there---do we get to budget in money for this?

can an emergency fund be established? or does every extra dime go to the trustee?


Thanks in advance for your help. We are very nervous about all of this and just have loads of questions.

[lrprn]

how is net disposable income calculated?

A complicated cross-comparison of all sources of income vs. a combination of required set expenses in certain areas + your real expenses is first calculated on the Means Test. Your income from all sources plus your real expenses are then plugged into the Schedules A-J. The amount of disposable income on Schedule I minus Schedule J is another determiner of disposable income.

Which is taken as *your* disposable income amount depends on the customs of your local bk court. Some take what they see on the Means Test, others take Schedule I minus J. You'll have to ask experienced bk lawyers (or your own lawyer if you've retained one) which is the case for your court.

how restrictive is the budget? ie our two kids play hockey and there is scholarship potential there---do we get to budget in money for this?

Writing a Ch 13 plan the family can live on for five years is much more an art than a science. Finding a really good Ch 13 lawyer to file your case is by far the most important thing you can do for yourself and your family. Interview a minimum of four to ensure you understand the competency of each and who you think will do the best job representing your family throughout your Ch 13 plan.

Saying that, if your lawyer doesn't write your plan to maximize to what your trustee finds acceptable, you can find yourselves locked into a plan that will make it extremely difficult to get through five years. Get a really good Ch 13 lawyer and often you'll find with very careful budgeting, you can accommodate more than you thought you might.

About hockey for the kids - chances are your trustee is not going to allow it to be openly listed as an expense in your plan. Sports for any family member is often considered a luxury, and your trustee is out to get as much as possible for your creditors that file claims. However, depending on how much money the hockey costs, your lawyer *might* be able to pad other expenses to free up enough for the kids to continue playing. Only the lawyer you retain to file for you can tell you if it's going to be possible or not.

can an emergency fund be established? or does every extra dime go to the trustee?

Right after filing and your 341, you have two goals - to make your first Ch 13 payment within 30 days of filing, and to save as much cash as humanly possible every month to put into your emergency fund. Ask your lawyer if it's safe to put it in a savings account for immediate access and so you won't be tempted to spend it like you would if it's in your checking account.

After your Ch 13 payment is confirmed, unless something significant changes for long-term (income drops more than 10%, job loss, major medical problems, etc), you still operate by saving every dime you can every month. Stuff *is* going to happen over five years - cars and homes need repair, appliances need to be replaced, medical and dental costs....the list goes on and on. There's no credit cards or loans any longer to get you through those times. Your emergency fund truly can make or break your Ch 13.

We are very nervous about all of this and just have loads of questions.

All of us were nervous at the first too. Just keep reading here and asking questions. We'll help you sort things out as best we can. Hang in there, and welcome!

[cjsgac]

Thanks for your response. We have an attorney but plan on interviewing a few others.

[forgotten]

About hockey for the kids - chances are your trustee is not going to allow it to be openly listed as an expense in your plan. Sports for any family member is often considered a luxury, and your trustee is out to get as much as possible for your creditors that file claims.

Here the trustee has the opinion of "the children shouldn't suffer for the parents mistakes". Anything the children were involved in before filing can be continued, as long as its not insane ($1000/mo for skydiving or something).
Expenses for sports, after school activities, horse riding lessons, etc. all go through without a second look.

As always, that is where a good attorney who knows what the trustee likes and doesn't like makes a big difference.