Chapter 13, Can't sleep... help

[mom901]

I have so many questions about Chapter 13 it has me so worried and just plain sick. We built and own our own home, it must be saved in all of this as our priority. We took out two loans to finish the home, a loan and a line of credit, I imagine they are liens against our home as they are secured. We owe total around $130,000. Ten years ago I quit my job to care for my mother next door with many medical issues, I am also stay at home mom to our daughter going to kindergarten this year. My husband is in the construction field, some months are good, some months are not so good and he is on unemployment, it all averages out to around $40,000 - $50,000 income per year. He is a great guy and helps my mom a lot, we have sacrificed a lot of ourselves but are ashamed right now of our situation. Over the last ten years we have accumulated $60,000 in credit card debt, when my husband's work was slow we used the cards. We shop at thrift stores, dollar stores and cut coupons, we are not extravagant at all but are in this financial dilemma. We started paying payments and retained an attorney, first we were told it would be chapter 7, now it is to be chapter 13. We have a few years of real estate taxes accumulated also that we were making payments on, but we would always be behind, a judgment was filed against us and we kept making payments, they have not bothered us recently at all and our payments have been consistent. We have stopped paying the creditors long ago and have told them to contact our attorney, they have left us alone but recently we found out one card is suing for a few thousand dollars. I met last week with the attorney and have about a thousand scary questions that have bothered me all weekend. I am so worried and sick over so many things, but the main thing is we want to keep our home we built ourselves. We know we could never repay the $60,000 in card debt but know the five year plan the attorney mentioned may work for us, but what if my husband has a bad month at work or the weather is bad? We don't want our five year old to live a horrible life because of our dilemma and also don't want to be sitting in the dark eating ramen... I feel like the next five years of our lives we will be struggling to make the payment they will want. Our only secured amounts are the loans of $60,000 and $70,000 and $12,000 in taxes and the $60,000 in credit card unsecured debt, we could never fit those in the plan, will they be excluded? We are very simple but think of if there was an emergency, it just seems like the plan is so final and we don't know our payment yet but I feel like what if we can't afford it? Is it as much as you used to pay for your home loans and taxes? Do they take into consideration things to let you life your life or do you only have a few hundred dollars to your name each month after everything and they don't care? Is the attorney on your side? I am so upset and wonder to believe them when they say we will be able to keep our home through this? And what happens when the payments are done? Do we resume loans payments with the same balance as usual just where we left off? I just feel like the payment they will tell us we can't afford and I am so upset. It is just so much and so much fine print and I wonder if it is really in our best interest, but we don't have much choice. I can't work either because of caring for my mom even when my daughter is in schoolbecause it could go over the 10%. Can past real estate tax bills be eliminated somehow if you can't afford the payments? Any advice out there for this mom? I have a thousand more questions but for now will take a deep breath, or try... thanks

[car67]

Dont Worry

Your way too stressed out dont worry thats why the law is here to help. You can keep the home if you pay the payments, the creditors will get in line and share equally for 5 years then poof they are gone. Things happen people lose jobs while in Bankruptcy just talk to your lawyer and trustee with any changes. A solution can be adjusted to work with you. thanks Car 67 Sent ya message as well!

[espo1357]

Sorry to hear about your situation.

Just know that you have options and you are protected. Sit down with an attorney and go through the options you have.

There is hope.

As for your home, do you have a second mortgage? If you do, then the 13 is the way to go if you want to keep the home.

If you don't have a second, then you most likely qualify for a 7, and that is the best way to go.

Keep us posted. This forum is the best on the net imho, as it deals with real issues and has many smart and caring people.

[mom901]

Thank you for the replies. We own home and have the deed. The two loans are against the home, liens. We are current on them and also don't understand why they are in the plan. The trustee will make money on them right? What is a lien strip and would that apply to us? Is it better if your value shows up lower? The county website is off on value. Do the loan payments stay the same in the plan as what you would pay or are they different and what happens to them after 5 years? Does everything go back to normal and resume where you left off? So stressed, thanks for any help.

[Flamingo]

It sounds like you only owe $130,000 on your home that you built and you have a first mortgage and a home equity line of credit which both total that amount. I am assuming you have a good bit of equity in your home and that is why you are required to file a Chapter 13. Your attorney can explaiin all that to you as he/she has a complete listing of your finances if you absolultely want to keep your home. You also must actually sit down and figure out if you can really afford to keep your home; while bankruptcy will eliminate debt, it does not solve cash flow or unemployment problems.

Believe it or not, things will and do get better and a Chapter 13 is the best budget teacher in the world. A lot of your fear right now is how to survive on cash only, little of it and no credit cards there to save you. Over the next three to five years, you will learn that it is actually possible and you will probably never want to look at another credit card again.

Best of luck to you...

[debthlp]

Mom901. Hello we are almost in the same boat. We can't decide. We asr so nervous about not making the new payment plan. Our job is weather related and goes up and down. We had great times these past few months. But what if we got in plan that we can afford is the biggest drawn back. What to do. Does everyone feel this way before they start chapter 13???

[espo1357]

Mom901. Hello we are almost in the same boat. We can't decide. We asr so nervous about not making the new payment plan. Our job is weather related and goes up and down. We had great times these past few months. But what if we got in plan that we can afford is the biggest drawn back. What to do. Does everyone feel this way before they start chapter 13???

At first, it felt great to get the monkeys off my back.
But, now, I see that this is a total grind and I feel like a slave to the system.

Still, in four years, I will be in great financial shape, God willing I keep my job.

I would say don't make any quick decisions on this. And if you do it, be sure you can make those payments.

Good luck.

[ColoradoBell]

I filed Chapter 13 to try to keep my home that I built...so we are in a somewhat similar situation.

Bankruptcy, simply put is dealing with UNsecured debt...like credit cards.
It depends on your district, but I also questioned keeping the mortgage payments (secured debt) IN the plan...didn't see why I wanted to pay the trustee 10% of them. First, my attonrey included them in the plan but I asked her to take them out and she did. That made the payback on the plan MUCH less.

I think you might try to keep the secured debts you have OUT of the plan and then have any arrearages on the property taxes and your credit card debt (and payment for lawyer and trustee) in the plan. I am waiting for my creditors meeting and have heard that any objections to the plan will be filed a few days before or after (usually). My plan is complicated in that I am trying to buy out my X's share of the house and I only owe him unsecured debt (no credit card debt). But bottom line, I'm hoping to save my home same as you!

Try not to stress and make sure you write down your questions so the attorney can answer them!

[mom901]

Thanks again to all, just figured out bare bones budget and our bills are about $4000 a month, including their estimated plan payment of our $1300 owed on our loans, taxes, and their approximately said $20 a month lawyer's fees and $36 a month trustee fee. I am sick. The 60k in credit card debt is getting 0, or the minimum maybe of $1 each. Yes, in five years that is great, back taxes will be paid, we keep our home, credit cards gone. I can live with a cash budget, we have been doing it since our cards closed about two years ago, we have been behind at times but ahead others based on my husband's work. I did a take home average over the last seven months up to now and come up with $4218 per month take home. That is with nothing extra all bills can be paid but nothing extra left really in the budget. I am just wondering if something can be done about the loans, bringing down the amounts would help, if that can even be done at this point, the paralegal filed the case today. I feel like they have estimates of everything and not really exact amounts. Can anything be done to bring down the house payments or could we be a hardship case or something? I have called there to talk to them and they have been busy, now I feel like I am bothering them. I am so afraid this plan will fail if we can't pay, I would like to think they wouldn't set us up to fail, they must know what living expenses are and I want to hope they are in our best interest but I am panicked about not making it work. I can't go to work because then I am over the allowed 10%. I asked about taking out the home equity loans and they said they have to be in. What happens if they set you up and then see you really can't afford the plan?

[tikiman]

Hi mom901,

I have been lurking at this site for several days and have yet to make a post. I was referred over here by someone at (removed by moderator) (a great site you should check out). Your post compelled me to write.

My husband is also in construction. I know all too well the "feast or famine" mentality of that business. Things were rolling here for the earlier part of the 2000's. Then, the market went sour and along with it my husband's construction business. We sold our old house in Aug. 2005. We used $100,000 from the sale of that house for a down payment to buy our current home. We (stupidly) paid $530,000 for this house with an interest only 1st loan and 7% interest second loan. Things were good for about a year and a half. Then, things got slow. First, we defaluted on our credit cards. Then we started to get behind on the mortage. Tried to get a loan mod....told we didn't qualify.

In Oct. 2008 we got papers from lawyer stating that house was being put into foreclosure. Borrowed money from friend and rec'd more money from relative to catch up. But, it wasn't long before we were behind again. House went into foreclosure again in summer of 2009. Finally went to see BK lawyer in August. He said the only way to save the house was to do a Chapter 13. He put us into a plan paying back $750 a month, on top of our other bills--big mortgage payment, etc. We told him that we could not afford that high of a payment but he said our income dictated it. I asked what happens if husband has a bad month? He said you'll just have to save money from the previous month. WTH?? There is no left over money!

Made the Chapter 13 payments & mortgage for several months. Husbands business fell yet again. Called lawyer, told him and he said he could not modify our plan, even though he DID tell us it could be if we had a change in income, which we did. Finally converted to a Chapter 7 and had our 341 meeting June 22. We signed the papers to surrender our house and are just waiting....waiting for something to happen. We plan to live here as long as we can and not pay any mortgage payments. We have no other choice. The bank forced us into BK. We tried working with them and they rebuffed us at every turn. What sets us apart from a lot of other people in this situation is that $100,000 we made as a down payment. We know that's gone and we'll never see it again but we would at least like to stay in our home if the bank would modify the loan and lower the payment, interest rate, etc. Even though our house is not worth what we owe on it---we are underwater, we would still like to stay here. We probably will never again be able to buy another house if we lose this one.

I know that wasn't the info you were looking for but I still wanted to share our story with you. I totally feel your pain on the construction business issue and my heart aches for you and your family in the situation that you're in. I think that industry has been one of the hardest hit by this recession that we "aren't" having. The banks all rec'd their bail-outs from the govt to save them. Where is OUR bail-out? We didn't ask for this to happen.

So, who knows where we will end up. A crappy rental apartment, house in the bad part of town, cardboard box?? Our president needs to wake up and help the real people out here suffering, like you and us. God have mercy on us because the banks sure won't.

[mom901]

The lawyer called me back tonight and I was able to ask him more of the questions I have had on my mind. I have most crossed off so that is good and maybe I can sleep tonight. I wish there was a way we could modify our loans but we can't. We need to be very cautious with every dollar, I think the last two years of cash living has trained us, shopping at the thrift, coupons, Aldi, doing without. I get sick every time it gets slow but I have to look at the high rate work months and put that extra money away and not touch it for anything, eventually we hope to even out but it is scary. I am scared. We do not lose any assets in this case, we disclose but keep our old cars we own, etc. He pointed out that we would have to make the secured loan payments anyway without the bk and we have been making them. The tax portion of the payment is smaller than the tax payment we have been making and the back taxes will be paid on the plan and we are protected against any action. The one suit against me for a credit card will not be able to do anything either. He said to stop thinking of it as a bad thing but as a saving our home reason for doing this because it is so important to us. We built from the foundation up and on our family homestead, we would be devastated to lose it, especially living next door and helping my mom. He said I am able to go back to work but not to exceed too much income or it will affect the plan, I think it was around 10% or so I could make and leave things alone. I could do something from home hopefully, would like to get into medical transcription or customer service from home. My daughter will be in full day kindergarten and I can help my mom and have some hours to make some extra money, maybe when my husband is off I can increase my hours. Maybe something on ebay, do you report that? If you make soy wax tarts or something, I do that too. I am really trying to look at this in a positive way but it is scaring me a lot, even though we are still making the same payments now, I guess it is just scaring me because of a possible result. I have only a few more questions for him on my list, the list is getting smaller as they are getting answered but still my mind is thinking too much. I have to drop off some papers there tomorrow. I really like hearing from others, it has helped me through this so much, you don't even know.

[mom901]

I met with the lawyer again last week, mind you with several pages of questions. He never rushed me and spent 2-3 hours with me going over everything and answering my concerns. I do feel a little better but I am nervous about our monthly payment, I have no idea what it is and he said there are no hidden charges but I feel nervous about it. Our home loans are $1308, his amount $21, trustee's 2% is $35, and not sure about the back tax amounts yet. Are there any other hidden charges that go into your monthly payment? He told me our loans are paid 100% payment each month as if we were paying and not to worry that it is just that our secured payments are going through another person's hands, that was it. I am just scared for some reason this payment is going to be more than I think or know about and we won't be able to afford it. Any help or advice from others when they were at this point? Thanks to all

[newbie2]

I met with the lawyer again last week, mind you with several pages of questions. He never rushed me and spent 2-3 hours with me going over everything and answering my concerns. I do feel a little better but I am nervous about our monthly payment, I have no idea what it is and he said there are no hidden charges but I feel nervous about it. Our home loans are $1308, his amount $21, trustee's 2% is $35, and not sure about the back tax amounts yet. Are there any other hidden charges that go into your monthly payment? He told me our loans are paid 100% payment each month as if we were paying and not to worry that it is just that our secured payments are going through another person's hands, that was it. I am just scared for some reason this payment is going to be more than I think or know about and we won't be able to afford it. Any help or advice from others when they were at this point? Thanks to all

It sounds as if you have a thorough and caring attorney. Believe it or not, that's one of the biggest hurdles to a successful Chapter 13 - finding the right attorney.

If there are any surprises about your confirmed payment you can always stop the process. Chapter 13 is voluntary. You don't have to stay in the plan.

[Pandora]

Mom901

we all know its nerve wracking to be where you are, but it does sound like you have a caring attorney, so thats good.

I do want to point out one area of concern however - and thats your budget. You say all of the bills will be paid with only about $200 left over a month - does that mean you have everything put into your budget (car tags, taxes, car maintenance, medical visits, medications, school lunches, clothing allowance, house maintenance, pet care, etc etc etc). The budget goes beyond utilities and car insurance - its for every bill you would have for the year, so you need to ensure you are able to have $ for those necessary and needed areas. Have you and your lawyer actually filled out the schedules to ensure everything is being accounted for or are you merely estimating at this juncture? Remember, if the trustee doesnt think the plan is feasible, he/she will not approve it - so make sure you have everything accounted for that you are able to.

Also, with your child starting school, I dont know what your area allowances are for school lunch programs for free or reduced lunches, but its something you may want to look into to see if you qualify.

[ColoradoBell]

Mom...
looking at the very small amount you are paying the trustee and the attorney, it seems to me that you are getting a very good plan. i think you mentioned that you were paying 0 to the unsecureds...so essentially you are repaying your mortgage just as you were before (with an additional amount to pay the trustee for handling the mortgage within your plan), your trustee, and your attorney.....and at the end of the 5 years you are discharging all that credit card debt. (Forgive me if I read your previous posts wrong).

At the end of 5 years (or 3 if you qualify for a 3 year plan)...you are 'all caught up' on your mortgages. The problem i see is that your mortgages are interest only, so you aren't paying down on the principal at all. But in 5 years, your house will have probably come back in value and your loans are for only a small portion (25%) of your house's worth, so you should be ok.

I have a question that you might want to ask your attorney: what happens if, in 5 years, you get a great offer on your house and you want to sell? Would you have to pay off your unsecureds at 100% with the proceeds from teh sale OR could you sell the house, pay off the secured at 100% and then continue iwth the plan which is paying 0 to your unsecureds and jsut a little to the trustee and attorney? (I asked my attorney this same question as I might want to sell my house in less than 5 years, and I'd like to hear what another attorney thought)

Good luck!