Ch13 and then switch or wait to do Ch7

[BrokeJack]

[StartingOver08]

Welcome to BK Forum! You have come to the right place to ask your questions. We are not attorney's - just people that either have filed BK, are going to file BK or in the process of BK right now. So ask away.

As you your proposed situation, it seems to me that if you are going to surrender your house and your vehicle, then you need to seriously consider stopping all payment on everything that you do not plan to keep. Stop paying credit cards and unsecured debt. You will want to continue to pay just the essentials. You may even want to first do a budget with just the minimum essential payments to see where you are with your NEW paycheck with the NEW career.

My feeling is, try for the CH 7 if at all possible. You will want to have a plan before you stop payments. Do the budget first. Interview 3 -4 attorneys with your situation to see what they advise.

The 6 months leading to your BK is THE MOST CRITICAL. It sets the tone for which chapter you can file. Do not borrow from the 401k as that is considered income to you. Check out the means test for you and your family in your state. See link here: http://www.usdoj.gov/ust/eo/bapcpa/meanstesting.htm

Check out your exemptions.
Write down all your creditors and amounts and questions for your attorney interviews (which are free BTW).

Hope this helps. Come back to ask more questions.

[BrokeJack]

I guess our plan is to wait and go with the Ch7 after my income is lower.

We've already contacted several lawyers who've basically told us that we can only do a ch13 right now, but we could wait to do the ch7 after my income is lower so that we pass the means test and fall below the median income for a family of 4. Thats all they've told us, but they said that because of our unique situation, it would take much longer to analyze our data at their hourly rate. I've already budgeted, ran the numbers and did the means test with multiple scenarios, so I think I have a plan has to how this would play out budget-wise if we are to stop making payments..

But, I'm not sure what happens now if we stop making payments. OK, I'm afraid, even terrified by what-if scenarios of what happens when you stop making payments that you're legally obligated to pay - I've never done this before.

Should we get a lawyer right now or when we plan on filing in 4-6 months?

Do we just ignore the phone calls that we are going to start getting from the creditors or what do we tell them if aren't planning on actually filing for 4 months?

[StartingOver08]

Well, I had always paid myself until I could not any more this year. What I did was negotiate the larger payments to a hardship program and closed those accounts. The hardship program was at a very, very low interest rate (2% to 4%). When I had a further reduction in income I stopped paying and then fairly shortly thereafter, within about 45 days, I retained an attorney with a small deposit.

For the most part I selectively answered calls from the OC (because they were not turned over yet). If the OC became particularly aggressive, I did refer them to my attorney (the BK attorney). I gave the name and phone number. It took another 60 days beyond that before I filed. The reason I filed rather quickly was the mortgage companies - they had filed for FC. My filing was for a CH 7 and to surrender the properties. (I am waaayyy upside down - over $200k upside down in one of the properties alone).

You probably can buy 5 to 6 months or more this way. I made my last mtg pmt in May 08 and filed Sept 30 2008. I had been paying on the hardship program for one year prior to the filing.

[BrokeJack]

Even with hardship programs, I won't be able to afford to make the payments to creditors with my lower income.

What did you do in the 45 days before you retained a lawyer when the creditors called you? If I understand you correctly, though, once, you have a lawyer, you can refer the creditors to them, even though you may not be filing for several months after that?

[StartingOver08]

I occasionally answered the phone calls, but did not provide information. No bank account information, no promises to pay. I usually said " I am working on it".

[casdem1]

We filed a chapter 13 in July to save house and our confirmation date was delayed until October. During the month of September, my husband had to take early retirement due to his health. His income dropped from $2400 per month to $650. We just converted to a chapter 7 and we go to court at the end of November. Our lawyer said we did not have to wait the six months with a lower income. I guess he filed some type of 'change of circumstance' or something. We have also decided to give up the house because of the high interest rate (12%). I am worried about the 6 month rule, but our lawyer seems to know what he is doing...