Eleven years after 7 Discharged - "forced" to file for 5-Year chapter 13. Common?

[RobertFarmer]

Hi,

This is my first post. My wife and I filed for BK and our chapter 7 was discharged in February, 1999. We did our best and had a good run of 10 years, but then, in late 2010, we realized we were at the end of our rope and sought to file for bankruptcy again. We are honest, hardworking people, but things happen ...

When we went to our attorney (in late 2010, eleven years after our prior discharge), we were told that if we filed again and sought protection under chapter 7, we would be challenged by the Trustee and the Judge would likely find that we were "abusing the system".

This in spite of the fact that our income is well below the median level for our state and our circumstances are above board and we're not hiding anything, etc.

We were told that the only option for us was a chapter 13, for five years, with no allowance for anything except basic living expenses. Since we had no choice, we filed under chapter 13. So far, even trying to look at the bright side, it sucks (it's been over a year). I feel as if we were unfairly punished because the judge and the trustee went beyond the law and discriminated against us because of a prior bankruptcy filing that wasn't even showing up on our credit report.

I am curious if others have had similar experiences (i.e.,. being pushed into a chapter 13 when all legal requirements to file a chapter 7 in good faith were being met)?

Obviously, this is very discouraging and makes me resentful against the judge, the trustee, and our attorney because it seems to me that it goes beyond what is legally required to the detriment of my children, and - to me - seems to be "abusing the system" in favor of the creditors.

Thanks for any insights anyone might have.

[DeadManCrawling]

I would visit a few more attorneys. What you are describing sounds unlikely, given your income. A claim of abusing the system generally results from intentional acts, that are easily proven or shown in court. Sometimes bad things happen to the same people again and again. Our system supposedly allows legal relief for us and for that exact reason.

Keep in mind attorneys make more money, generally, in a CH 13, as well. And not all attorneys are as forthcoming as would be nice.

Seriously, visit some more attorneys.

[despritfreya]

Welcome to the Forum - glad you found us but I must assume that there is something you are not telling us.

1. If you are below median income the only reason you would not “qualify” for a 7 is if your Schedule I and J (real time budget) shows that, despite being below median income, you have the ability to pay.

2. If you are below median income but you have the ability to pay based upon Schedule I and J, you would be a 36 month bk unless you needed to go longer for some reason.

So, if, as you say, all is above board and you are below median, then we are missing some details that forced you into Chapter 13 and set the Plan duration at 60 months. Perhaps you have non-exempt property you are trying to protect. Perhaps you owe a lot of taxes and cannot afford a less than 60 month Plan.

This Forum will give you a wealth of information and support but we do need to understand what is going on in the case to be able to attempt to assist you. Please supply more details.

Des.

[AngelinaCat]

I would visit a few more attorneys. What you are describing sounds unlikely, given your income. A claim of abusing the system generally results from intentional acts, that are easily proven or shown in court. Sometimes bad things happen to the same people again and again. Our system supposedly allows legal relief for us and for that exact reason.

Keep in mind attorneys make more money, generally, in a CH 13, as well. And not all attorneys are as forthcoming as would be nice.

Seriously, visit some more attorneys.

Unfortunately, he has already filed and is about a year in to the CH13. I think the only recourse would be to dismiss the CH13 and file a CH7--using a different attorney, of course. Despritfreya is online, and hopefully will offer a solution.

RobertFarmer, welcome to the Forum!

[AngelinaCat]

Ahhhhh..... Des found you even as I was typing.

[keepsmiling]

Ah so sorry RF. Until/unless we hear some clarification about this, I can only offer condolences that you got such a @#%&!-y lawyer, and my hopes that it's not too late to get out NOW.

PEOPLE-- ALWAYS talk to more than one attorney!!!!!
This is why^^^^

[SMinGA2]

What reason did the attorney give that you must file a 5 year ch. 13? Were you behind on your mortgage, and wanting to pay the arrears off over time? Did you have a high amount of non-exempt assets? Those are 2 scenarios I can think of. Except if either applies, then it wasn't that you were forced to file a 60 month ch. 13 due to your prior 7. Perhaps a 60 month ch. 13 was the only way to accomplish what you wanted.

If one of those situations applies - perhaps you should re-evaluate your situation if its too hard to live with your current budget. Maybe letting the house go, and finding something more affordable. Or parting with some of the assets.

Just guessing it is one of these 2, and that a limited DMI meant you could not afford to pay off in 36 months and therefore needed to do 60.

[Flamingo]

Something is missing - I am assuming the OP has a high amount of assets as he indicates nothing as to his assets (only his income) in the initial posting. Apparently the OP wants to keep a house or some other large asset obtained during the past 10 years so he was "forced" into filing a Chapter 13. I am only guessing here - there is not much to go on as to information.

I believe what the OP is mentioning as to filing BK again is that it has been mentioned often in this forum that serial filers, no matter what the reason, are looked at more closely so there is a reason for a Chapter 13 to be filed in this case. If the OP posts more as to his assets, debts, etc., I think we would have a clearer picture of what went down.

[ValleYum]

Something to note as well: The New York BK exemptions changed in mid-January of 2011 and allow much larger home equity exemptions as well as other exemptions. The Federal Bankruptcy exemptions were able to be used for the first time in NY at this same time.

Good article here: http://www.rochesterdebtrelief.com/2...cy-exemptions/

So, if equity in a home or lack of exemptions for other assets were the "cause" of his having to file a 13, would it behoove the OP (if otherwise qualified) to allow his 13 to be dismissed and file for a 7? Because if he simply converted - he would still be under the laws in effect at the time of his filing, correct?

RobertFarmer: what was your filing date?

[keepsmiling]

Excellent point, VY-- you guys are so on the ball. But, even before the change, according to that article, NY had much better home exemptions than either NJ or Fed ("Only" 50k ea... rofl)

[DeadManCrawling]

Oops, I missed that he has ALREADY filed the 13. Late night.

Something still not right about all this. The exemption change is a great idea. Good luck to the OP.

[RobertFarmer]

Thank you all for your comments We do own our home but don't have much equity (around 10K) I think it was covered under the NY exemptions, and we reaffirmed and are making all payments timely. We also owned a vehicle that was worth about 9K that we needed to keep for employment. We filed in late 2010 so the NY auto exemptions were really low at the time. We were making payments on another car and that was included in the bankruptcy. Our attorney told us that even if we gave up the 9K car it was unlikely that we'd be able to get a Chapter 7 telling us not even to try. We are paying about 250 every two weeks on the Chapter 13. Even being able to find that much discretionary income was difficult. My apologies if I don't provide all the details but there's nothing that I am aware of out of the ordinary. We had to fight to get what I thought was a very stringent budget as I said allowing absolutely no leeway to save without foregoing important expenses.

[SMinGA2]

Non-exempt assets and low income are probably the key points. To do what you wanted - keep the car - there wasn't much else available. A ch. 13 has a minimum amount that must be paid in, depending on the circumstances. That would include things like mortgage arrears and non-exempt assets. Also your attorneys fees, whatever wasn't paid up front. If a car is being paid in the plan, it needs to be paid in full and will get some interest. But somewhere in the 5-9% range, depending on your district.

And part of the payment goes to the trustee. It might include taxes and other debts as well. You add those things up, and divide by 36 and factor in the trustee fee. If you cannot manage that payment - then use 60 instead. You MUST pay that - or you can't do ch. 13.

Here's an example. For trustee fee, I'll go with 7.5% since it can range from 5-10% depending on the district.

Let's say you have the following items that MUST be paid in your plan:

$10,000 mortgage arrears
$5,000 car balance *I didn't factor interest, too complicated here
$7,500 non-exempt assets <---This amount goes to unsecured
$3,000 attorney fees
That's $26,000. Over 36 months its $722.22. For $583.33 to go to your plan, you'd need to pay at least $780.78 per month. If you can't, then you could take $26,000 over 60 months: and you get $433.33. You'd need to pay $468.46. (At 7.5% trustee fee, the trustee would keep $35.13 and distribute $433.33.)

Sounds like you have to cram down on your living expenses to be able to do a plan that you can't REALLY afford, but you're making it work because you have to. You also don't have to make that car payment now, as you said its included in the plan. Any possibility of extra income? 2nd job maybe? (I started doing pizza delivery 2+ years ago.) You'd be able to allow for your real expenses.

Perhaps you needed more time with your attorney to understand how it all works. Unfortunately if you want to keep non-exempt items and still file ch. 13, you need to pay in a certain amount to your plan.

[ValleYum]

EDIT: I agree with SMinGA as to why you likely ended up in a 13 at the time you filed.

But the exemptions have changed enormously in NY since you filed your 13.

Is your income still below median for NY for your family size? New York family of 2 median income is $56,113.

If , after discussing this possibility with attorneys, you meet all the criteria to NOW file a Chapter 7 and allowed your current Chapter 13 to dismiss you would be able to file and choose either the new state exemptions or the Federal exemptions that became available to NY residents in late January 2011.

The exemptions are here:

New York: http://www.legalconsumer.com/bankrup...ws/#New%20York

Federal: http://www.legalconsumer.com/bankruptcy/laws/#US

Since you don't have much home equity to protect (less than 20k), you may find the Federal exemptions with their generous wildcard (for the unused portion of the homestead) - and they can all be doubled if you and your spouse both filed - much better for your circumstances.

Take a look at these NEW exemption systems and see if either of them would cover all the property you need to exempt. It may be worthwhile (IF you currently qualify to file a Chapter 7) to dismiss the 13 and file a 7 under these new laws. POINT BLANK ask your lawyer. Even better, make an appointment and talk to several attorneys about dismissing your 13 and filing a Chapter 7. Mention your concern about what current attorney said about not being able to file a second Chapter 7 before.

Good luck.

[SMinGA2]

In addition to what Valleyum said - even if you don't qualify for a ch. 7 now, speak to your attorney about another option:

Dismiss your ch. 13 and refile under the new exemptions. It may or may not be an improvement. But if you can get a lower payment (from having less non-exempt assets, and having paid off some required debts under the current case) then it may work to your advantage. Possibly even be done in 3 years, or about the same as the end of your original plan when its all said and done. And if you're not happy with your current attorney, meet with others.