I think ChatGPT lied to me

[Otter35]

Hello everyone
I’ve been researching chapter 13 for a while and unfortunately I’ve been using ChatGPT for most of my information.

I make around 190k a year, have around 300k in debt and was planning on filing for bankruptcy in a few months.

What I’ve been doing is preparing by almost maxing out my 401k and my HSA, which was suggested to me by an attorney but then reinforced by ChatGPT with what I believe is unrealistic expectations.

I make good money but I also have high expenses. My calculations have me with about 1500 of disposable income which would put me around 30% repayment over 5 years
that’s definitely doable. Today I got some different feedback from a human and when I asked ChatGPT about the feedback it said oh yeah that’s actually true and you’re going to be paying like 3000 a month.
So now I’m confused.
This entire time I was under the impression that my 401k and HSA contributions were completely protected and can’t be used as disposable income. Now it’s saying that the trustee can cap contributions or pause them to make the plan work.

I’m in the eastern district of Pennsylvania if that makes any difference.
I just need to know what kind of payment I’m actually looking at before I move forward.
if it’s going to be 3000+ a month I think I’d rather just try setting up settlement payments with the creditors and skip the chapter 13 drama

Any advice or suggestions would be greatly appreciated

[justbroke]

Only an attorney that has looked at your specific income, expenses, family composition, assets, and priority debt can give you an individual expected monthly payment to the Trustee. Whether a Trustee can attack 401K contributions in a Chapter 13 depend on many factors including your consistency in making such contributions and how close you are to retirement.

Given that... no one but that attorney can give you a "good" estimate of your expected payment.

While ChatGPT is good for chatting, it certainly doesn't get the nuances of the law and is highly flippant when presented with additional contradictory information. I would be more aligned with a human that performed an analysis over ChatGPT.

In the end, a deep dive must be performed. The Means Test and Schedule I/J must be completed. The analysis with ongoing secured debt payment must be done. Reconciliation of the actual tax liabilities must be performed (e.g., refunds means you don't actually owe the tax you say you owe). Secured debt that is to be surrendered must be factored in. Any cramdown of secured debt must be analyzed. The Chapter 7 liquidation test--best interest of creditors test--must also be performed. Then you can come up with a Means Test/Schedule I-J which ares reflective of your actual disposable monthly income (DMI) and amount to be paid through the plan (debt service).

For what it's worth, 401(k) payments that were not consistent well before filing well be looked at with skepticism. Maxing out anything just before filing will draw scrutiny especially in a high-income earner. The Trustee "knows" that the high-income earner is going to try to max out expenses and try to pay creditors the least amount.

Remember that consultations are free so consult with a few more attorneys.

[Otter35]

Only an attorney that has looked at your specific income, expenses, family composition, assets, and priority debt can give you an individual expected monthly payment to the Trustee. Whether a Trustee can attack 401K contributions in a Chapter 13 depend on many factors including your consistency in making such contributions and how close you are to retirement.

Given that... no one but that attorney can give you a "good" estimate of your expected payment.

While ChatGPT is good for chatting, it certainly doesn't get the nuances of the law and is highly flippant when presented with additional contradictory information. I would be more aligned with a human that performed an analysis over ChatGPT.

In the end, a deep dive must be performed. The Means Test and Schedule I/J must be completed. The analysis with ongoing secured debt payment must be done. Reconciliation of the actual tax liabilities must be performed (e.g., refunds means you don't actually owe the tax you say you owe). Secured debt that is to be surrendered must be factored in. Any cramdown of secured debt must be analyzed. The Chapter 7 liquidation test--best interest of creditors test--must also be performed. Then you can come up with a Means Test/Schedule I-J which ares reflective of your actual disposable monthly income (DMI) and amount to be paid through the plan (debt service).

For what it's worth, 401(k) payments that were not consistent well before filing well be looked at with skepticism. Maxing out anything just before filing will draw scrutiny especially in a high-income earner. The Trustee "knows" that the high-income earner is going to try to max out expenses and try to pay creditors the least amount.

Remember that consultations are free so consult with a few more attorneys.

Thank you so much for your response.
My 401k contributions will be consistent for about 8-9 months prior to filing. I would assume that would not count as “just before”
I am going to touch base with a few more lawyers to gage their thoughts on this but I was just hoping to get some real world feedback from people who have already been through the process

[shipo]

I deliberately delayed my Chapter 13 filing to establish a higher 401(k) pattern, and then over the next four years, I dialed up my contributions by the very amount of my income increases from bonuses, raises, and promotions. I think I hit (or got very near) the IRS limit (plus Catch-Up) somewhere in my third year; my Trustee didn't say a word.

[Otter35]

I deliberately delayed my Chapter 13 filing to establish a higher 401(k) pattern, and then over the next four years, I dialed up my contributions by the very amount of my income increases from bonuses, raises, and promotions. I think I hit (or got very near) the IRS limit (plus Catch-Up) somewhere in my third year; my Trustee didn't say a word.

Thank you for sharing that.

I am currently going through a lot of anxiety at the moment due to the fact that I had mentally prepared myself for a certain payment range and now I’m thinking that might not be possible based on some new research and a conversation with my attorney.
He told me today that it doesn’t matter what my actual disposal income is, it only matters what the trustee calculates it to be.
I can realistically swing 2000-2500 a month with meaningful cuts to my expenses but he’s inclined to see it more like 3600 a month with a 60% plan. I’m not being cheap, I honestly can’t afford that.
If that’s the reality of what I’m looking at there’s no point in wasting my money on lawyers fees if it’s not possible to get where I need to be. I guess I’ll have to look into debt settlement options

[shipo]

The Trustee's job is to make the Chapter 13 survivable; they want you to succeed! Or, said another way, they don't want to bleed you to death.

Maybe it's just me, but $3,600 per month on a $190,000 annual income sounds absurd. Question, is the 190K your salary, or is that your gross with bonuses added in? I ask because the game my attorney played was to delay our filing until the look-back was unable to see any bonuses. This effectively set the baseline calculations as my monthly salary, less expenses, with no accounting of the bonus(es) I might receive in a given year.

[Otter35]

That’s just my base salary
I do get a bonus every February which is why I was going to wait until September to file.
I agree that 3600 is insane. I owe around 310k in debt and back taxes so he said 60% plan was what I was looking at. I was under the impression that most chapter 13 plans were in the 30-40% range. It seems like he doesn’t want to fight the trustee and is trying to get me to agree to something that will just coast through the process. And to your point about trustees being more concerned with survivability than actual dollar amounts, yes that’s what I thought too but I was told that they would rather me walk away and not confirm than offer me a plan that they feel is too low. Even if my expenses are valid and defendable.
also, my attorney is a high volume attorney who obviously doesn’t get paid more if he has to work more to get me a better deal
I just wish there was a straightforward way to actually see what my plan would be before I commit to filing
my home is rented and is 4k a month which is above the IRS guidelines but it’s in line with HUD guidelines for a family of 3 and it’s about 1000-1500 cheaper than comps in the area. I honestly thought I had a pretty solid plan for September but now I don’t know what I’m going to do

[justbroke]

There is no "most" Chapter 13s are in a particular range. There is no range. It is solely driven by the individual debtor, family composition, debt, priority debt, etc. One can never gauge or guess at their particular payment to the Trustee based on another person's Chapter 13 calculation; it is simply impossible.

Having wrote that, even with the $3,600 calculation that you have received, I can't say it's absurd for a $190K income. Your priority tax debt -- you said you owe back taxes -- is also going to take a big part of this! Make no mistake, that if you owe $180,000 in past priority taxes, you will be paying $3,000/month. Even if your back taxes were $60K, that's $1K a month just in back taxes. That does not take into account your Disposable Monthly Income (DMI) as calculated by the Means Test. You may also be penalized for renting a home above the IRS guidelines (Means Testing). I can't tell if the Trustee will argue that point. If you owned the home that's an entirely different story since ownership payments aren't generally attacked by the Chapter 13 Trustee, and are factored into the calculation of the DMI.

(Thinking aloud: actually, your DMI may be inflated because the Means Test is not going to allow you to put a number higher than the IRS Collection Financial Standards (CFS) for rent. To make this more complicated, most jurisdictions use the DMI generated by the Means Test as the starting point for calculations! The DMI calculated by the means test actually deals with home ownership much better than someone renting. In other words, some jurisdictions use whatever number gets spit out by the Means Test as your DMI. That is used on top of any priority, secured, or administrative payments.)

You will see your plan prior to committing. It's just going to cost you the fee ($4,500 - $6,000+) to see what that bottom line number. I'm suspecting that the home rental above the IRS CFS is driving a higher DMI and combined with the priority tax debt is driving a higher payment to the Trustee.

But, and I know I sound like a broken record, it's impossible to guess at this. You need real numbers and understand the black magic in creating a confirm-able Chapter 13 plan.

[Otter35]

15k of the 60k in back taxes is priority but yes it’s definitely influencing my numbers.
I don’t need an exact number but I do need to know if it’s going to be above 2500. I can’t move. Even if the IRS thinks my rent is too expensive that’s not the reality of the area where I live.
If it’s above my break point then it’s not worth even filing. I can just start working on settlement agreements with the highest balance creditors especially the ones without arbitration clauses

[justbroke]

You'll need a few more consults to see how far the attorney is willing to dive into a possible payment. Also, if you're in arrears on any secured debt and you want to keep that property, that must be paid through the plan and the payment must account for both the ongoing monthly payment and the arrears.

Settlement agreements are not as easy as you may believe and any amount forgiven is taxable as ordinary income. You could try debt settlement or management but most of those that attempt that path end up in bankruptcy.

[Otter35]

I don’t have any secured debt besides my car and I’m current on that.
I was in debt management before and it was working but then I had to start paying 1100 a month on back taxes and that’s when things fell apart. I’m about 90-120 delinquent on my credit cards and personal loans at this point. I’ve received a few settlement offers but they were around 60-65% so I’m going to wait until they move to pre litigation and negotiate for something closer to 40% or if they sell them to debt collections agencies I should be able to get an even better settlement.
Again, I’d much rather do chapter 13, but that doesn’t seem like a real possibility anymore. I have one more lawyer I’m going to speak with. He’s all about maximizing protected contributions like 401k, hsa, life insurance, charitable contributions, etc. I’m assuming he has a method to reduce payments by doing that so I’ll see what he says. Unfortunately he charges $500 to run numbers but that’s a lot cheaper than $6000. It’s not a mock 13 but he goes through your means test and I’d assume he can get a pretty good idea of what I’d be looking at based on the trustees that he deals with

[justbroke]

That sounds like a great Chapter 13 attorney. That is the type of attorney that knows the Trustees, the judges, and has experience with just how far you can push the numbers. Seems like they are also willing to litigate and push back against the trustee. I like that angle for now!

(Also, having only one secured debt is also hurting your "expenses" and is driving your DMI upwards. For high-income earners, a moderately expensive home, two vehicles, and a large family are what keep the DMI low. Being single is the worst, of course.)