New, filing Ch 13 soon in Texas

[imtryingtho]

Hi everyone, new here! Married couple with two kids (4 and 1), single income. I was working until January, when our infant kept getting sick in daycare and we realized with the cost of daycare and transportation, it didn't even make financial sense for me to keep working. So I will probably be staying home for 4-5 years when our youngest starts school.

We are in a weird place where we make too much money to qualify for Chapter 7, even with the means test. But our expenses drain our income, so we aren't sure how a payment plan is going to be agreed on by anyone. We're really stressed at what the payment will be. Our house and cars are protected since we are in Texas. Our house and car payments are quite expensive, plus $800 in student loans a month. I'm working on the Expenses page of the paperwork our lawyer gave us and I don't see where they would find money for a repayment plan.

What's the lowest percentage that they will do for repayment?

We haven't been paying for a while and got a notice that a lawsuit against my husband was filed for one of the consolidation loans we have, so it's definitely time to get going. I have felt like such a failure at times, but I think I've gotten over that. We are trying to look at this as a business decision for our family. It's just such an isolating feeling, so that's why I wanted to join a forum. I have one friend who knows and she is an online-only friend, no one in real life knows. I don't trust my real life friends because most of them make half or less than half of what my husband does and there will be nonstop judgment that we have to do this and didn't manage our money better. We don't want to tell our families because they will stress and try to fix it for us (there's no fixing they can do, we are at $200k in debt probably).

Anyway, hello!

[justbroke]

First, a heartfelt welcome to BKForum! The thought of filing bankruptcy is overwhelming. I know that it pained me to file but I really had no other way to protect property and family other than a Chapter 13.

We are in a weird place where we make too much money to qualify for Chapter 7, even with the means test. But our expenses drain our income, so we aren't sure how a payment plan is going to be agreed on by anyone. We're really stressed at what the payment will be. Our house and cars are protected since we are in Texas. Our house and car payments are quite expensive, plus $800 in student loans a month. I'm working on the Expenses page of the paperwork our lawyer gave us and I don't see where they would find money for a repayment plan.

I immediately see $800/month available for your Chapter 13. That's because all student loans are put into automatic deferment during a Chapter 13 (or even a Chapter 7) filing. The student loan would be partially paid during the Chapter 13 based on a percentage of the amounts available to unsecured creditors.

(Yes, even though a student loan is non-dischargeable, it is treated as a general unsecured creditor. Additionally, student loans go into automatic deferment when there is a bankruptcy, so there is no "pressure" on a Chapter 13 to provide the monthly amount. The downside is that interest continues to accrue and you'll likely owe more once the Chapter 13 concludes -- unless the Chapter 13 provides at least interest payments during the plan duration.)

What's the lowest percentage that they will do for repayment?

We don't like to refer to anything in a Chapter 13 as a percentage. Think of it as disposable monthly income (DMI). This amount is calculated using the means test and Schedule I/J. Once set, you'll pay your DMI plus (potentially) the payments for your home and car through the Trustee.

We are trying to look at this as a business decision for our family. It's just such an isolating feeling, so that's why I wanted to join a forum.

We know the feeling and it should always be a business decision. A Chapter 13 is actually an ability to recover (reorganize your debts) while making "some" sort of payment towards those debts. It can be long (5 years) and no one can tell you that you won't have life's challenges thrown at you during a Chapter 13. I call this... life happens.

I have one friend who knows and she is an online-only friend, no one in real life knows. I don't trust my real life friends because most of them make half or less than half of what my husband does and there will be nonstop judgment that we have to do this and didn't manage our money better. We don't want to tell our families because they will stress and try to fix it for us (there's no fixing they can do, we are at $200k in debt probably).

No need to tell anyone. Besides, those that doesn't understand bankruptcy are sometimes judgmental and can even become enemies. They will wonder why you got to "keep" stuff while being in bankruptcy because they don't understand how it works.

[flashoflight]

Don't feel alone and think you are a failure. You've made the successful decision to move on and will be done in 60 months.

I actually have a cover story for 99% of my friends and family. I'm on a Dave Ramsey plan. If you've listened to DR, you'll know I'll be doing the "debt free scream" in a few years. That's pretty funny since I think Dave Ramsey is actually infeasible for those with non-housing debt that is over 1.5 times income once the household income is north of $100k. In his world, high taxes, high interest, and unforeseen health expenses don't happen while we should eat a rice and beans diet for the benefit of the unsecured creditors at 100 cents on the dollar LOL.

Lowering your plan payment on the eve of bankruptcy is very difficult. As justbroke mentioned, there is $800 already there for unsecured creditors. With certain exceptions, you cannot make up new expenses out of thin air since you need receipts to back them up. If you pre-plan the bankruptcy 6-12 months in advance, then yeah you could do some things. In general, everybody's budget in a 13 is super tight and you will have to sacrifice a lot of expenses just to survive.

Welcome to the forum and I think you're making the right decision even though it will be difficult at the beginning until you are used to the tight budget.

[shipo]

imtryingtho, I just want to underscore what the others here have said, don't sweat the percentage which will go to your unsecured creditors; for all intents and purposes, if the number is under 100%, then the actual percentage is irrelevant; said another way, I've seen stories here of folks in a Chapter 13 where 100% of their DMI went to their secured creditors and their unsecured creditors got nothing.

Also as has been stated, welcome, have a glass of wine, destress, and give your attorney as much fodder as you can to keep your monthly payments to the Trustee as reasonable as possible.

[imtryingtho]

Thank you everyone! Most people haven’t heard of chapter 13 bankruptcy so I can only imagine the education I would have to give every single friend I chose to tell. I have one friend who has had every job in the world so thinks she’s an expert on everything. She worked at a bank (for 3 months) 😂. It would be unnecessary stress to try and discuss with them.

I had planned for our cover story to just be a debt repayment plan like one of those credit counseling places, but Dave Ramsey is a good one!

Sorry, I never know if it’s percent or DMI or what! We are in the document gathering process so I’m filling out a monthly expenses page for our lawyer and gathering bank and credit card statements etc. Our attorney apparently knows the trustee and said she is reasonable, so I’m hoping that’s true. No matter what it’s going to be an adjustment of course. But I’m so ready to just do this and know what the payment is so we can budget around it. We have a financial advisor we had hired for a year and our meetings with him have been on hold indefinitely until we know what our repayment plan is plus covid and just general chaos!