What to do chap 7 or 13

[253BK]

Hello everyone so here is where we are at! We retained an attorney but he gave us to think about please give me your input!

We have about 130K in unsecered debt due to giving cars back and a few lower credit cards BUT own a truck that is worth 45K outright for our towing business! He mentioned filing chap 7 by selling the truck and paying the mortgage current along with my taxes off of 20K and buying 2 cars to get around until the chap 7 is discharged!

OR

We file chap 13 for 60 months and not have to sell the truck... This would allow us to keep the truck and have to pay back into the 13 the 45K over 60 months! Plus I would owe my taxes still in the long run!


If you guys were going to file specailly the ones that have filed and discharged what would you go with? I really think selling and catching everything up would be smartest due to being over in 4 months and not somehting I have to worry about for 60 months what would you do?

Our monthly payments are about 4800$ and we make about 5400$ so we have some left over but he said that we can put that towards food/gas and be just about even!

Give me your thoughts and be honest and blunt lol Thanks

[MomIcantFindmy]

I honestly like the first idea the best. If the only purpose of a 13 is to save the truck..forget it. Plus you still have taxes to contend with.

In terms of financial expenses and well being which way is going to cost you the most? Replacing the truck at a high interest rate after BK or paying a 13. I'm sure you have already considered this, but, If the truck is a business expense how much of the value would be exempt in "tools of the trade"?

For that matter, surrender the truck in a 7 and buy it back from the trustee with payments, arrange a IRS payment schedule and work to pay down the house. ...sorry...just ideas whirling through my empty head.....

[253BK]

Good info I think option one is best! The truck I own outright and have title so that is the problem I can give it to the trustee and buy it back I dont think???

If I owed money on it then I could but not 100% sure

[TEW]

I have read this a couple of times and this is what I think. The truck is income producing? If so what are you going to for that income if you going to do for that income if the truck is gone? It looks like with the info you have given us that a 13 would be the cheapest. I would have a very hard time giving something up that’s paid for and is income producing.
In my State you would have a hard time with a 7 if you have 2 people in your household. And your income.

[keepmine]

Our monthly payments are about 4800$ and we make about 5400$ so we have some left over but he said that we can put that towards food/gas and be just about even!

Add the cost of insurance and applicable business liscences, depreciation/maintance plus, your time and you're better off working at MacDonalds.
I'd sell the truck and use the money to pay the IRS which is a priority debt. Then, take care of the transportation needs.
IMO, a 7 is far preferable to a 13. It's faster cleaner and neater. In 90-120 days, it's over.

[253BK]

That is really how we feel to! The truck can go I am ready for no car payments on a lower end car! If I sell the truck it gives me about 8000$ left over which buys cars that are worth about 5000$ to the trustee which should fly AS long as I use the other funds to pay the IRS and mortgage up to date!

The 7 is over and done which would be a great feeling to start fresh!

[TEW]

Our monthly payments are about 4800$ and we make about 5400$ so we have some left over but he said that we can put that towards food/gas and be just about even!

Add the cost of insurance and applicable business liscences, depreciation/maintance plus, your time and you're better off working at MacDonalds.
I'd sell the truck and use the money to pay the IRS which is a priority debt. Then, take care of the transportation needs.
IMO, a 7 is far preferable to a 13. It's faster cleaner and neater. In 90-120 days, it's over.

Isn't the 45K going to be counted as income no matter what he does with it?

[MomIcantFindmy]

Isn't the 45K going to be counted as income no matter what he does with it?

Yep....good call.....can you wait 6 months after selling the truck to file or exempt the truck and sell it when the chap 7 is over?

[oldrocker]

As another poster asked; how much of your income does the truck produce for you? If its a money maker it might be worth saving. I would think with tools of the trade and (possibly) some wildcard exemptions you could knock the payback value down a bit in a 13. Where are you getting the value of the truck?

Why won't your taxes get paid if you do a 13? I had the choice of either a 7 or a 13. All my 13 plan is paying is taxes, trustee and lawyer, unsecureds are getting 0.

Can you use exemptions to knock down the value of the truck, then craft a plan that pays your taxes and home arrearage ($36000) with a little to unsecureds as needed. If you can swing a payment in the $800 to $900 a month range for 60 months to keep the truck, pay your taxes, catch up the house and pay lawyer (if his payment is in the plan) and trustee, go for it. Plus the 13 will clear off your credit reports 3 years earlier then the 7 will. Just a thought.

[BnkrptcyLwyr]

First, you have to remember that if you make a decent amount of money, then you may have to file a chapter 13 regardless of whether or not you want to file a chapter 7.

On the other hand, it may very well be that your finances don't allow you to do a chapter 13.

Ok, so either way, it sounds like you're married (you said "we"). Is the truck in one name, or both of yours? Also, does your state allow you to take the federal exemptions? If so, the federal exemptions are fairly generous and you can apply a lot of exemption to the truck.

That's good in both a 7 and a 13. In the 13, it will reduce the "liquidation analysis" and reduce the bare minimum you will have to pay to unsecured creditors in the 13.

ALSO, in the liquidation analysis, the priority unsecured tax debt is taken out as well, and don't forget to take out administrative costs! So, for example you might have the following:

45000 car
less 20000 taxes (assuming it's all priority).
less (say 12,000) exemptions
less 1500 administrave costs
leaves $11,500 minimum payments to unsecured creditors.

I guess I might prefer a chapter 13 just because as someone else noted, if the vehicle is income producing, why not keep it. In a chapter 7, if there's enough equity left, you'll just be giving it up and losing income to boot.

On the other hand, if you don't care about the truck, and you can live without the additional income, and you can get into a chapter 7, I would do that - because you're right - rather just have the trustee take and sell the truck and pay off the priority tax debt, and give you back whatever you were able to exempt.

A caveat, you owe a lot in taxes, if you end up in a 7, you will want to make sure that the truck can actuallybe sold for enough to be able to pay off the tax debt.

Really, you need a thorough examination of your financial situation and to see just how much you'll have to pay to unsecured creditors, and whether you can even afford a chapter 13.