chapter 13 & stripping 2nd then converting to 7 in 2 yrs.

[sheilaE]

The atty said we don't qualify for a 7. My husbands net is $6200.00 per month. Gross is $8200.00. In 2 years his monthly retirement will be $5500.00. He'll receive a payout from unused vacation time of about $25,000.00+. It would be wonderful if we could roll that into a retirement fund, but I'm sure we will have to surrender it. That is another thread for another time.

Our first is $2060.00 per month. The 2nd is $550.00 per month. Our home is nothing fancy. We don't live in the high end part of town with the great schools. It's very average for our city. If we gave up the house, we'd be renting for very close to the same-maybe a bit less, but it just doesn't seem like a wise choice, we have 20 more years left on the house, then we are mortgage free & retired
We aren't young-I'm in my mid 40's, H is in 50's. When this is all done-we won't be starting over. There won't be another chance to purchase another home, that's why if we can just get through the next 5 years, then we'd really like to keep it if possible.
Question: what is pay & stay?
Sheila

[justbroke]

"Pay & Stay" or "retain and pay" is a term used to describe a process known as a "ride through". Those two terms are used on the Statement of Intentions form to indicate that you are not reaffirming, redeeming or surrendering secured property, but rather maintaining your payments as current and "staying". Pay-and-stay only applies in a Chapter 7.

With the income you're earning, I can see why you probably won't qualify for a Chapter 7.

[momofthree]

An alternative to cashing out his vacation time is to schedule a leave of absence before retiring that would use up his available hours, which would probably be better than just losing the money altogether. Something to think about...

[SMinGA]

Was that atty's opinion on ch. 7 based on full income/expense details? I seem to recall your initial projection was $1300/mo for a plan payment and that has since changed drastically. Due to going into detail on your expenses. Plus you added a used car payment. That payment has an impact on your means test.

So does your mortgage & 2nd mortgage payment. As I see it - granted I am not an attorney but I am decent with #s - you have $500-600 a month DMI if you strip the 2nd. I believe you said DMI is about $100/mo when you count having to make the 2nd payment?

Option 1: ch. 13, strip the 2nd. Make plan payment of X years (don't recall if you are over or under median). Deal with changes in income as they happen - facing the prospect of not being able to afford the plan payment. Vacation pay in 2 years will probably be in jeopardy.

Option 2: ch. 7, with an attorney that will fight for you. If you truly have $100 dmi, you're a ch. 7 candidate. Don't reaffirm either mortgage - but keep paying 1st and perhaps keep paying 2nd thru discharge. If its with a different lender, stop paying after discharge and save up $ to try and settle with the 2nd for 15-20%? If its with the same lender, this probably won't work! Vacation pay in ~2 years would be safe.

The atty said we don't qualify for a 7. My husbands net is $6200.00 per month. Gross is $8200.00. In 2 years his monthly retirement will be $5500.00. He'll receive a payout from unused vacation time of about $25,000.00+. It would be wonderful if we could roll that into a retirement fund, but I'm sure we will have to surrender it. That is another thread for another time.
Sheila

[momofthree]

I agree with SM. You could be a ch.7. I remember thinking that you could easily have a negative DMI if everything was calculated correctly. You just need the right attorney. You could then use your $25k to settle your 2nd mortgage down the road with money left over.

[Pandora]

I was thinking the same thing as SMinGA and Momof3... thats why the "pay and stay" comment .

How did you manage to go from the initial 1300 payback to now being at 500-600? Did you adjust your schedules and thats what caused it to go down?

[uncommon]

I haven't asked a question here for at least 3 weeks, so I guess I'm due.

Background: Filing 13 in about 1 month. Keeping the house, stripping the 2nd.

We have only spoken to the atty a few times since our 1st meeting in March because we don't want to have his extra fee's adding up to early.

So, two years into our 13 my husband will be retiring. He is a police officer on a motor bike. His body has just about had it. Lots of medical issues from years of wearing the heavy vest and such. He's pushing it as long as he can, but needs to keep working the next 2 years in order to get his full retirement benefits. Once he retires our income will drop about $1000.00 per month, so when that happens I'm sure we'd need to convert to a 7, but what happens to the stripped 2nd? Are we going to be able to convert or will we need to finish the remainder 3 years, but with the loss in income that would be very hard.
I know I probably shouldn't be worrying about this now, but just trying to be prepared.

You can't do it this way - if you want to do what we in the bankruptcy law field cheekily refer to as a Chapter 20, you have to file the Chapter 7 first, get your discharge, and then file a Chapter 13 to strip the 2nd mortgage.

[sheilaE]

Hi all
The $1300.00 repayment was what the atty came up with after asking us about our expenses. We had no list to go by and had not researched anything here about expenses because we thought we were filing 7. The questions caught us off guard-he didn't ask us about car maintenance, home maintenance, school lunches x 3, school supplies x 3, pet care. We gave low amounts for the electric bill, groceries & gas. We have kept all receipts since then and we were off about $800.00, so this time when we go back in to meet with him-we've got the correct figures.
What I don't really don't know/understand is what we HAVE to pay into our plan. He never gave that figure. His $1300.00 was what he thought we had left over each month. So what do we have to pay? $100? $500? $1000.00? I don't have any idea. We have are a family of 5. We have 3 used vehicles that we will keep (son & daughter share a car to get to school and work) Keeping the house and we are in Calif.

[SMinGA]

If you have nothing 'special' (assets to protect, mortgage arrears, taxes, etc.) then there is no minimum. Simply whatever your DMI happens to be based on income and expenses. Unless you have secured items (car loan) that get paid in the plan, and then it must be paid off in full.

Some with very little DMI have a plan that pays just balance on atty fees, car loan and admin fee to trustee.

One last thing to point out - if you are under the median income for your state/family size then you would be able to do a 36 month plan. If that was the case, and your husband could delay retirement by 1 more year (perhaps using some vacation time for part of it) then that might be ideal...

[sheilaE]

Wow that would be ideal, but I don't know if we are under medium. We don't qualify for a 7, so aren't we over medium? This show's how much I still don't know.
Also...regarding assets to protect. Would that be our home and the 3 cars? 2 of which are paid off and the third is the used one we recently purchases. Our payments on it are $388.00.

[SMinGA]

You really don't know if you qualify for 7. The initial opinion of your atty was based on inaccurate expense info, so his/her conclusion (that you were not a ch. 7 case) could be wrong.

Being over median does not automatically mean no to ch. 7. It means the ch. 7 will be a little more difficult, with more scrutiny to your expenses. But some things cannot really be questioned - such as mortgage & 2nd mortgage payment.

Alternatively, being under median does not mean an automatic ch. 7. It still depends on income and expenses, as your DMI matters. But someone under median who files ch. 13 can do a 36 month term. (As long as they do not have a minimum to pay in. If you have a minimum and can't afford to resolve it in 36, can opt for 60.)

I use the DOJ's website to check median income #s. At $8200 a month - you are over median for a family of 5 unless you live in HI, NH, MA, MD, CT, NJ. Again, does not mean no way to do a ch. 7 as your expenses are critical. And having the large mortgage payment & 2nd tend to help people get into 7's when over median.

[mybk]

Wow that would be ideal, but I don't know if we are under medium. We don't qualify for a 7, so aren't we over medium? This show's how much I still don't know.
Also...regarding assets to protect. Would that be our home and the 3 cars? 2 of which are paid off and the third is the used one we recently purchases. Our payments on it are $388.00.

I would recommend sticking it out. The second mortgage lien strip is going to be far more valuable than anything else at this point. More so trying to deal with the uncertainty of a settlement with them and cash out of the pocket (if you decided to go with a 7).

Converting will null the lien strip. An option could be a hardship discharge. Most papers on the lien strip spell out converting to a 7 or dismissal of the 13 being grounds for the lien strip to remain in place; however, discharge will enforce it. If you can obtain a hardship discharge this would likely qualify.

It will not be easy though, technically it was not unexpected (like one loosing their job). If you can not obtain it, I would stick with the plan of doing what you can to ride out that last 12 months.

[Pandora]

Wow that would be ideal, but I don't know if we are under medium. We don't qualify for a 7, so aren't we over medium? This show's how much I still don't know.
Also...regarding assets to protect. Would that be our home and the 3 cars? 2 of which are paid off and the third is the used one we recently purchases. Our payments on it are $388.00.

assets = anything you own of value (personal items, jewelry, cars, house hold items, retirement accounts, savings, bonds, life insurance, etc etc etc).

Since you own 2 of the vehicles outright, you are allowed an exemption up to whatever your state allows (or federal if you can use that, check your state to see if they allow either/or). So say Kelly Blue Book or NADA value 1 of your vehicles at $5K, and your exemption amount is $2K - that means that you need to protect the $3K that it has in equity; that is an asset to you. Some states only allow X amount of $ for vehicle exemptions no matter how many vehicles you own outright, so you would apply the exemption towards the one that holds the most value.

Exemptions are something your lawyer should have told you about - and what can be claimed - or you can look them up for your state. You have alot of exemptions that you need to be certain are being allowed to the fullest for you and your family.

As SMinGA stated, just because you are over the median doesnt mean you cannot claim Ch.7 - the means test is only part of it; if you end up with negative DMI at the end of the month, then a Ch. 7 is possible from what I understand.

Have you talked to more than 1 attorney at this juncture? If I'd paid a retainer fee for an attorney to represent me for BK, I sure as hell would expect them to explain everything to me upfront. Again, you need to really think this through very carefully and discuss this with your attorney because to go 2 years into your plan and turn around and convert it to a 7 - ouch. If you cannot fund the plan for the 36-60 month, you need to really talk things through.

Maybe if you list what you have for your monthly expenses we can help you (if you havent done so already somewhere on the forum) and see if you're missing anything.

Hugs to you, I know you must be stressed over all of this

[momofthree]

Since she's in CA, she'd have to have major assets as the wildcard is nearly $22k. I'm guessing she'd easily be a no-asset case.

[Pandora]

Since she's in CA, she'd have to have major assets as the wildcard is nearly $22k. I'm guessing she'd easily be a no-asset case.

Man you're fast LOL I was trying to find out from her past posts where she was... you're like Speedy Gonzales over there

hey - how'd the lien strip go? Been thinking about ya