Pros and Cons of a ch. 7 or a 13 for the gray area filer...

[Credit Hater]

I hope you all can chime in on this. It's a long one though. I'm going to just stick with the facts about it and throw a few scenarios around and see what everyone here thinks. So here goes:

$54,000 unsecured debt
$9000 to a "for profit" private college (computer degree mill in my opinion)
$7000 to IRS (state and fed from back taxes) And they are already being paid through a payment plan. Plus they have a lien on my home.

I have about $190 a month in disposable income (when I tighten up and go on ham sandwich diets).
I am paying 2 entities that are government backed loans for the college (not the $9000 mentioned above). Short story.....the mill basically failed to get govt aid loans for me during my last year's attendance, but still allowed me to take classes. Now they want all $9000 right away. It was $25,000 originally for the entire degree but I decided to cut my losses after seeing 2 jobs posted in my area in 3 months time for that field. And the employers wanted 5 years experience plus a degree (network security).....sigh, and I was 8 classes away from that degree with a 3.8 gpa I still think I made the right choice though, considering my current debt situation.

The overtime at my current job is gone (and forecasted to be this way for quite some time). The automotive field I am in (setting up the dies that engineers like BassBoy create) is an up and down business and we are down hard right now. And at my current wage, I will be barely below the median income level, but if I were to get a wave of OT for say a month or two out of six months, then those earnings would push me a little bit over the median income for ch. 7.

Real estate prices in my area are coming down, not crashing but coming down, which is fine with me right now, the more they fall, the better. My state allows a $5000 homestead exemption. Based on my current home, which is in dire need of some renovations, I'll list:

-interior painting needed, walls, ceilings and windows
-floors need to be sanded and refinished
-ac/heat unit 25 years old, still works but there are problems
-bathroom and kitchen sinks are old and needs replacing, plus tub and tile in bathroom needs replacing
-ceiling in kitchen and living room needs repair from old sheetrock starting to droop in areas
-garbage disposal and dishwasher don't work
-old furniture (10 yrs) old tv (6 yrs) and old computer (6 yrs)

2 vehicles
---one not put together too well since it was a project and it hasn't been cranked in over 2 years. It's a 2000 model, paid for, worth maybe $5000
---and the other my daily driver, almost 10 yrs old, worth about $1800.
-My state allows a $1500 auto exemption.


So, I could face losing my home if it appraises for current values compared to the last 2 year comps in my area. But those homes were in excellent shape, and ready to sell for full value. Mine, lol, someone will sacrifice a lot of time and money to get it looking right. Not a dump, it's clean and liveable, but needs a facelift and some important everyday use items replaced.

I would like to keep my home and my 2 vehicles. A ch. 7 will take my project vehicle away, and as much as I would hate to let it go, I'm all for it to take care of my debt. But I'm not willing to part with my home. So lets say I have $10,000 in equity in a low appraisal (I may not even have $5000 in equity since prices are falling).


Scenario 1:
Trustee decides $5000 + $10,000 plus costs associated with taking these items and selling them (remember current project vehicle isn't functioning too well and not ready to start, but it will crank once assembled). After realizing this, do you think the trustee will decide on a ch. 7 liquidation, including dismissal of the "for profit" school debt? Or do you think I would be forced into a 13 where priority debts are paid? And maybe the non-govt granted school debt is wiped out?

Scenario 2:
I'm forced into a ch. 13. My IRS debt, my lawyer's fee, and I'm thinking maybe the trustee will make me "buy" back the project vehicle worth $5000 since a ch. 13 doesn't take anything away. Doing the math on this (with the $9000 non-govt loan wiped clean or placed in defferment) with a $3000 lawyers fee and over a 5 year plan will still put me at $15,000 (like scenario 1) and a payment plan of $250 per month.

According to how I adjust my expenses, I can adjust to a $250 per month disposable income for the payment. Even if I have to get a minimal part time job.


So what do you think the trustee will do? I feel like my situation is such a conundrum

If I get a tough trustee, I will lose my home and project vehicle.
If I get an easy going trustee, I may have the slate wiped clean in a chapter 7 liquidation where I just lose the project vehicle.
If I get a mediocre trustee, I could keep both and be in a ch. 13 of somewhere around $250 per month. Who knows what they would do with the $9000 non govt loan owed to the "for profit" school. I have read where ch. 7's do wipe out "for profit" school loan that aren't govt backed.


Sorry this was so long....I have a headache too after thinking this through and typing it.....hope that makes you feel better

[lrprn]

I edited and left some comments below:

$54,000 unsecured debt This will be wiped out by Ch 7.
$9000 to a "for profit" private college (computer degree mill in my opinion) It's questionable whether it can be discharged or not. The new BAPCPA law last October made it almost impossible to get rid of student loans, including private ones. You need a lawyer for this one.
$7000 to IRS (state and fed from back taxes) And they are already being paid through a payment plan. Plus they have a lien on my home. If your taxes owed are more than three years old, they may be dischargable. Again, a bk lawyer can help with this.

I have about $190 a month in disposable income (when I tighten up and go on ham sandwich diets). You DO NOT want to go on ham sandwich diets to estimate your expenses. You need to capture reasonable expenses you would normally have if you weren't near the edge financially that match the typical levels of spending for your community.

The overtime at my current job is gone (and forecasted to be this way for quite some time). The automotive field I am in (setting up the dies that engineers like BassBoy create) is an up and down business and we are down hard right now. And at my current wage, I will be barely below the median income level, but if I were to get a wave of OT for say a month or two out of six months, then those earnings would push me a little bit over the median income for ch. 7. Go for six months without overtime, then use that income level to file.

Your scenarios are good guesses, but half-hour to hour consultations (usually free) with 3-4 bk lawyers can help define what the most likely possibilities will be in your unique case. It's well worth the time to schedule those, even if you plan to file pro se (without a lawyer).

Good luck, CH - keep us posted on what happens, ok?

[Credit Hater]

Thanks for the response lrprn. The taxes are older than 3 years, but I didn't file them on time, so I think that will be frowned upon by the trustee and not dismissed.

For the school loan, theres a class action lawsuit against this school because people who graduated from there aren't finding the jobs that were so talked up about. If they move to a big city, then maybe they can find a low paying job in that field. I'm not interested in moving and these graduates aren't either. The school said these were high paying fields that were in our area and suffering from a shortage of qualified workers......hook, line, and sinker they got us. I plan on showing proof of this to the trustee (if allowed) and hopefully that part of the school loan will be dismissed. The other part ($12,000 worth) is from govt aid loans that I'm currently repaying and guess I'm stuck with. Lesson learned.

If I get no OT for 6 months and use that, I will very much qualify for a 7, but may lose my home. So I thought about getting a part time job just to stay at the median income level, or slightly above it, to see if that would push me to a 13 with realistic monthly payments that I could afford. I think the entire outcome of this will fall into the hands of what kind of trustee will I stand in front of.