What to Expect?

[StaciMM]

Whether you file 13 now or in a few weeks, its still set up so that your disposable income (all of it) goes into the plan. The main difference is that many plans now are as short as 36 months. They only need to go longer if you would have had an asset 7. In the new laws, plans will automatically be for 60 months.

A 13 now does not have a set % to go to unsecured debt. It is solely based on your disposable income. It may just be that 10% is the minimum in your state. The maximum is 100%.

Lets say I have $50,000 unsecured debt & I'm filing 13 due to having $10,000 beyond my state's exemption alot for my home. That would mean at least $10,000 would need to go to the unsecured creditors. If my income is $3500 and expenses $3200, I'd pay $300 into a plan. I'd almost certainly end up paying for 48 or 60 months, because only paying for 36 would be $10,800, and since part of that goes to the trustee and part to my attorney, 36 months wouldn't be enough to pay the creditors at least the $10,000 they would have been entitled to under a 7. If my income were $4000 and expenses $3200, I'd pay $800 X 36 or $28,800 total. (So creditors would get more as I had more income, but I'd be well over $10,000 by the end of 36 months.)

After 10-17, my example would be 60 payments regardless.

[concerned]

Thanks again! Is the budget calculated differently after 10/17 too? I seem to recall my attorney mentioning that you are allowed more money towards expenses now than post 10/17. Is this true?

My husband and I are not about to do something that might be considered fraud. I have been staying at our house every night, but would by just having the apartment (and that we moved stuff in) be enough to say we were committing fraud?

If yes, than we will do a Ch. 13 no doubt!

One final & very important question: Could you potentially end up paying MORE than you owe? If you have to pay back all your disposable income, and it exceeds your debt, do they still expect you to keep paying?

[StaciMM]

Now goes on 'real' #'s. If you spend an average of $200/week in groceries-and can back it up-you can claim that now. But, after allowed expenses will be much more limited making it harder for some people to fit into a 7-which requires you have practically no disposable income. Housing & utilities will have a maximum based on county/state. Categories like groceries, household supplies, personal items will be based on IRS standards for your family size. (That's what Rick's means test shows.) Car payments can be counted as actual, car expenses (gas, insurance, maintenance, etc.) will have limits.

For me, my rent & utilities runs about $1500/mo. I'm actually a little under what is allowed, as my county/state allows $1669. But, if I rented a more expensive house, and my #'s were really came out to $1850, I would only get credit for $1669 after 10-17. So, for someone who has a more expensive house/rent payment than is standard for their area, or has an unusually large house that results in a large heating/cooling bill, it could be possible for the true budget to be limited, but the approved budget to show $$ to pay a 13.

There is a small 'misc' category after 10-17, and I suppose expenses like cell phone, cable, etc. can go there. (Not sure if phone falls into utilities or not.) People who now claim $200 cable bills and $200 cell bills are ok - as long as they can back it up if questioned. After 10-17, those expenses won't be accepted-that's $400 you could pay into a 13.

Some things will be counted at actual: student loan payments, insurance, medical expenses, child care. THere may be others.

Lets say after 10-17:

My income is $3000 take home.

My actual rent & utilities is $1500, car payment $400, groceries, personal care, clothing, etc. runs $800, gas & vehicle maintenace is $300, cable & cell $200 (so I'm -$200 ultimately)

BUT

I am only allowed to claim $1300 rent & util, $400 car payment, groceries, etc. $640, gas & vehicle maintenance, etc. $260, misc (for cable & cell) $125... Then I wouldn't be able to file ch 7 (even though I'm below the median income) because I have $275 remaining based on what is allowed, even though I really spend more...

[concerned]

Thanks StaciMM--This is what I thought!

One final & very important question: Could you potentially end up paying MORE than you owe? If you have to pay back all your disposable income, and it exceeds your debt, do they still expect you to keep paying?

[StaciMM]

When you consider trustee fee, attorney's fee, yes. But your creditors would only get 100%. And, there is no interest-as I understand it-in what you pay to creditors.

[StaciMM]

One good thing, if you do file a ch. 13 now, and later income or expenses change you can possibly adjust the 13 or change it to a 7. (If you file now, I understand the rules are based on now-not after 10-17 rules should you convert.)

One thing to keep in mind-if you file a 7, and have to convert it to a 13, you CANNOT convert it back to a 7 later. (Though you could still get payments, etc. adjusted if your financial situation changed.

One thing to really make your attorney discuss with you-the possibility of converting the 2nd mortgage into unsecured based on the home value not being enough to secure it-and using the money saved from that to pay a few hundred a month into a 13. Make him earn what you're paying him & give you his time, don't let him disregard your questions. He will likely have other things he wants to move on to, may expect you to sign on the dotted line and be out of his office in 5 minutes. If you don't know exactly what he has in mind for you-and why-keep after him!

[concerned]

Will your 3 year payment be cut short then if you are able to pay it all back with the plan they set up?? I doubt this will happen, but it's hard to tell since we have no idea what they will get for the house. Do they actually wait until you sell the house, or do they somehow come up with a value?

Should we request that our student loans be increased to the correct 10 year payment amount in our budget even though we're not paying this now? We're not paying it now because we can't afford to?

Thanks!

[StaciMM]

If you go into a 13, its a good possibility the exact amount of your unsecured debt wouldn't be known until they sold the house, but they'd surely know before you got TOO far along.

I think raising your personal loans to a regular payment would make sense-if you're going to pay the same total amount (13+student loans) might as well have some of that going to the principal. Keep in mind the student loans would not need to be paid during the automatic stay in a 7, you might even be able to work out a temporary deferrment in a 13.

My personal opinion-and keep in mind it is just that-is that you'd be better off trying to file a 13 rather than trying to mislead the trustee that you're going to keep the house. I think its likely you'll ultimately end up having to convert to a 13 anyhow. That way, if things change later you would possibly be able to convert to a 7 and be done. If you file a 7, and it doesn't work (and I think its greater than 50% chance it won't unless you're 100% certain you can keep the mortgage payment & apartment current for another 2+ months) you'll end up in a 13 (under current laws but with no chance to convert back to a 7 later).

If I had your attorney, I would be looking to find another-except you don't have that time. This is just based on the fact that he seems to be trying to pull one over on the trustee. Again, this is only my opinion. In the end, you have to do what you're comfortable with - not me.

Edited-meant to say student loans!

[StaciMM]

I don't really know-you are kind of unique in that most who file 13 do it to keep their house-not get away from it.

Do they actually wait until you sell the house, or do they somehow come up with a value?



Thanks!

[concerned]

My personal opinion-and keep in mind it is just that-is that you'd be better off trying to file a 13 rather than trying to mislead the trustee that you're going to keep the house. I think its likely you'll ultimately end up having to convert to a 13 anyhow. That way, if things change later you would possibly be able to convert to a 7 and be done. If you file a 7, and it doesn't work (and I think its greater than 50% chance it won't unless you're 100% certain you can keep the mortgage payment & apartment current for another 2+ months) you'll end up in a 13 (under current laws but with no chance to convert back to a 7 later).

I think we will just try for the 13! I wouldn't be able to sleep at night if I thought I could get in trouble for something I've done--it's just not worth it. We talked it over, and really, it's still better than staying in the house. In 3 years, we can be on with our life. We will look into the 2nd mortgage issue.

My biggest fear is after meeting with us Weds., he will say that he needs to "redo" the paperwork and we won't be able to get it in in time for the new law. I hope he won't since he gave me his word, BUT, his word was based on our last conversation as filing a 7. What do you think?

I know you've advised me in this area before...should my husband and I live together until this whole mess is resolved? He has been staying at his parents, and I have advised my son's day care of this. We are so stressed and fighting over money so much, we thought it best not to be around one another. We really don't want to wait any longer to file the Ch. 13 due to the deadline, and I don't want to be dishonest about our marital status if questioned either. We are not legally separated. In fact, we spend most weekends together, and my husbad sees our son every night.

[StaciMM]

Keep in mind that you can always file an emergency petition on your own, which would give your attorney 2 weeks to get your schedules in. (The emergency petition is just the 1st two pages.)

[concerned]

Oh thanks--what a relief!

Is there a web site for each state's allowances for expenses? Ours is NY!

[concerned]

If you don't sign a reaffirmation agreement, then the house (1st & 2nd mortgage) would be discharged in BK. Many people who fully intend to keep their car or home don't reaffirm, and just keep making payments. After BK, if they reach a point where they no longer want or need the property or car, they can walk away-not owing anything. There isn't a time limit-it could be 2 weeks later, or 2 years later...

Maybe this is a dumb question, but...Can we simply pay the rent and mortgage for the next year? Give up the home after that and move some place else? Is this legal??? Couldn't we just say we were going to try and sell it later, or is selling a home post bk not allowed?? Like I said, we are still staying in our home, we just stupidly moved all our stuff to the apartment. The move has been very gradual and we haven't stayed there once yet. If I had to, I could just move it all back and pay for the empty apartment. It might still be cheaper than doing 3 years in a Ch. 13. Yes, we would be strapped, but just for a year. I suppose we could liquidate our retirement accounts to pay the rent payment. Would this be allowed? We could just say we had a change of heart and opted to keep the house. Who knows, maybe liquidating the $20,000 unsecured debt is all we need to do to be able to keep it anyway. What do you think? Is it questionable to file a ch. 7 with just $20,000 unsecured debt? Even if this debt puts you just over the edge?

[StaciMM]

Yes-if you decided to try staying in the home on a ch. 7, getting rid of the unsecured debt, and after discharge changed your mind-you could do that. If you don't reaffirm, then you have a way out even if you're not able to sell it in a year or so. If you reached the point where you wanted to move out, you could notify the mortgage company of your intentions.

If you do file ch. 7 & stay in the house, though, you would NOT need to pay the apartment lease out. Include them in the BK-they'll likely charge you 1-2 months for notice and 1 month of termination fee, maybe some other minor charges. There is no point-if you get a ch. 7 discharge-to pay something you can't afford when you don't have to.

If you meant not file at all, and use the retirement money to pay the rent for the lease & some of your house expenses-to get you through, that might be a good alternative. Perhaps use the apartment to have some space between you & DH so that you can work out things. (Him staying at his parents can only be temporary and could get to a point where it adds stress rather than helps!)

If you're in a situation where you have other options-perhaps filing BK just to beat the deadline is not enough reason.

[concerned]

If you don't reaffirm

Do you mean sign a contract? Will we have to sign an agreement if our payments are to date?

Him staying at his parents can only be temporary and could get to a point where it adds stress rather than helps

LOL -- This is already happening!!

Thanks so much for all your input. I am fairly certain we will still file. Not having any money has been such a strain on our marriage. I can't imagine it won't help to not have this strain any longer.