Chapter 13 - All bills are current - but not enough to live on

[Bkq]

All of our bills are current - but we have nothing left over to live on during the month (i.e. we have had to borrow money for food, car repairs etc.) from family. We have about $108,000 in credit card bills and the increase in interest rates have led to our current situation. Our current situation is as follows:
a) $91,000 in annual income ($24,000 in retirement from previous job as teacher) ; $45,000 in earnings as a teacher (went back to work after retiriing); $18,000 in SOCIAL SECURITY (husband); $ 4,000 retirement from husband's career.
b) We own a home with a first mortgage of $230,000 and a 2nd mortgage of $30,000 with a current market value of $185,000
c) We have a car payment of $350.00 per month with 2 1/2 years left to pay it off.
Thanks!

[Flamingo]

Your income, debts, and assets and the state in which you reside (exemptions) are what determines what Chapter you can file. If you post more about your financial situation (income, secured and unsecured assets, etc.) more folks can help you.

[Bkq]

Rreply to your question

I edited my original message and put it out on the message board again. I am a new user - so I do not see the reply button on your message. My apology. The information you asked for is on the new post. Thanks

[SMinGA]

When you say all bills are current, which bills are you counting?

Since you're posting here, I'm guessing you are considering ch. 13 as a likely option? In constructing your budget do not consider debt payments that would not remain after filing. SUch as:

Do count your 1st mortgage if you intend to keep your current home. If you intend to let your house go, you would need to estimate your rental expense and/or use the IRS rental max for your county.

Do not count your 2nd mortgage - based on the #s you posted, your home is worth less than the 1st and so the 2nd would be 'stripped' and treated as unsecured debt when you filed.

Do count bills like utilities, insurance, etc.

Do count expenses like groceries, personal/household needs, gas/vehicle maintenance, clothing, out of pocket medical, etc. Even a small amount for entertainment/recreation is allowed in many cases. Try to be reasonable, meaning cutting back/out on things you don't need but be sure and cover what you DO need.

Do count your car payment - though that is handled differently in some districts. (Paid in plan or paid out of plan...)

THen when you start with your net income and deduct your bills & expenses, what remains? In theory - that is what you have for a plan payment. I say in theory, because some things are handled differently in some districts. (Such as where I am, the car loan would be paid off within the plan so I would no longer make a car payment - increasing the $ available for a plan payment.)

Some things depend on the state you live in, and of course its a good idea to consult with a few attorneys to ultimately decide what is best for you. If you are CERTAIN filing is your ultimate choice, you may want to go ahead and stop paying debt payments which you won't make after filing.

[catleg]

The question in my mind is, are you just working to pay the credit cards? In other words, best thing for you is clearly to take an income cut and file ch7, as long as you have enough to live on and pay house+car. Ch13 might work too, but I'm not sure the payments on the 30k second loan are worth getting rid of , vs a quick easy ch7.

[Hos75]

You need to understand, you're NOT a banker! Therefore, you are just a pawn and at the mercy of the bankers! They will suck you dry, and you'll grin and bear it for 60 months. There is no debt forgiveness. The best lesson you can learn from this is to go open your own bank and loan out several million to all your friends, then default to the government, and have them bail ya out! You'll make millions in bonus's and your friends can all walk away rich! WOW! GRRRR

ok, enough of my rant. I hope things work out for you. I hope and pray you'll strongly consider getting help with a credit card negotiator to settle your debt. 60 months of payments which you already can't afford may be a bit too much if you encounter another family emergency requiring funding. 5 years is a LONG time. There are companies out there willing to negotiate a lower payment for your credit card debt. I had several of these call me before I filed my own 13, but it wouldn't matter due to my situation. But in yours however it may. Google is your friend! good luck!

[Flamingo]

Even though you are high income, you are probably one paycheck away from disaster. In your situation, I'll bet you are robbing Peter to pay Paul at this point and all it would take would be a job loss or cut in pay to put you right over the edge as what occurred with us. I would highly suggest you call and make a few free consultations with BK attorneys in your area. That way you will find out exactly where you can stand and make some decisions.

[boochase]

All of our bills are current - but we have nothing left over to live on during the month (i.e. we have had to borrow money for food, car repairs etc.) from family. We have about $108,000 in credit card bills and the increase in interest rates have led to our current situation. Our current situation is as follows:
a) $91,000 in annual income ($24,000 in retirement from previous job as teacher) ; $45,000 in earnings as a teacher (went back to work after retiriing); $18,000 in SOCIAL SECURITY (husband); $ 4,000 retirement from husband's career.
b) We own a home with a first mortgage of $230,000 and a 2nd mortgage of $30,000 with a current market value of $185,000
c) We have a car payment of $350.00 per month with 2 1/2 years left to pay it off.
Thanks!

We started out this way. The credit card debt, though, is all in my name. Our income has not so great this year as in past years; hence the need to do a ch13. We have two mortgages, but our house is not totally underwater..so we keep the house. Incidentally, it is cheaper to pay the mortgage than to pay rent in our area. Our cars are leased, so they are counted as expenses, not assets. I went to three attorneys for consultation and retained one. I am the sole filer of the impending ch13. I was immediately told to get another leased car to replace one that has to go back shortly (and I did this). Then I was told to get myself a cell phone ( I have been putting it off). The paralegal stated that credit checks are done by the cell companies (I did this). Then I was told to STOP paying my credit cards (which I did). I am now trying to save up for the rest of the attorney fee so that I can file. This is my situation based in FL. Your laws in your state may differ. I am not an attorney, so I am just relating my experience and not giving legal advise.

[Bkq]

Is it a requirement to file chapter 13 - to be past due on your bills

Does anyone know if it is a requirement - in order to file chapter 13 - to be past due on your bills.... or can you be current - with no money to live on,,,and then go ahead and file. Also - I am curious.... my husband draws social security - as well as a VA disability check for injuries in Viet Nam in the Marine Corps....Are these included as income in a Chapter 13?? Thanks

[NoTomatoCan]

Does anyone know if it is a requirement - in order to file chapter 13 - to be past due on your bills.... or can you be current - with no money to live on,,,and then go ahead and file. Also - I am curious.... my husband draws social security - as well as a VA disability check for injuries in Viet Nam in the Marine Corps....Are these included as income in a Chapter 13?? Thanks

No, it is definitely not a requirement. But most people stop paying the CCs prior to a BK in order to either save a little for the attorney fees or to build up some cash reserves (depending on whether you can exempt the cash or not).

The tough thing for many, particularly those of us who have "never been late" on a payment, is to just flat out stop paying. But remember, you are filing for BK. Your credit is going to be trashed anyway. By the time you are out of your CH13, any 30, 60, or 90 day lates will have aged to the point where they don't matter (plus they are all on accounts that will be listed on your credit report at IIB - Included In Bankruptcy).

[ShooFly]

Definitely talk to an attorney. But it looks like 13 would be your best option because it doesn't look like you'd pass the means test for a 7. In a 13 you pay a portion of your unsecured debt while protecting your house. It looks like you can strip your 2nd mortgage off also.

The sooner you talk to an attorney the better you willl feel.