Is Chapter 13 my only choice?

[babyvo]

Thank you, that's really helpful information. Does anyone know, if in a chapter 13, what bills would I stop paying? I know I'd stop paying all credit cards, but would I still pay on my car loan, or would that become part of my monthly payment plan to the trustee? I was told I'd stop paying on my student loans, but are they totally deferred, or would some of the money from the trustee go to them? What's confused me is that the lawyer told me my payment plan would most likely be $250-300 a month. But if I'm not paying my car, student loans, or CC any more, then that monthly payment is less than what I'm currently paying on those things.

I'm trying to set up more consultations for this week, but I think something needs to be done about the suit before friday or a judgement goes against me. Does anyone know what would happen if I don't do something about the suit before the 20 day window has passed? I'm feeling really stressed and pressured to make a decision quickly because of this impending suit.

[momofthree]

You should be able to file a chapter 7 fairly easily. Schedule interviews with a few more lawyers, and if your boyfriend isn't on the lease or utilities, I would list the full amounts. Technically, since you're not married, engaged, etc. he could leave at any time (not saying he would, but legally).

[SMinGA2]

For the DOJ 'standard' expenses for 1 person: $301 food, $86 clothing & apparel, $32 personal care products, $116 misc., $30 housekeeping supplies. So you could probably claim the upper end ($300) on food, but the lower end ($80) on clothing. And personal care is a little high at $50. Pet expenses, I think, would fall under Misc, as well as entertainment & gym. I don't think you'd be able to get away with claiming the full amounts listed for those 3, but the difference is not a big amount. Savings would not fit in a ch. 7 or ch. 13 budget.

For the gas & electric utilities, try contacting the providers to see if they have a budget billing plan. If so, they look at your prior 12 months usage and bill you an average amount each month. Helps to keep things even, so you know what you're paying each month. If not, then look at your last 12 months and average them out. That's what you'd include monthly.

As far as I know, when it comes to a roommate (that's what your boyfriend is since technically) then you'd count what you pay. Such as if you split the utilities, you'd count your 1/2. You'd count in full things you pay on your own - like auto insurance, cell and such. You don't have any claims on 'his' money. Just as he doesn't have claims on yours. (Its a little different when its a family/spouse situation.)

A net income of $1932 is not ALOT of money. Overall your expenses are reasonable, with a few tweaks here & there. If I were in your shoes, I'd sit down with a couple of attorneys and go over my #s. I'd push for a ch. 7.

[babyvo]

Since I got hired full time and got a $5/hour raise in January, I do have money left over. I've still been living pretty simply and paying down my debts the last few months, but i have allowed myself to spend more (which is probably just an average amount) on food, clothes, and other personal expenses. I bring home $1932 a month. My boyfriend and I live together but our finances are separate. We share the house bills, but everything's in my name (he moved into a place I was already living in alone before we met). Here's a breakdown of my expenses, these are total amounts and I have not split my boyfriend's share:
Rent- $575/mo
cell phone- $90/mo
internet and cable $120/mo
electric- ranges from $30-$120 depending on season
gas/heat- ranges from $30-$350 depending on season
car payment- $217.38/mo (about 6 months left on loan)
car insurance- $65/mo
Student loans $202/mo (that's with hardship deferment and only paying interest on most of the loans right now)
gym- $40/mo

Those are all of the set bills. Everything that follows here is a guestimate depending on what I need from month-to-month.
Food- $200-300
transportation- $120/mo
pet expenses- $50/mo
personal care- $50/mo
clothes- $80-100/mo
medical- $50/mo
automatic transfer to savings- $40/mo
Entertainment- $80/mo
Car maintenance and repair- about $1000 per year

I guess I'm confused about what will be considered acceptable amounts for each category. And when it comes to my boyfriend, will they look at his income, or assume that he pays more than beyond just the house bills? We really do keep our finances separate, and sometimes I'll pay the bulk of the house bills if he's having a rough month. If he were to move out, I would definitely have little to no DMI. Also, for things like gas and electric that vary depending on season, how do I list that? My heat bill has been as much as almost $400 in the winter and as little as $30 in the summer.

[ValleYum]

PA has terrible exemptions - but the OP can use Federal exemptions. Median income for 1 person in PA is $45,092. Federal exemptions with their generous wild card would likely cover all of the OP's assets. Their being able to file a 7 will very likely hinge on their DMI.

Listing their expenses here could perhaps help us see why the attorney recommended a 13 versus a 7. (Perhaps it is the fact that she lives with her boyfriend and splits living expenses with him leaving OP with too much DMI)

[SMinGA2]

It really depends on your situation.

When you consider your net income less your expenses - what is left? By expenses, I don't mean the 'I haven't bought clothes in 10 years and I can only afford cereal and ramen' budget. I mean reasonable expenses. Google the DOJ means test expense figures to get an idea of what is considered reasonable. There are amounts based on family size. I can tell you that for my family of 6, $600 a month on groceries (food only, not all the other stuff) is reasonable. But I'd also need to factor in household stuff (cleaning supplies, paper products, etc.) and personal care items (shampoo, soap, toothpaste, haircuts, etc.) and medical OTC (misc cold meds, ibuprofin, bandaids, etc.). Then there's rent or mortgage, gas, utilities, insurance, car maintenance, home maintenance, and so on. (If you rent, you probably will have a minimal amount for home maintenance.)

The major factor in choosing ch. 7 vs 13 is DMI. When you take your net monthly income and subtract all of your bills/expenses - what is left? If its a minimal # or negative, you will probably not be forced into a 13. You can demonstrate that you can't afford a payment plan. Keep in mind you would NOT count credit card payments.

Another factor - do you have non-exempt assets? Research your state's bankruptcy exemptions. If you have non-exempt assets, you have to make a choice. You could strike a deal with the trustee, and pay the trustee the non-exempt portion. Or you could let the trustee take your property. Example: if your car is worth $15,000 and your state only allows you to exempt $5,000 then you have $7,500 non-exempt equity. OR you could try to do a ch. 13 where you pay at least the amount of non-exempt equity to your unsecured creditors over 3-5 years. If your DMI is really small or negative - this can be tough of course.

The lawyer didn't even mention chapter 7. I guess I assumed I didn't qualify, or that chapter 7 would mean losing my car. I'd like to keep my car if possible.

[babyvo]

The lawyer didn't even mention chapter 7. I guess I assumed I didn't qualify, or that chapter 7 would mean losing my car. I'd like to keep my car if possible.

[Pandora]

why would you file a Ch. 13 vs. a Ch. 7? If you dont have to be in a Ch. 13...then dont opt for it for goodness sake.

[babyvo]

Thanks lillymarlene, that's really helpful. I'm going to try to meet with a credit counselor before I make my decision.

[lillymarlene]

Hi babyvo, Welcome.

1. I'm so close to paying off my car and those small CC's. My student loans will always be there. The only real problems are the cards in collections, and the only reason I have to act now is because of the suit. Is 13 really my only option? Is there some other avenue I should be looking into?

No, you might look into credit counseling, if your income is high enough to support it. While I was still considering whether to bankrupt or not, I saw somebody who is a "legitimate" credit counselor. She immediately took one look at my income, expenses and debt, and recommended that I consult a bankruptcy attorney.

2. He said all the CC's, my car, and the student loans would be included in the ch 13 and I'd stop paying them, and pay the trustee instead. $300 a month is even less than I'm paying now between the loans and my car. Could this really be true? And if so, can you have a savings account and save money while in a 13? I thought the whole point was that they got your disposable income?

My chapter 13 is much less than if I had to pay and negotiate something with my former creditors. I haven't really been able to save much, but my bank balance is positive. Many people though, I do think are able to save. For example, not spending all that is in the clothing budget this month, but putting it instead into savings.

3. My boyfriend and I live together, and plan to marry, have kids, get a house, etc within the next 3-5 years. I've also been working on starting my own food business, and have been trying to save money for licenses, etc. Does a CH 13 mean all of that goes on hold for 3-5 years?

That's tough to answer. You will need permission from your trustee to take on any new debt while in a ch-13. I could be wrong but I imagine obtaining a mortgage, or taking on a business lease would fall under the "new debt" category. As far as business licenses, go that may be different, if you can pay for them outright. Then (well in my case anyway, though it may be different in other areas) according to my attorney, small accounts, net 30 with my vendors are allowed, being considered "normal business."

Good luck.

[SMinGA2]

The short answer: your monthly payment is net income less expenses. That is your DMI.

You don't want to make a plan that has you eating ramen and never using electricity for the next 3-5 years. On the other hand, you can't really expect to eat steak every night. Ideally you would work out a budget allowing reasonable expenses that you need in every category. If $600 is reasonable on groceries per month (example - depending on your family size, it may be too much/too little) then you could probably manage to save some $ by spending a little less each month. And you'd set aside money in months when you don't need it. Such as you'd budget for home/car maintenance, clothing, medical needs. You probably would not have those expenses each month - but you'll need to be reserved enough to hold onto the money so you'll have it when you need it.

Some cases have a minimum $ that needs to be paid - such as if you're paying off mortgage arrears, or want to keep non-exempt assets. But if there is no minimum amount, then its a matter of DMI. If you are below the median income, you can do a 3 year plan. If above, it must be 5.

[babyvo]

Thanks for your input. I guess I'm just really scared about the lawsuits, and not sure that I'd be able to get the debt settled for a reasonable amount without a 13. I'm making more money now, but a $700 a month payment for one CC is still beyond my means. There's also part of me that is so angry with them for not just working with me in the first place, that I don't want to give them all $20k they say I owe (since almost half of that is from late fees, charges, etc).

I think the part that had me most confused was why my monthly payment would be so low. After reading through more posts, it makes more sense now why the lawyer had me go over my expenses again and kept saying "i think you're forgetting something". I was unemployed for so long, and therefore broke for so long, that I scaled down my expenses years ago, stopped using CC (too late though, they were already maxed) and learned to live without, and only off of cash on hand. Even though I'm making more money now, i'm still living pretty simple in order to save/pay down debt. It seems like when I fill out an expense sheet, I can fill it out with higher numbers that reflect what most people spend, and what I would actually like my budget to be for those categories? How do they determine what my monthly payment would be? Just based on income vs the expense sheet I fill out? How do they determine whether a plan will be 3 or 5 years?

[SMinGA2]

List (for yourself, here only if you want to) your monthly expenses. Gas, insurance, rent, utilities, groceries, personal care, clothing, vehicle maintenance etc. Compare to your net income. What remains? That is the bottom line answer to whether or not you can do a ch. 13.

If you do a ch. 13, the student loans will be part of the plan - you won't make the SL payments during the plan. But those balances will remain after.

[karm43]

Oh by the way they cannot garnish wages in Pa. but they could garnish your bank account just fyi

[karm43]

If you really don't want to file a chap 13 you can probaly call the company that sued you before you go to court and m alot of times they will make a payment plan, and your right the other will follow, however sounds like you may be in a position where you may be able to make extra payments and get them out of your hair. Being that your car will almost be paid that car payment money would go to the plan unless you buy a new car.Then the student loans would be put in deferment for your 3 years only getting some money because there not allowed to get the full amount.
You really have to give it some thought. The good part about chap13 is all interest and calls stop and you make 1 payment. The bad part is you have to pretty much tell the courts everything, like raises etc.
If your boyfriend lives with you they will want to know that too. Hmm maybe he doesn't live with you.
Good Luck a chap 13 is def right for some people.