? Re: Creation of payment plan

[boochase]

Had meeting with ch13 BK attorney yesterday. I live in Florida. I am filing, my wife is not. I am trying to understand how the payment plan is created and how long it will last (3 or 5 years). I have 22K of CC debt ($450.00 minimum payment per month), first mortgage ($1040/month), second mortgage ($330 per month). House is underwater so looking to strip second mortgage. These are all of my debts. Assets include 28K cash and underwater house. I understand that I get to keep all of my assets. What I didn't understand is how the payment plan is created. I thought it was based on my disposable income (which comes out to a little over $150.00 per month (rough estimate). I did understand that there is a trustee's fee and my attorney is adding half his fee to the payment plan. So, I thought that I would be repaying a total of $150.00/month for five years. Then my attorney mentions that my assets (the cash) will be considered in creating the plan (cash is held jointly, so only 14K is mine). So, now the attorney states that I will have to pay back the entire CC debt (or maybe 14K) over five years (estimated to be about $450/month if the full debt is required). I don't get the advantage here. It looks like I have not freed up any funds to pay my bills on a monthly basis. I do see that the CC's balance will be gone in five years rather than in 64 years (if I keep making the minimum payment). I do see that the second mortgage will be discharged if I complete the payment plan. If I did a CH7, I was told that I would have to surrender the cash (which I can't do, for I use it to create monthly investment income as a trader). So, I appreciate any comments to help me understand. Attorney tries to explain, but won't do any work to come with actual numbers until the retainer is paid in full (halfe the fee).

Last question, should I delay filing as long as possible, say until one of the CC companies file a lawsuit? At least this way, there are no payments to be made and I am saving $450.00 per month? Appreciate thoughts.

[momofthree]

You have to pay your unsecured creditors at least as much as they would receive in a chapter7 liquidation. As you've stated, in a ch7, that cash would be taken from you and distributed to them, so you HAVE To pay at least that amount into your 13 in order to get a discharge...That would be $233/mo for 60 mos. + attny fees + trustee fees. If there are other non-exempt assets, this number will be higher.

This number is just the minimum that must be paid. If your dmi is higher, you will pay the higher amount. Also, just because you claim to only have $150 a month of dmi doesn't mean that the trustee will agree with your numbers...

[SMinGA]

The payment is based on your DMI - but there are a couple of other things to consider.

There is a liquidation 'test'. If you were to file ch. 7 and liquidate non-exempt assets, that amount would go to unsecured creditors. In your case it sounds like $14,000. So you must pay at least $14,000 to unsecured, in addition to attorneys fees, trustee fee, priority debt. That over 60 months is $235 roughly. And since FL allows very limited exemptions for vehicle, personal possessions your attorney may be rounding up to cover those things as well. The $450/mo does not seem unreasonable, assuming $23-45 goes to the trustee and part of your atty fee is paid in the plan.

Priority debt would be taxes, vehicle loans if paid thru the trustee, mortgage arrears. I'm guessing none since the $450/mo would not leave much room to also pay priority debt.

When you figure the $150/mo were you counting the 2nd payment? You won't be paying that if you file ch. 13 & are able to strip the 2nd so it goes back into your DMI.

As to 36 vs. 60. You MUST file 60 if over median. If under median, you may do 36. But if you have liquidation issues or priority debt and cannot afford to pay enough to resolve in 36 then you can do 60. The $14k over 60 months would be almost $390/mo to unsecured before you factor in trustee, atty fee.

[SMinGA]

Ps - you don't see any advantage?

After 5 years, you'd have no credit card debt and no 2nd mortgage. Which means no 2nd mortgage payment.

[debtinohio]

Well - you could put $5000 into an IRA or other exempt retirement vehicle like that and than delay filing so this will help you keep more and pay less but it will not be available for income but you could still trade with it within your IRA.