Chapter 13 DOs and DONTs!!!

[Flamingo]

"2. Since we cannot take any vacation next 5 yrs in the plan, would like to take one before filling (one month worth of vacation left at work. Take it or lose it method)?"

You are struggling to make ends meet and you are worried about taking a vacation? How are you going to pay for it? If you are actually going to file a Chapter 13, realize that your lifestyle is giong to change tremendously during the 3 to 5 year period in the plan. In fact, the main reason for a Chapter 13 dismissal is the filers not being able to budget or cope with cutbacks and living discount, without, staying home, not eating out, etc. etc. Yes you can take vacations during a Chapter 13...you can save funds during your Plan and take weekend trips somewhere via car or just stay in your own backyard. You need to focus now on gettingout of debt and not on vacation brochures. That can come later when you successfully complete your plan and get our life back in order.

If you are not already robbing Peter to pay Paul you are one step from the practice. Realize you are broke and need to make some changes. Hard to face (we were there) but reality hits hard.

Best of luck to you.

[SMinGA]

First a couple of questions if you don't mind? Are you sure you're filing ch. 13? Reasons could be you don't expect to qualify for a 7 based on means test, of you filed chapter 7 more than 4 but less than 8 years ago, or hope to strip a 2nd mortgage? (You don't have to answer in the forum if you don't want to, its more food for thought type questions.)

As of right now - what do you think your DMI looks like? Take that amount, multiply it by .90 (max trustee fee is 10%, so this accounts for it) and multiply by 60. This is about what you would pay in, total, to your plan right now. DMI = Net income, less bills and expenses? (Only counting what you'll still pay after filing. So if stripping a 2nd, do not count it.) Keep that answer in mind...

Do you have any priority debts at this point? Mortgage arrears, taxes owed? The total you pay into your plan must be enough to cover all priority debts.

1. I think yes to replacing the old, high maintenance vehicles with newer. But be reasonable... And make sure you'll still have sufficient DMI. Secured car loans are usually priority debts and must be paid in full during the plan. Mentally round up what you'll borrow (to account for some interest paid on the loans in the plan) and deduct that from what you anticipate paying into your plan.

2. Probably not a good idea. My opinion? Start living now as you'll need to live thru the plan, kind of a trial run. Will help you to file a solid plan, because you won't be adjusting to your new 'budget' after filing it. That doesn't mean you have to twiddle your thumbs, never doing anything. But keep it reasonable. An elaborate vacation just seems like a bad idea.

3. If you're sure you'll file, then do stop paying credit cards. If you're going to give up the house, stop paying all mortgages. If you expect to keep the house, then you could stop paying the mortgage a few months ahead of filing (the arrears becomes a priority debt to be repaid in the plan) and use that $ for appliances, etc. BUT keep in mind your DMI will become the plan payment, and must be enough to resolve priority debt, trustee fees, etc. If you stop paying now and run your priority debt up to a point where you can't pay it off in your plan - you have a big problem. If your DMI is fairly low, I'd say don't create more priority debt. If your DMI will pay back a decent amount over the plan, you should be fine with adding more priority debt though.

4. No. Hiding assets is a bad idea.

5. Don't retain, but interview a few. Ask questions about your situation, and get a feel for what attorney you ultimately want to work with. Also start learning your state's exemptions, so you'll know whether you can keep some cash on hand when you file.

[kolCh13]