Was just told i have to file ch 13;

[jixxxer]

Just left attorney and did not qualify for ch 7 as i was hoping.....so its ch 13 or idk what? We have about 35k in debt and the repayment wld be about $465 a month. If thats the case i can just borrow from my 401k and avoid all the commotion with dealing with a trustee.....am i right????

[justbroke]

Never steal your future to satisfy a problem today. I don't know who was the first to write that, but I learned the hard way. I nearly depleted my 401(k) and savings before filing. Sure, you can payoff a lot of debt, but you are stealing your future. The key is whether stealing from your future will really fix your problems (especially if they are one of inability to budget or the reality of fickle employers).

Having wrote that, you actually wrote "borrow". What would the payment be? Would it be... $465/month for the same number of months as the bankruptcy, or were you going to stretch it to 10 years?

Run the numbers every single way. Make sure that "borrowing" is going to FIX the problem. Borrowing is still dangerous if you lose your job. If you lost your job during a Chapter 13, you could possibly convert to a Chapter 7 and be done. Think strategy.

[jixxxer]

ok, one other thing; why not just go thru one of the consumer credit agencies....because according to my math, im not saving any money with this ch 13; where as they claim they can get the creditors to take 50% or less of my balances???

[justbroke]

I wouldn't trust any debt management company. Many of them take a lot of fees while they "attempt" to negotiate with companies. You need a real plan.

[sophieanne]

Hello jix...

I read your concern and walked away to think about what you were writing. My first question was whether the attorney told you if you would be in
a 100% or would only be paying a percentage of your debt. My calculator shows that at $465/mth for 60 months you would be paying back
$27900. Also did he say if you would be in a 36 mth or a 60 mth plan? That of course will depend on the means test (your earnings, exemptions, etc.). If you were only expected to pay for 36 months your payback amount would be much less. Your attorney would work with you to figure that out.

One important thing you are overlooking is that your debt balances freeze.to the amount owed at the time you file (assuming they are all
non-secured debts). So there will be no further interest added over the time you are in the plan. And than at the end you owe nothing and you continue with life. That is a significant savings over either 36 or 60 months.

Debt management companies CANNOT promise you a reduction of any amount. Not all creditors will deal with them. If it sounds too good to be true, it probably would be.

Look at the complete BK plan before you make any decision. Good luck!

[jixxxer]

It was for 60 months.......so if u add in 465 month plus they take my tax return for 3 years which have avg. 4,000 seems i'd be paying more back than i have in debt. Looks like ineed to call him back and ask a few more questions. Thanks for your repiles..........this is very tough espically being we have 3 active kids!

[sophieanne]

Hi again,

Yes, definitely call for clarification. The thing to remember is that you cannot pay more than the 100% you owe. So if you give your tax returns, that reduces the amount owed by the amount of your tax return. So the tax returns may actually reduce the number of months you pay.from 60.to whatever the balance at the time is divided by 465.

[LadyInTheRed]

Actually, if you end up in a 100% plan, you do pay more than what you owe because of trustee fees. But, that is not likely to be more than the interest you would pay on the debt.

If you borrow from your 401k, you will be paying interest to yourself. But, that interest may not make up for the decrease in capital generating income and growth in the 401k. As already pointed out, if you loose your job, you may regret borrowing. If you are not at least 59.5 years old, that balance of the loan becomes an early distribution and you have to pay a 10% penalty, plus income tax on the entire balance. If you want to leave your job voluntarily because a great opportunity comes up or you want to move, you have to come up with the cash to pay off the loan or pay the same interest and penalties. A Chap 13 provides more certainty and flexibility in case your situation changes.

How does $465 a month compare to what you are paying on the debt that would be discharged? I just ran a credit card calculator and if you have $35,000 of debt and are paying 10% interest, to pay off the debt in 5 years, you would have to pay $745.65 per month. If you paid $465 a month it would take almost 10 years to pay it off. I bet you are paying more than 10% interest.

A Chap 13 is not the end of the world. People who file and re not trying to keep assets that they can't afford and don't have things like high non-dischargeable tax debt and child or spousal support that they have to catch up on during the plan, usually experience relief as soon as they file. There is rarely any "commotion" of dealing with the trustee. Your attorney will deal with the trustee and the extent of your contact once the 341 meeting is over will be sending in payments and, perhaps, copies of your tax returns every year if your trustee requires it.

[sophieanne]

Thanks Lady,
You've given me some food for thought. My only comment is even if you pay trustee fees (in my case 3.8%) it's much less than the high interest i was paying on everything.

[jixxxer]

So i like to hear yalls responsed to compare to my attorney....a few questions im gonna ask are.......
what if I get a promotion or another job making way more money; does the monthly note have the capability to go up r down?
We have an old car, what happens if during the bk we need another one......i wld assume no one wld lend us money!
Since they take my income tax returns, can I go and change deductions so that there wld be harndly any return?
Since u can't get a credit card or line of credit........what do people do for emergencies, like car troulbe or unexpected things?

[159515951]

So i like to hear yalls responsed to compare to my attorney....a few questions im gonna ask are.......
what if I get a promotion or another job making way more money; does the monthly note have the capability to go up r down?
We have an old car, what happens if during the bk we need another one......i wld assume no one wld lend us money!
Since they take my income tax returns, can I go and change deductions so that there wld be harndly any return?
Since u can't get a credit card or line of credit........what do people do for emergencies, like car troulbe or unexpected things?

You should probably listen to your attorney -- that's why they make the big bucks. Regardless:

1. Some Trustees will expect you to report changes of x% or more in income. Your attorney will know the answer to this.

2. You'd have to get permission from the Trustee and find a lender/dealer that will work with you to buy a new car.

3. You should do that anyway, but it will result in your filing being amended to reflect your revised income (and Plan payment).

4. Save money, and use it for emergencies. You can file a motion to incur debt if you have a large repair, but it's better to pay cash.