If I file for 7 and get forced into 13, can I back out of it?

[GoneBust]

I am desperate to get out of debt, and I have judgments on the horizon within weeks - but I am too worried that I will get forced into 13 and then won't be able to comply to its 5-year terms.

What happens in a Chapter 13? Do they basically own you for the next 5 years? I am really worried and I don't know what to do. I would almost rather sell my home and move my kids to a different school district to find a home than go through the scrutiny of a Chapter 13 based on the nightmares I have read about it.

The reason I think we will be in Chapter 13 is because I make about $93,000.00 a year for my family of four. Our mortgage payment is $3,500.00 a month ($2,800.00 payment and $700.00 paying on past due amount of $12,000.00). We have one vehicle that we are paying $658 a month for.

We are using one of the cattle mill type BK lawyers and they haven't told us if we can qualify for Chapter 7, but I am guessing that my higher income will put us into 13. However, I develop websites for a living, and one month I might sell $8,000.00 and the next month it could be $11,000.00 - or it could be zero if nobody buys my services.

We run my business out of our home now. We used to have an office downtown with a few employees until the economy crashed in late 2008, and we've been on the verge of foreclosure and bankruptcy ever since. We've already had one vehicle repossessed. I feel like I will be giving my livelihood over to the BK courts to do whatever they want to with it.

Am I missing something? Is it not as bad as I think it will be?

Any advice would be very appreciated!!

[LadyInTheRed]

A 13 is not as bad as you think it will be. Not if it's done correctly, anyway.

I have been in Chapter 13 for a year. My trustee payment is lower than my pre-bankruptcy debt payments were and it includes the payment on the car I bought before filing. I have more money to spend than I did before filing. I have money in my savings account and contribute to my 401k every month. In 3 years, my 401k loan will be paid off and I'll have another $350 available every month. A year after that, my BK will be discharged, my car will be paid off and I will no longer have a second lien on my home.

A lot of people share your fear of a Chapter 13, which is why I posted a poll recenty to see how people felt about their Chap 13s. Perhaps the results will calm your fears a bit. http://www.bkforum.com/showthread.ph...highlight=poll Not everybody in a 13 has it as well as I do, but even most of the people who have a hard time do not regret filing.

Since you are self employed, you may have to submit periodic profit and loss statements during a Chap 13. That depends on your trustee. Because you have fluxuating income, if possible you should time your filing at a time when the prior 6 months income was low. You will need to budget and save in months when your income is higher so you can cover your trustee payment and living expenses in the months when your income is lower.

Once your plan is confirmed, you make your monthly trustee payment and send the periodic profit/loss reports if required. Your trustee may also require you to send copies of your tax returns each year. During your 60 month BK, you would need approval to incur more debt and have to tell your attorney if you have any significant changes in your financial situation so your attorney can decide whether the change needs to be reported to the trustee. Other than that, you go on with life.

One key to having a successful Chap 13 is to have a good attorney who will make sure you have a livable plan. If you have any doubts about your attorney, find a different one. You should have an attorney with lots of experience in Chap 13s. A good attorney is a good investment. Interview attorneys until you find one you have confidence in.

ETA: I forgot to answer your question. If you file a Chap 7 and the trustee doesn't believe you qualify, he will file a motion to dismiss your Chap 7. At that point it is up to you wether to let the Chap 7 be dismissed, petition to convert to a 13 or fight for the 7. You cannot be "forced" into a Chap 13. An experienced attorney should have a pretty good idea BEFORE you file, whether you will be able to qualify for a 7.

[LadyInTheRed]

I was just reading another thread and see that in Maryland, debtor's are required to update their income and expenses each year. I don't know how common that is, but wanted to point it out so you know of other possibilities of what may be required. Ask your attorney about what kind of information must be given to the trustee each year in your district. See Cirsto's post at http://www.bkforum.com/showthread.ph......seem-normal.

[Flamingo]

Remember, once you file for any bankruptcy, it is going to appear on your credit reports for 10 years for a Chapter 7 and 7 years for a Chapter 13 (from date of filing). So if you file, and whatever happens thereafter, you still have to deal with the bankruptcy filing.