New here with Chapter 13 questions...

[stircrazy]

Hi All! I've been snooping for quite some time now. I met with a lawyer today and finally decided to join the BKFORUM Community. I'm even more scared and nervous after talking with the lawyer.

I have a 1st and 2nd mortgage on my house and my house has absolutely no equity in it whatsoever. I'm so far underwater on it, I don't think it'll ever have equity in it again. With me and my spouse's income, we are about $1000 over being able to file Chapter 7. The lawyer we met with moved numbers around and couldn't get it to a Chapter 7 for us. I have a few questions that I thought of, of course after we got home, that I'm hoping someone can answer for me.

1. The lawyer gave us a rough "estimate" of our Chapter 13 payment. I'm not sure we can afford the payment, with our mortgage payments and living expenses. If we get into a Chapter 13, what happens if we can't make the payments. I understand we can have the payment adjusted, but I'm just afraid there is no hope for us at that point if we can't make the payment since Chapter 7 is out of the question.
2. Can the 2nd mortgage be stripped? I've read that a 2nd mortgage can be stripped if there is no equity in the home.

My spouse and I are in our 60's and we want to keep our home, we don't want to move into a rental community anywhere.

Thanks All!

[HHM]

Keep in mind, the number you can pay in the chapter 13 is what, on paper, you CAN afford. That number is your "disposable" income after you pay all your other necessary expenses. So, on your part, to make it work, you will need to have spending discipline. That is simply the reality of chapter 13. So sorry, we do not accept sob stories about "I don't think I can afford it." Now granted, that is if you and your attorney did a good job of crafting your budget.

Frankly, there is no alternative to not staying in the chapter 13, you either want to get out of debt, or you don't. Get over the fear and WORK to make the plan WORK.

The 2nd mortgage CAN be stripped, but not if there is no equity in the home, the 2nd can only be stripped if the current market value of the home is less than what is owed on the 1st mortgage.

[SMinGA2]

1. Your goal is to find an attorney who is willing to work with you/for you to make sure your best interests are represented. In the form of submitting a plan proposal that allows you reasonable amounts in your personal budget. Depending on where your spending and expenses are now, there may be some cutting back needed.

2. It depends. What's the value of your home now compared to what you owe on the 1st mortgage?

[momofthree]

1. If you can't live within your submitted budget, and fall behind in payments, the case will be dismissed and all of your debt comes back plus penalties, interest, and fees. The creditors receive all their collection rights back and can get a judgment against you.

2. If your second mortgage is wholly unsecured, then you can strip it. If it has even 1 cent of equity, it cannot be stripped.

edited to add: consult with a couple more attorneys before settling on one. You may find one who can push a 7 through, or is willing to fight for a more workable budget for you.

[stircrazy]

With the Chapter 13 payment we are left over with $200 a month for gas, groceries and entertainment. Is this normal? How can anyone live on this?

[SMinGA2]

No it doesn't.

There could be a few determining factors, as I see it.

1) Your attorney does not have an accurate list of your actual bills & expenses.
2) You don't understand what is being paid 'in the plan payment' and so are counting your figures incorrectly. Such as if the attorney is assuming a lien strip, you won't be paying your 2nd mortgage. So if you're counting that as an expense, you would be better off than you think.
3) There could be a minimum amount that MUST be paid into your plan, and either you figure out a way to make it work or you don't file ch. 13.

Examples of #3 would be if you have mortgage arrears that must be paid off during your plan or if you have non-exempt assets high in value you want to keep. There could be others.

Ultimately you want to understand exactly why your attorney recommends a plan of $X payment per month. How many attorneys have you consulted with, and did you go over your debts AND expenses in full with each one?

With the Chapter 13 payment we are left over with $200 a month for gas, groceries and entertainment. Is this normal? How can anyone live on this?

[SMinGA2]

If you would care to list a summary of your debts (in particular, any arrears on mortgage or other secured property you intend to keep, IRS) and an outline of your bills & expenses some of the forum regulars may give you some feedback. Never post private details, of course, and you don't 'need' to post this if you don't want to. It just might help you have an understanding of how a plan could work for you though.

With the Chapter 13 payment we are left over with $200 a month for gas, groceries and entertainment. Is this normal? How can anyone live on this?

[Pjmax]

I'm just throwing this out there, but can either of you file for Social Security? As far as I know, it is not included as income for BK. My understanding is if you are full retirement age (mine is age 66), you can earn as much as you want and it won't effect your SS amount. I filed for SS at 62, because I didn't know how long unemployment would last. For me, I can earn up to about (forget the exact number) $14,000 before deductions are made from SS., and at 66 no limit.

That extra money might help. Something to look into.

[stircrazy]

Our attorney included our social security. I'm going to definitely look around at other lawyers.

[HHM]

Let's be careful here when it comes to chapter 13 and SSI/SSDI.

Although that income is exempt, that doesn't mean it doesn't gets factored into a chapter 13 plan. Most people on SSI NEED to factor in their SSI income to make the plan feasible. To do a 13, you MUST show some amount of disposable income.

What happens in a 13 is that you can back out SSI on the chapter 13 means test, but you don't back out SSI on Schedule I and J.

Now, if the only thing pushing you over on the chapter 7 means test is SSI, that is a mistake.

[Pjmax]

From what I've read, Soc. Sec. Is not included as income for the means test, but is considered in the 13 repayment plan, as in one's ability to make the payments. Hopefully, an expert can clarify this?

Edit, aaah, HHM to the rescue.

[SMinGA2]

Something to think about: if either chapter were available to you, would you have a reason to choose 13 over 7? Such as to repay mortgage arrears over 3-5 years, strip a 2nd mortgage (if your home is worth less than the 1st mortgage), or to protect non-exempt assets?

[karm43]

what district are you in?

[karm43]

Is that 1000 a year over or month?

[O2brnot2b]

Social security excluded

From what I've read, Soc. Sec. Is not included as income for the means test, but is considered in the 13 repayment plan, as in one's ability to make the payments. Hopefully, an expert can clarify this?

Edit, aaah, HHM to the rescue.

October 26 (Consumer Bankruptcy News) – The Bankruptcy Code says Social Security income is not included in a debtor’s “disposable income.” Because it is not included in “disposable income” it cannot be included in a Chapter 13 debtor’s “projected disposable income.” Neither the Supreme Court’s Lanning ruling nor good faith changes this outcome, and requires that Social Security income be committed to plan payments, the 10th U.S. Circuit Court of Appeals ruled in Anderson, Trustee, v. Cranmer (In re Cranmer), 2012 WL 5235365 (10th Cir. 10/24/12).