top Ad Widget

Collapse

Announcement

Collapse
No announcement yet.

Considering Chapter 13

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Considering Chapter 13

    I have to make a decision fast in order to start saving for attorney fees, but maybe you will discourage me from filing. I hope the folks with expertise can advise what's best in my situation.

    Currently I owe $61,000 in student loans (I understand this debt is untouchable), about $26,000 in car loans, $41,000 in credit card debt (now with Advantage CCS), and about $20,000 in business loans. This is a total of about $148,000 worth of debt. I work in my own company with a 50/50 partner. We have quite a few employees, but the company may not be profitable for at least 3 years, while we do expect to break even during that time. My partner and I can't give each other raises because our payer is the state, and the payments for our services are capped. I make $52,000/year, and for the last 8 months or so I have been working an average of 10 hours of overtime. This will put me at approximately $72,000 if I continue doing extra work. We are trying to take away some of my tasks by hiring someone who can take over some of my duties. This will free me up to do more of my job, and I can have a sane 40-hour week. My wife makes about $40,000 per year at the current rate.

    Currently, my portion of expenses is around $3,250 - $3,500 per month, which includes student loan payments, food, my car payment, half of rent, most needs and my child support payments. An additional $1,000 goes to Advantage CCS for the credit card debt. I started their program in March of 2014. My spouse contributes about $1000 toward bills, which pay for the other car, half of rent, half of groceries, etc. So we spend a total of $5,000 to $5,500 per month before we have some discretionary cash.

    We net about $6,900 ($3,900 (me after child support) and $3000 (spouse)) between the two of us right now. My spouse pretty much gets to keep all the left overs, because most of our debt is in my name. Both of the cars are in my name, too.

    Of the $41,000 of credit card debt, $25,000 is for AmEx. All would be well and good if we continued this way. However, there are a few important factors that make the situation complicated.

    1. I couldn't make my last AmEx charge payment of $6,000 before joining the repayment program with Advantage, which is now 120+ days past due. Advantage states that they will keep me in the program, but American Express keeps insisting that they will report me as delinquent for the entire 4 years I am in the consolidated program.

    2. My overtime may go away if we hire someone else to help with my duties. This means that my income will go down to $52,000.

    3. Our relationship is a bit shaky, and my spouse may leave, which will leave me with full expenses and the second vehicle that the spouse plans to abandon.

    I am at my absolute limit when it comes to being able to cover my bills, and I can only sustain this with my spouses share of the bill payments.

    The question is does it make sense filing for Chapter 13 in my case? I don't want to touch or tarnish my business at all, by the way, because the business is paying on my share of the business debt. I have a solid 4+ year payment history on everything. The only thing that will destroy my credit is the continuous AmEx negative reporting, because they sold the account to NCO and won't re-age even if I came up with $6K of the $25K to pay the past due. From what they are saying, they will continue reporting 120, 150, 180, 210, etc. days past due on my credit history for AmEx until the full $25,000 is paid in full through Advantage. I almost paid the retainer fee to an attorney today to help me with Chapter 13, but I then checked my credit history with Equifax. I failed to pay the last payment in March, and so this is what the most recent report says:

    Comments: Payments managed by financial counseling program,
    Current Status: 120+ DAYS PAST DUE
    2014: Apr - 30 (past due), May - 60, Jun - 90, and nothing else


    It appears that the reporting stopped. So this is the only thing that's freaking me out. Should I wait to see if the AmEx reps were just scaring me and the reporting will look like this from now on without changes? Or should I take the Advantage CCS payment and pay it to the lawyer for the retainer?

    I realize this is long-winded, but I really need help in making a decision. I am afraid that my arrangement under Chapter 13 might put me in an even worse situation. Just trying to make the least harmful choice.

    Thank you in advance!

    #2
    I don't know really but you are def spread thin. Talk to an attorney to see what they say. Don't rush into anything! Good luck!
    Discharge date: October 2017 (will it ever get here?)

    Comment


      #3
      What is being reported on your credit report should not be a factor in your decision of whether to file. Will the DMP get you out of debt in 5 years? To answer this question, make sure you really understand the DMP. Have the creditors agreed to reduced interest rates or balances? Or, are they just not suing you while you pay less than you were before so it will take you even longer to pay off the debt? How much is actually going to pay down debt and how much is going to Advantage CSS? Are your creditors bound contractually to the DMP, or can they change their mind at any time? Do you realize that in a Ch 13, all interest on unsecured debt will stop?

      Many people have come to BKforum after trying DMPs that didn't accomplish what they thought it would.

      It sounds like you are working with an attorney. Have you discussed how the BK will effect your partnership? How much are partnership assets worth? If there is non-exempt value, is that going to make your plan payment too high? Has the attorney even estimated how much your payment will be? Have you discussed how a decrease in income or divorce will affect your plan? Have you consulted with more than one attorney to make sure you are chosing the right attorney?

      Has the attorney run the means test to make sure you can't file a Chap 7?

      There are many factors for you to consider when deciding whether to file. Your credit report should be the last thing on your mind.
      LadyInTheRed is in the black!
      Filed Chap 13 April 2010. Discharged May 2015.
      $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

      Comment


        #4
        dmc-2008 and LadyInTheRed, thank you for your responses. I don't know if the credit cards are under contractual agreement with Advantage. I think it's all at will, but all credit card companies are agreeing to keep me in the program, except the AmEx insisting that they will continue reporting. The interest rates have been reduced somewhat significantly, but they are still there. My DMP is 4 years long, and Advantage is only charging around $30/month for their service.

        The attorney wants a $2000 retainer, and he is not doing the means test until I pay. He is not willing to discuss the nuances, and he wants the money now. The firm is somewhat respectable in the area, too. I am just worried of ending up with a less advantageous repayment plan under Chapter 13. I need their true advice instead of their desire to make money on this. This is why I turned to this forum. I am trying to find another attorney in the area, but the two or three I called have voicemail messages. There is no receptionist. This makes me think that they are one-person operations that probably wouldn't give me the time of day to find the info I need.

        Comment


          #5
          So, to make my intentions clear, I would stay in the DMP until I could no longer pay. But I don't know if the reflection of the AmEx reporting will be better or worse than Chapter 13. And if I knew that once I started Chapter 13 I could adjust my plan if my income changed, I would be willing to enter the arrangement.

          Comment


            #6
            Don't let voicemail scare you away. Leave a message!

            You could try this means test calculator: http://www.legalconsumer.com/bankruptcy/means-test/ But, it isn't a substitute for an attorney performing the means test. Running the means test and calculating your plan payment is a large part of the attorney's work. So, it is not surprising that they don't want to do it until you pay a retainer. You could ask the attorney if you can pay them to run your numbers and give you an estimate of your plan payment and then credit that payment to the $2,000 retainer if you decide to retain them.

            To pay off $41,000 in debt in 4 years at $1,000 a month, all interest rates would have to be less than 8%. Are your interest rates that low? If not, are you sure all the creditors will consider your debt paid off at the end of the DMP? You would not be the first to finish a DMP to find out you still owe money to creditors. To determine whether a Chap 13 would be more advantageous, you need to fully understand your DMP and whether you have a binding agreement with the creditors that all of your debt will be considered paid in full within that 4 years. You also have to consider whether you will pay off those car loans in that 4 years, or at least within 5 years.

            In a Chap 13, all of your secured debt (car loans) will get paid off, possibly at lower interest rates than you are paying now, and the unsecured creditors get what's left, up to 100% of what you owe, but without any interest accruing after you file your BK petition. After 5 years, you walk away debt free. If you have non-exempt assets, there may be a minimum amount that you have to pay to unsecured creditors. But, even if that means you have to pay 100% of your unsecured debt, that is without interest continuing to accrue.
            Last edited by LadyInTheRed; 08-08-2014, 08:51 AM.
            LadyInTheRed is in the black!
            Filed Chap 13 April 2010. Discharged May 2015.
            $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

            Comment


              #7
              Originally posted by chijuara View Post
              So, to make my intentions clear, I would stay in the DMP until I could no longer pay. But I don't know if the reflection of the AmEx reporting will be better or worse than Chapter 13. And if I knew that once I started Chapter 13 I could adjust my plan if my income changed, I would be willing to enter the arrangement.
              I saw this after my last post. If you don't think you will be able to finish your DMP, then you are throwing your money away compared to a Chap 13. In a Chap 13, when your circumstances change, you still have the protection of the court and the option to request a payment forbearance, petition to modify your plan, or convert to a 7. With a DMP, as soon as you stop making payments, the creditors will start pursuing you again.

              Do you have non-exempt assets? Does your partnership have equity in assets? Having significant non-exempt assets is what will make a Chap 13 inflexible when you have a decrease in payments.
              Last edited by LadyInTheRed; 08-08-2014, 08:52 AM.
              LadyInTheRed is in the black!
              Filed Chap 13 April 2010. Discharged May 2015.
              $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

              Comment


                #8
                I will try the means test calculator, but yes, the interest rates are pretty low. Thank you so much for trying to help!

                Comment


                  #9
                  Do you know for sure you will be hiring somebody to help decrease your overtime? How long will it be before you do that? You could delay your filing until your income has decreased so that your plan payment can be based on your decreased income. If you stop making your DMP payment, it will take some time before you are sued.
                  LadyInTheRed is in the black!
                  Filed Chap 13 April 2010. Discharged May 2015.
                  $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

                  Comment


                    #10
                    My attorney said that once they receive the retainer, there is a way to wait quite a long time, perhaps even up to 6 months to make the decision. I was able to successfully place the Advantage payment on hold. This will give me enough time to use the calculator myself to have a general idea about my financial standing. I will update you on what happens.

                    Comment


                      #11
                      So, with my spouse and the current income, the means test calculator shows the following:

                      48—Enter the amount from Line 18 (Monthly Income)—$5,960
                      49—Enter the amount from Line 47 (All Deductions from Income)—$ 5,989
                      50—Monthly disposable income (Line 48 - Line 49)—$ -29
                      51—60-month disposable income (Line 50) x 60
                      Amount you could pay in a hypothetical five-year Chapter 13 plan.—$ -1,734


                      Quite honestly, it's a little confusing. I hope I did it all right.

                      In our first year of business operation we lost $15,000. We are in our second year of operation. Since we have to obtain health insurance for the company, I don't see us making much profit for a while.

                      The attorney fees can be up to $5,500 in our area. Does this mean they will charge more beyond the $2K retainer?

                      Comment


                        #12
                        And this is without student loans...

                        Comment


                          #13
                          $5500 sounds like a Chap 13 or a pretty complicated Chap 7. Your business does complicaate things. A $2,000 retainer is basically a down payment for a Chap 13. The rest would probably be included in your plan. In a Chap 7, you will have to pay the entire fee before your case is filed.

                          If you did the means test correctly, you qualify for a Chap 7. Is there some reason you would file a Chap 13 if you qualify for a Chap 7?
                          LadyInTheRed is in the black!
                          Filed Chap 13 April 2010. Discharged May 2015.
                          $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

                          Comment


                            #14
                            Originally posted by LadyInTheRed View Post
                            $5500 sounds like a Chap 13 or a pretty complicated Chap 7. Your business does complicaate things. A $2,000 retainer is basically a down payment for a Chap 13. The rest would probably be included in your plan. In a Chap 7, you will have to pay the entire fee before your case is filed.

                            If you did the means test correctly, you qualify for a Chap 7. Is there some reason you would file a Chap 13 if you qualify for a Chap 7?
                            And to add to that doesn't she have to have some dmi to qualify for a 13 Lady?
                            Discharge date: October 2017 (will it ever get here?)

                            Comment


                              #15
                              Originally posted by dmc-2008 View Post
                              And to add to that doesn't she have to have some dmi to qualify for a 13 Lady?
                              Good point. Yes. But, the means test isn't necessarily an accurate indication of DMI. Schedules I and J will show whether there is sufficient dmi to fund a Chap 13, based on actual expenses. In a Chap 7, the contents of Schedule I and J could result in an objection to a Chap 7 discharge if it shows enough dmi to fund a 13.
                              Last edited by LadyInTheRed; 08-08-2014, 08:40 AM.
                              LadyInTheRed is in the black!
                              Filed Chap 13 April 2010. Discharged May 2015.
                              $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!

                              Comment

                              bottom Ad Widget

                              Collapse
                              Working...
                              X