Information on Chap 13

[NowOrNever]

We are getting ready to file in Missouri. I've been browsing this very helpful forum for a few days and scouring the internet for information. I'm curious as to why so many Chapter 13 bks fail? I don't want to set myself up for another failure. We are using an attorney who only handles bankruptcy cases.

I would like to hear more personal stories from Chap 13 filers. Surely it can't be ALL bad. It can't be any worse than the way the last year has been - using CC checks to make payments on other CC. I'm anxious to get started and put this mess behind us.

Thanks for any info.

[SinkingFast]

We are not in a 13 plan, but one attny we Consulted with fig'd one for us.

He didn't even bother with the Means Test, or he would known we are below the Median. Only slightly, but below the Median none the less.

A Ch 13 plan figures all your ROUTINE expenses in a nice tidy, monthly budget, deducts that from your income, and the remainder is considered disposable income. That disposable income becomes your Ch 13 Play Payment amount.

When your budget is figured, at the time of filing, you are using information about expenses from the past 6 months to a year. But things change.

Say you hadn't had any major medical or dental expenses in a few years. You won't allow very much for medical. What if some major medical event occurs with huge out of pocket expenses associated with it. What if you have a child who needs serious orthodontia work done to correct bone growth defects in their mouth and your insurance pays little if any of that cost.

Say your kids haven't started to drive yet. You won't allow the unGodly amount for auto insurance with teenage drivers on the policies. And the kids start to drive, and you get hit with insurance premiums that are double or more what you'd budgeted at the start of your Ch 13 plan.

Say you haven't had any auto repairs to amount to much of anything. Then, during the plan your car needs major repairs, or needs to be replaced.

Say you hadn't had any major household repair expenses prior to figuring your plan. Then your heat pump dies, your furnace blows up, your A/C unit goes kerplunk, your roof starts to leak. And you have a major repair bill come due for that.

You can petition the Court to ammend your plan to accomodate for some things, but the Trustee is not gonna want to hear from you every time something happens. You aren't allowed to take on new debt during your plan term. You can buy a house and a car, but you have to petition the Court first. The Trustee must approve and usually sets a dollar limit on the amount you can spend.

The whole time you're in the Plan, you have no safety net. No CC's to fall back on to take up the slack when you have no money and you need to repair the heat pump in the dead of winter to heat the house.

And if you don't set aside your budget amounts for bills that come once or twice a year, you'll be short when those bills do come. If you rob the auto insurance premium amount to buy school clothes for back to school, are you gonna be able to replace it later to pay the auto insurance bill when it comes.

One poster here is a Ch 13 Rentor. Their apt complex has had a rules change or something. I don't remember. They are being forced to move. Being in a Ch 13 plan does not allow you to save up 1st month's rent and security deposit in advance, plus the costs to change utilities, and the expenses to physically move your things. Plus the people cannot find suitable rental housing available in the same school district for near the same rent they've been paying. All the rents are higher.

[13inOR]

Here is our story:
We began a chapter 13 about 19 months ago. The payment was $1302,
which was taken directly from my paychecks.

This took all but approximately $500 a month from my income, and then my
husband brings home about $2800 a month as well, so between us, after
BK, that totals $3300. We have a family of 3, our son is 14.

The bk payment covered the car payments (which were paid off early into the plan) and all the other creditors, which in our case were primarily medical
and mortgage arrearages.

So out of our $3300 income that was left after the ch 13 pmt, we paid our mortgage which was about $1300,
all the utilities, car insurance, medical copays and payments,groceries, and the ever-ominous "miscellaneous" expenses. All in all we have done ok. There is not extra for trips or frivolous big expenditures, so you have to reconcile yourself to living lean, but it hasn't really been that bad. It is scary worrying
about the unexpected though, thats the worst part, and thats what drove my husband nuts through it all.

I have to say that its been easier to make it to next payday now than it was before Bk, because the bills are paid, and you don't have creditors breathing down your neck to pay more than you can really afford.

We were able to amend our plan to pay for our sons orthodontic work, by the way, sometimes things like that come up.

Now, we recently refinanced to pay ours off early because it was a 100% plan anyway (for 29 months) primarily because our car was at deaths door.
(yes, you can buy a car in chapter 13 but there are many hoops to jump through and it would only have extended the length of our plan so we decided to go this route) We had tons of equity and were able to take out just enough to pay off the 13 which was on 11,600 by this point and a little more for a reliable car. The payoff route isnt for everyone, but in our case it was the best thing to do, and since we were paying off 100% to begin with
we didnt lose anything.

Hope our experiences helps you some. Best wishes.....!

[Lesa13]

I have filed 13 in Missouri under the OLD rules - filed September 2005. Everything SinkingFast has said is absolutely 200% true. My plan payment is 90% of my "excess" income. However, in figuring out my "budget", they attorney plugged in statutory amounts for food and other things - so no matter what you actually spend, the statutory numbers are used and you can only hope you are spending that much or less. Woe to you if you spend more. I was told if you spent more than the statutory amounts the trustee would basically feel you were living too high on the hog.

I also have had an issue with them not allowing me to budget for dog food and animal care/vet expenses, which is a big expense for me, but I was told they could care less about that and if I wanted to continue to keep animals, I better figure out a way to pay for that out of my grocery money.

Also, as SinkingFast says, you have no safety net - your furnace goes out, you either live w/o heat or try to figure out a way to get it paid for. There is NO extra money for anything like that. At this point, my mortgage has adjusted upward $200 a month and basically my attorney has told me tough luck, you have to pay it (with other suggestions of getting a roommate or getting rid of my dogs - what a sweetie pie he is ). So if something like that does occur while you are in your 13, again, you are stuck.

I would think if you have a good support system in place (ie family, friends, etc.) who are willing to help you financially if and as they can (say, paying for that furnace that dies or floating you the money and letting you pay back as you can), that would be a big help. *NOTE: I don't know the "legalities" of "helping out" or how it is viewed by trustee/court.

On the other hand, my most important goal was to keep my house, which I have done. I like the 13 in that it takes so much out of my paycheck every paycheck and I don't have to worry about paying the court myself or falling behind on my plan payment. All of my other bills, however, I pay, including mortgage.

I did not have a whole lot of creditors calling me (most of my debt is house/medical and not c. cards) but it did help me stop foreclosure on my house.

I also personally feel that since I work and have a job, ethically, I need to pay my bills as much as I can - but that's my personal ethic, not everyone's.

So I guess like everything else, it really depends on how much you can handle in your life (how much you can tighten your belt or live with uncertainty), what your beliefs are, how much you have to lose and if you have property of some type you want to hold on to.

Good luck!!

[LostOne0069]

If your mortgage payment went up or if something else has affected your income or expenses you are supposed to be able to go back to the trustee and amend your plan... or convert to chapter 7 if necessary.

[Armmick9]

Lesa, that is very intresting about your animals. My husband and I have been in our 13 since Sept as well and if I am not mistaken we were allowed to budget for cat food, and vet appointments. Does it depend on which state you file?

I agree with you guys as well...the scary part about the Chapter 13 is there is no safety net. We are hoping that are cars hold out for 2 1/2 more years that we have left to pay. We thankfully live in an apartment, so we shouldnt have to worry about things going wrong at home. Right now things seem to be going a long ok...knock on wood...but, it is a struggle at times. I just hope that my husband and I will be able to keep our jobs and make it through this all!!

[GettingThere]

Excess Money

What if you really only have the mortgage arrears? How much could they take then if you have to stay in the minimum of 3 years? Wouldn't you still get to "keep" the leftover monies?

[13inOR]

Getting there-- you don't automatically have to be in a 36 month plan if your debts or arrearages don't amount to that much. In our case, ours was only for 29 months. Our disposable income was enough that it was paid in only 29 months so no need to stretch out to 36. But again, ours was also paying back 100% which I assume would always be the case for any plan less than
36 months to begin with.
Also, I agree with Lesa and SinkingFast, its the unexpected emergencies that
can really knock you for a loop in a chapter 13. We were fortunate not to suffer any job losses during ours, or anything too catastrophic but it doesnt
take a lot to upset the budget applecart so to speak. Just remember that plan amendments can be made for long term issues. That can help a lot.

[GettingThere]

O.K. Thanks, I had always wondered about that!

[NowOrNever]

Thanks to all who've replied. I had a meeting with the paralegal today to go over our worksheets. She said the attorney will prepare the papers and such and we'll see where we stand. We have our own business and farm, and she didn't think the expenses involved (vet, feed, etc.) would be an issue. Lord knows we have plenty of those types of expenses. But I guess we'll see. This is the first month I haven't sent anything to the CCs and it feels really weird.

She also told me that it's possible to amend the plan, as I expect my son to be in braces in a couple of years. I asked her about the failure rate, and she said they have some people they never hear from and some that have a hard time, so I guess it all depends on how your personal circumstances go through the course of the plan. She did say that one problem they have seen is folks missing a payment and not calling them. She said to always call if we have any issues at all. So far, anyway, I'm happy with my choice of attorney.

I've read several folks having an increased mortgage payment. Is that from ARM? Ours is fixed rate, thank goodness.

[13inOR]

Yes, I know about the braces thing, my 14 year old is sporting them now, all
$5000 worth. The amendment for those was no sweat, by the way. : )

Just an FYI, our attorney is very busy with Bks and when we filed in 2004 we asked her about the failure rate and she said out of all the 13's that she had done (which must be hundreds, she is very popular) only 3 have failed, and in her words, it was "pretty predictable" in those 3 cases. So thats good, I guess??

[aa06a47]

I have filed 13 in Missouri under the OLD rules - filed September 2005. Everything SinkingFast has said is absolutely 200% true. My plan payment is 90% of my "excess" income. However, in figuring out my "budget", they attorney plugged in statutory amounts for food and other things - so no matter what you actually spend, the statutory numbers are used and you can only hope you are spending that much or less. Woe to you if you spend more. I was told if you spent more than the statutory amounts the trustee would basically feel you were living too high on the hog.

I also have had an issue with them not allowing me to budget for dog food and animal care/vet expenses, which is a big expense for me, but I was told they could care less about that and if I wanted to continue to keep animals, I better figure out a way to pay for that out of my grocery money.

Also, as SinkingFast says, you have no safety net - your furnace goes out, you either live w/o heat or try to figure out a way to get it paid for. There is NO extra money for anything like that. At this point, my mortgage has adjusted upward $200 a month and basically my attorney has told me tough luck, you have to pay it (with other suggestions of getting a roommate or getting rid of my dogs - what a sweetie pie he is ). So if something like that does occur while you are in your 13, again, you are stuck.

I would think if you have a good support system in place (ie family, friends, etc.) who are willing to help you financially if and as they can (say, paying for that furnace that dies or floating you the money and letting you pay back as you can), that would be a big help. *NOTE: I don't know the "legalities" of "helping out" or how it is viewed by trustee/court. ....
Good luck!!

Lesa13, I have a feeling your attorney was playing it safe at your expense. I have read where some people do fine in a 13, probably because they get another job with money under the table, or there expenses went through so high that there was alot more disposable income than not. I have never heard that you couldn't have pets. I don't think even the courts / judge would disagree with having some money held back for pet expenses. I also understand that there has been judgements under appeal that says people who smoke are allowed the expense to smoke.

You might, if you desire to do so, go back and see if you can ammend your plan. It might be worth a try. I know you got what you want by keeping your house, and I understand the morality issue you are facing, but that said, BK plan should be made to succeed, not fail. Part of the approval of the chapter 13 is that it is a budget presented in good faith.

How can an attorney tell you to basically kill you animals, or get a room mate.... to me he has submitted a plan that is not in good faith!

[SinkingFast]

Sounds like you are a Farmer. There's different provisions in the New Law for Family Farmers and Fishermen. You will probably be handled totally different than most of us here.

I haven't read up on them as much, since those rules didn't apply in our situation. But I do know there's extra rules for Farmers and Fishermen.

Here's some stuff about that from Thomas:

Title X: Protection of Family Farmers and Family Fishermen - (Sec. 1001) Amends the Federal bankruptcy code to reenact Chapter 12, Adjustment of Debts of a Family Farmer with Regular Annual Income, as amended by this Act (thereby reinstating permanently family farmer bankruptcy relief).

(Sec. 1002) Provides for triennial adjustments of the debt limit for family farmers.

(Sec. 1003) Cites circumstances under which the claim of a governmental unit that arises from the disposition of a farm asset used in the debtor's farming operation shall be treated as an unsecured claim not entitled to priority.

(Sec. 1004) Increases from $1.5 million to $3.237 million the maximum aggregate debt that qualifies an individual, or individual and spouse engaged in a farming operation as family farmers for debt adjustment purposes. Reduces from 80 percent to 50 percent the minimum percentage of aggregate, noncontingent, liquidated debts arising out of such a farming operation.

(Sec. 1005) Repeals the requirement that the family farmer and spouse receive over 50 percent of income from farming operations in the year before a bankruptcy petition is filed. Allows such income requirement to be met during either the taxable year preceding the year in which the bankruptcy petition is filed, or the taxable year in the second and third taxable years preceding the bankruptcy petition.

(Sec. 1006) Allows the court to confirm a family farmer bankruptcy plan, notwithstanding the objection of the trustee or holder of an allowed unsecured claim, if the value of the property to be distributed under the plan in a specified period is not less than the debtor's projected disposable income for such period.

Prohibits any post-confirmation modification of a bankruptcy plan that would increase the amount of payments that were due before such modification. Provides that, unless the debtor proposes the modification, a modified plan may not: (1) require payments to unsecured creditors in any particular month greater than the debtor's disposable income for that month based on an increase in the debtor's disposable income; or (2) if the modification takes place in the plan's last year, require any payments that would leave the debtor with insufficient funds after plan completion to carry on the farming operation.

(Sec. 1007) Extends Chapter 12 coverage to family fishermen.

Here's a website at the DOJ about Family Farmers and Fishermen portion of the New BK Law:

http://www.uscourts.gov/bankruptcyco...chapter12.html

[FoolAndHisMoney]

We are getting ready to file in Missouri. I've been browsing this very helpful forum for a few days and scouring the internet for information. I'm curious as to why so many Chapter 13 bks fail? I don't want to set myself up for another failure. We are using an attorney who only handles bankruptcy cases.

I would like to hear more personal stories from Chap 13 filers. Surely it can't be ALL bad. It can't be any worse than the way the last year has been - using CC checks to make payments on other CC. I'm anxious to get started and put this mess behind us.

Thanks for any info.

Would you qualify for a chapter 7? Do you have any non exempt assets you want to keep or are you behind on any loans, mortgage, etc.?

At least make sure that you covered ALL expenses and make sure you have adequate car, home & health coverage. This will decrease your disposable income and provide you a better safety net in a dreaded chapter 13 plan or in any type of bankruptcy.

[SinkingFast]

Lesa13, I have a feeling your attorney was playing it safe at your expense. I have read where some people do fine in a 13, probably because they get another job with money under the table, or there expenses went through so high that there was alot more disposable income than not. I have never heard that you couldn't have pets. I don't think even the courts / judge would disagree with having some money held back for pet expenses. I also understand that there has been judgements under appeal that says people who smoke are allowed the expense to smoke.

You might, if you desire to do so, go back and see if you can ammend your plan. It might be worth a try. I know you got what you want by keeping your house, and I understand the morality issue you are facing, but that said, BK plan should be made to succeed, not fail. Part of the approval of the chapter 13 is that it is a budget presented in good faith.

How can an attorney tell you to basically kill you animals, or get a room mate.... to me he has submitted a plan that is not in good faith!

We met with one like that. We smoke. I've seen smoker's expenses listed in BK petitions and it went thru. But one attny we met with wouldn't submit it to the Court. He said, "You can smoke. It is legal, of course. But you cannot include the expenses in your BK petition. The Court simply will not allow it." He was talking about the very same Court I'd seen petitions go thru on PACER.

Another attny told us, the Trustee's and Judge, and several of the BK Court employees all smoke. They have a room INSIDE the Courthouse. A Federal Building that is by law a "Smoke Free" place. They go in a room, open a window, light up, and chat. But when they get in Court, their attitude of mind is,

My finances are fine. Yours are not.
You are asking for help here. I am not.
Your lifestyle has to change. Mine does not.

We saw one attny that had sent us a packet to complete before we came for the Consult. That was right after we'd collected receipts for every penny we'd spent for a month. I knew we'd paid $1085 for food so that's what I wrote down on the expense sheet. That attny went thru our expense sheet and literally SLASHED the food amount down to $700. I was shocked and said so. The attny said there was no way we'd get $1100 for food/month thru the Court. When we got home, I checked the schedules. The IRS allowable for a family of 5 is $976/month for our area. $976 is a heck of a lot closer to $1085 than $700 is.

If you don't learn this stuff your self, so you know whether the attny is acting in good faith or not, you can allow yourself to be royally screwed. You might as well just bend over, pay for it, and smile. Cause the attny sure is gonna be laughing. All the way to the bank.

Edited to add:
I just rechecked the IRS schedules today. 3/11/06. The numbers musta updated since that Consult with that attny. The new food amount for a family of 5 is $1084.

WOW, was I ever close to start with. Our receipts showed we'd spent $1085 on food. $1084 is allowed.