Chapter 13 co-signer?

[spidge]

My attorney stated that if I want to file a chapter 13 that I would need someone to sign a statement that they would help with payments if we fell into hard times. I thought this odd and she gave me a term for it but I cannot remember the actual term. We plan to strip the 2nd on our under water house, but have quite a bit if back income taxes and 1st mortgage payment arrears to catch up on. The plan is a 0% payback but brings the house and taxes current.

Is this a common practice?

PS. I really don't need the lectures on why I am attempting to keep an under water house. I would like this topic to stay on the solution not reasons to do something different.

[despritfreya]

I am not sure of the term you are referring to but. . .

In cases where the debtor does not have sufficient income to fund the necessary payments under the Plan the debtor can enlist the aid of a family member or friend. This person may agree to contribute "x" amount each month to supplement the debtor's income. Since this contribution is coming from a non-debtor a Trustee may want verification from that person that he or she is willing to help on a monthly basis.

I have used this type of supplemental income in the past for cases where my client is just under the ability to fund a Plan. I will tell you however, that in these economic times it is very difficult to meet the goal of using a friend or family member. The reality is that while this person really wants to help, in the end he or she may just not be able to help.

Des.

[spidge]

Thanks Des,
I would not require any help from anyone, but would rather just have the BK turn into a ch7 and walk on the house. I would use it only to get into a plan to see if we could sink or swim.

[Pandora]

spidge -

is there a particular reason why your attorney would say "if you want to file Ch. 13" if you qualify for a 7? Means test is part of qualification for 7 but schedules is the other part - sounds like you have enough neg DMI to do it. Is your attorney maybe not as experienced doing an over the median 7?

I would definately not enter into a 13 with someone else guarenteeing any part of the plan payment. In these times you just dont know from one day to the next and then, think about if something DOES happen and your 13 cant be funded. All that money and time wasted that goes to the Trustee and creditors - just to have to refile, pay additional attorney fees and convert to a 7 anyway.

I liken it to co-signing a large loan for someone - and to answer the question yourself - ask yourself if the shoe was on the other foot, would you sign agreements saying you will help pay someone else's Ch. 13 for XX amount of years?

Something to think about.

Wishing you the best...

[momofthree]

spidge -

is there a particular reason why your attorney would say "if you want to file Ch. 13" if you qualify for a 7? Means test is part of qualification for 7 but schedules is the other part - sounds like you have enough neg DMI to do it. Is your attorney maybe not as experienced doing an over the median 7?

OP wouldn't be able to keep the home in a ch.7 due to mortgage arrears. OP also has back taxes and wants to do a lien strip. Depending on how much credit card debt the OP has, it might not even be worth filing a ch.7.

Honestly, someone looking at our budget would have also told us that we can't afford our home and to give it up. However, I have a gift of stretching a dollar to the max, and we make it work. Before filing, I had several people on this forum tell me that my budget was unrealistic and we wouldn't be able to survive. But we do, very comfortably, and are even able to save money most months. If OP wants to keep the house badly enough, he/she may be able to find a way. She/he has already said that they'd give up the home before taking money from family, but they want to at least try to make it work.

OP, are you under median? If so, then you qualify for a 3-year term, which would make it quite a bit easier on you. Good luck!

[Pandora]

OP wouldn't be able to keep the home in a ch.7 due to mortgage arrears. OP also has back taxes and wants to do a lien strip. Depending on how much credit card debt the OP has, it might not even be worth filing a ch.7.

Right - I understood that. What I was referring to is the OP's 2nd response of "wanting to walk on the house" I know that tax arrears cant be paid in a 7 - but was figuring if they decided to walk on the house, they could pay the tax arrears themselves, outside of BK - if that was possible.

For the 13 - a 3 year or 5 year plan wont matter if they cant afford to fund the plan without assistance, the payment is the payment.

[Pandora]

OP:

If you decide to try for a 7 and let the house go, given you owe back taxes you may be able to discharge them in a 7 if you meet 5 criteria. (This is assuming the back taxes are for income tax). Look up BK code for back taxes and see if you meet them. Also if it is IRS taxes - you could look up the Offer in Compromise and see if thats a viable option.

[spidge]

So it is common, but not neccessarily encouraged.

I found that our attorney had listed our taxes twice so with the adjustment we are still a few hundred dollars away from possitive. Its still less than the payment on the second and puts us straight with the taxes and 1st mortgage.

If something happens and we cannot make the payment we would then walk away from the house and convert to a ch 7. We would then have to pay the taxes outside of the ch 7 as they are not older than 3 years old. We are under the means by a toothpick but it counts so we qualify for a 3 year plan but the payment is way to high. We opted for the 5 year plan in hopes to buy out of it in the fourth or fifth year. The attorney said buying out will be complicated by the lien strip so who knows.

Why stay in an upside down house? Because to rent something thats big enough for the family we would end up paying the same amount. One must consider the tax advantage when looking at walking away, along with many other factors that are mostly emotional and personal.

Thanks for the responses.

[spidge]

OK. Filed for a 13 and 341 scheduled for early Jan. 2011. Payment as filed is feasable, but I wonder what the trustee will do with the case. If we are upside down to begin with I would think he would not do anything and take it at face value and pray like me that we are able to complete the plan. The more I pay the more he gets, right. The attorney said the payment is averaged for the two months of summer where the little women does not get paid, and my 401K loan expires in June. They said since we are upside down more than the amount of the 401K payment that it will not adjust. So the first six months look tough but after that as long as we can keep the taxes paid up and cars running we should be in good shape.

I feel good about it, but I wish we were fully in the plan.

[momofthree]

Congrats! Keep us posted on your progress.