Question Preparing for Chapter 13 – Seeking Advice and Insights

[Myownerrors]

Hi everyone,

After 30 years of never missing a payment on any loan or credit card — and almost draining my 401(k) just to keep up with the minimum payments — I’ve decided to start preparing for a Chapter 13 filing as I am done with the emotional stress and I will retire in 5 years.

I’ve been reading many posts here over the past six weeks and have already made some adjustments based on what I’ve learned from your experiences. For example, I bought a used car in August, updated our old phone plans, and canceled the additional credit cards for my wife and kids. I’m still working on finding other ways to reduce costs and would really appreciate your advice and recommendations based on your experience and my financial situation below.

Household

• 3 people living at home NH (my wife, my younger son, and me)
• My younger son is in college (junior) in South Carolina (I paid his college with my 401k funds through a credit card)

Income

• Net monthly income ( my salary and wife salary - after taxes and all deductions): $9,300
• Annual bonus: $15,500
• Total monthly income around $10,592

Monthly Essential Expenses (do these look reasonable?)

Mortgage + HELOC (includes HOA, insurance, panels)	$4,793
Home insurance	$187
Electricity + Gas + Solar panels	$488
Water + Sewer	$205
Cell phones (family plan) + Internet + Cable	$488
Home maintenance / yard / snow removal	$200
Transportation (2 financed cars, 2 paid off, insurance, gas, maintenance, registration)	$2,429
Food	$1,200
Clothing / personal care	$180
Child’s school / activities	$225
Father’s care / nurse	$600
Medical / dental	$80
Life insurance	$674
Donations / religious	$40
Subscriptions / memberships (Netflix, Prime, Gym)	$42
Pets	$55
Total Essential Expenses	$11,586

Deficit = $994


Debts to be restructured (205,600) Monthly Minimum 6,125
Credits cards: 170,000 - monthly minimum 4,475
Personal loans: 35,600 - monthly minimum 1,650



Questions:

1. Can I file Chapter 13 individually, and how would it affect my spouse?
2. How is paying my son’s college with my 401K treated in bankruptcy?
3. How will the trustee determine my monthly plan payment if my essential expenses exceed my income?
4. Will I be required to reduce life insurance, 401k contributions, or other essential spending?
5. Can I continue paying for my father’s expenses ($600/month) and have it counted as essential?
6. If I stop paying my credit cards and personal loans within the next couple of months and file for Chapter 13 in April/May, how likely is it that creditors will file a lawsuit against me before then? I’m waiting until April so that I have six months of reasonable expenses documented in my statements and checking accounts

I have a meeting with a lawyer but I want to gather as much information as possible from people that has gone through this painful process.

Thank you in advance for any insights you could share.

BTW any recommendation for a lawyer in NH?

[despritfreya]

Thank you for posting and welcome to the Forum.

Assuming you are advised to file a Chapter 13 as opposed to a Chapter 7, let’s look at the budget you created.

You have net income of $10,592. That’s good.

Your expenses are the issue as you have included items that may be removed or reduced by a competent attorney based upon local procedure. For example, if you were in my jurisdiction, the following expenses would be reviewed carefully:

1. It appears you included payment of the solar panels twice on the 1^st and 3^rd lines. If the 3^rd line is an additional expense (over the monthly finance/lease payment), it needs to be broken out. Further, if you are purchasing the panels (as opposed to leasing), there will be a discussion with your attorney about either “surrendering” them or paying, through the Plan, the “fair market value” of the panels.
2. Your transportation expense is way too high.You included car payments on financed vehicles. Unless you are leasing them, vehicles will be paid through the Plan. Redo the budget and break out each payment so that we can tell what is what. Also break out your estimated gas/vehicle maintenance expense.
3. Discuss with your attorney the “need” to keep both financed vehicles. Maybe you will be able to live without one and surrender it through the Plan. That removes the payment on that vehicle be it inside or outside the Plan.
4. Father’s care – while this is an allowed expense due to his health/age, you will need to document the expense.

In essence, how much are the vehicle payments? If you are purchasing them, those payments will go away. In their place you will have a Plan payment. Removing them from your expenses will create the ability to make fund the Plan payment.

Of course, my comments are based upon how we handle things in my area. I do not know how things are done in NH.

I do not have a referral for you as I do not practice in NH. Maybe another poster will. You can try searching here:

https://network.nacba.org/advanced-search

Whatever you do, make sure you interview several attorneys. Consultations are usually free or very low cost.

Best of luck.

Des.

[shipo]

I filed for a Chapter 13 in New Hampshire in early 2015, unfortunately I don't have much advice to give you beyond Des. Here is what little I can say:

• My attorney has retired; she was amazing and worked out of Manchester. A few years before she retired, she merged her law firm with another firm in Manchester (I assume you're either in Hillsboro or Rockingham county), so they might be a good place to start; I will PM you the name of the firm when I dig it up.
• I had a similar amount of debt at the time, but my income was a bit lower than yours is now.
• By the time I filed, we had already sold our house in Windham, at a significant loss, and my wife and I ended up separating due to the stress of our finances.
• My new cars were long gone, and at the time of filing, I was driving a 14 year old car with over 150,000 miles on it. My attorney advised me to buy a new car and pile on a complete maintenance package; I was too dumb to take her advice and opted to soldier on with the old car. This turned out to be a bad move; in my fourth year, the car succumbed to rust, culminating in leaking coolant, leaking oil, leaking brake fluid, and leaking fuel. I had to dig deep into my piggy bank and buy something a bit newer, which totally cleaned me out.
• The Trustee I had was firm, but fair. I was able to keep paying into my 401(k) because I already had a demonstrable history of doing so, I was also able to keep my bonuses. However, I needed to surrender all but about $1,250 of any tax returns I might get (which only happened once).
• At the time, I was prohibited from having even so much as a secured credit card; hopefully that restriction has changed. I ended up going from 2013, when our finances finally cratered, to 2020 without a credit card, and that was uncomfortable to say the least. Try renting a car at an airport without a credit card, and you'll understand.

If I think of anything else, I'll let you know.

[Carmella]

You have good questions and have gotten some good advice.

This is not a big expense and I know the answer might be due to where you live. Do you need Cable? Can you go with just the internet/streaming?

Why do you have 4 cars? I think the attorney or the trustee might question that. We had 3 cars, two with payments. My daughter's name was on one car, but we were paying for it (my name was also on it). We were good with 3 cars since there was one for each family member even though my daughter had graduated from college just before our meeting with the trustee.

I hope shipco can find the name of the firm for you because it's great to get a recommendation for an attorney. Definitely see more than one attorney and find the best fit. You have great questions to ask the attorney just as you posted here.

[Myownerrors]

Thank you all for your replies — I really appreciate your input.

Here’s some additional information about the cars, as well as an updated expense table since I corrected a few numbers and broke down the car and credit card/loan payments:

I have four cars (Alfa 2020, Mitsubishi 2023, Chrysler 2014, and VW 2013), and there are four of us in the family. My son has his car (the VW) at college in South Carolina, and I only pay for the insurance and maintenance.

The Alfa is usually used by my other son, who lives with us but doesn’t have a steady job yet. I only pay for the loan and extended warranty on that car.

The Mitsubishi and the Chrysler are used alternately by my wife and me. The Chrysler is a 2014 with almost 200k miles, so we couldn’t really afford to surrender one of the financed cars. I bought the 2023 Mitsubishi in August, based on information and advice I read here.

My question: would it be wise (or even allowed) to transfer the VW and the older car to my sons’ names before filing?

[Myownerrors]

Here is the breakdown of my financial picture:

Monthly Expenses

House	Gas	$159
	Water	$155
	Electric Bill	$45
	Solar Panel	$283
	Sewer Bill	$50
	Home Warranty	$0
	Insurance (Home - AllState)	$187
	Internet	$93
	Lawn Mowing / Snow Removal	$200
	Cleaning Service	$140
	Cell Phones	$395
Subtotal - House		$1,707
Mortgage	DCU	$3,627
	DCU HELOC	$1,166
Subtotal - Mortgage		$4,793
Credit Cards & Loans	Credit Cards (Mine)	$3,148
	Credit Cards (Wife)	$1,100
	Loans (Mine)	$1,650
Subtotal - Credit Cards & Loans		$5,898
Cars	Loan - Alfa	$430
	Insurance - Alfa	$263
	Extended Warranty	$111
	Maintenance (Alpha)	$0
	Loan - Mitsubishi	$555
	Insurance - Mitsubishi	$218
	Registration / Inspection / Maintenance (Mitsubishi)	$30
	Loan - GTI	$0
	Insurance - GTI	$61
	Registration / Inspection / Maintenance (GTI)	$28
	Loan - Chrysler	$0
	Insurance - Chrysler	$118
	Registration / Inspection / Maintenance (Chrysler)	$28
	Gas (Mitsubishi & Chrysler combined)	$200
Subtotal - Cars		$2,042
Food / Groceries		$1,200
Vacations		$150
Other	Food Outside / Dining	$150
	Clothes	$150
	Netflix	$15
Subtotal - Other		$315
Son in College	Monthly Money (School)	$150
	Spotify	$10
Subtotal - Son in College		$160
Wife	Hair	$15
	Dogs	$55
	Astrology Classes	$50
	State Farm Life	$100
Subtotal - Wife		$220
Mine	YMCA	$69
	State Farm Life	$124
	Ameriprise Life Insurance	$450
	Apple Music	$10
Subtotal - Mine		$653
Father	Support	$600
Subtotal - Father		$600
GRAND TOTAL MONTHLY EXPENSES

[Myownerrors]

Question - since I’m the only one filing for Chapter 13 (not jointly with my spouse) and my wife has 3l credit cards in her name with outstanding balances, we’re wondering what’s the best way to handle them to keep them.

Would it make sense for us to pay them off using money from my 401(k)? Has anyone else dealt with a similar situation where only one spouse filed, and the other had separate debts? What approach worked best for you?

[Carmella]

I am not the attorney or trustee so don't take my word for truth since things vary. It sounds like you have good reason to have 4 cars, nothing outlandish.

I would not do anything with your 401K. Talk to the attorney because it is YOUR 401K and you need to think about your creditors--not to use the 401K to pay them, but you need to focus on your BK and not make any questionable moves.

My husband and I filed together so I don't know how it works if one spouse files and the other doesn't.

I personally find 31 credit cards very scary. And I am someone who had many, I don't even know how many, but I think it was in the 20's. Getting the cards for the special offers that really just lead to charging much more than you should. I don't know the rest of your story or how it would work with you in a BK, but I would focus on not using those credit cards even if they are in her name and not stealing from Peter to pay Paul.

I would stop using those 31 credit cards and start working on paying them off. Then put some of them away and do not use them or close them out.
I have 3 credit cards and don't like even having 3 of them. I did it to build credit and use them occasionally and I do not sign up for any special offers or save % off your whole total today...Even if there's one card that could be paid off and used no more, get rid of bulk of them one at a time even if it takes a long time to accomplish it.

When do you talk to the BK attorney? I would ask questions about all scenarios if you file alone or with your wife--how it would work. It's good you broke down the expense that should be helpful. I was a mess when we went into BK, dragged our feet and totally overwhelmed. I found this forum while in BK, wish I found it beforehand like you did!

Try to avoid shortcuts and focus on doing it right, no impulsive moves. IMHO you should focus on the best scenario and get out from under the debt to debt no more.

[Myownerrors]

Thank you, Carmella, for sharing your insights. I currently have six credit cards and two personal loans, while my wife has three credit cards. Starting this month, I’ve only been using one card and my Amex service card, but I’ll follow your advice and stop using them altogether.

Were you sued by any of the credit card companies? Also, did the bankruptcy have any impact on your job?