Poor folks in a 100% Chapter 13 - Journey Thread

[womanonfire]

Before filing, I posted a lot of questions and thought I might had to file pro se to do somethings that are outside what is normal. I finally found a small firm that is going to attempt to handle some issues that I had with my prior mortgage servicer, who I sued and who filed Chapter 11, and my current mortgage servicer, who I may sue depending on the results of the claim objection and recoupment claims as part of that objection. My costs so far are over $8000 for filing.

I filed an individual Chapter 13 on December 3rd to stop a foreclosure scheduled for December 7th. We decided against including my husband because with his debt added, which is a lot, we were concerned that the plan payment would be too high and that the extra exemption we could claim, wasn't enough to cover his debt. He has over three years before his debt becomes uncollectable based on statute of limitations so that is a little concerning however he has no personal assets besides a car and is 1099.

We met the means test criteria as of the date of filing so that is my main concern right now. My husband got a new job in November so we hope we can prove that we can afford the Chapter 13. Right now, we are paying back around 27,000 in mortgage arrears plus escrow once that gets adjusted but the escrow account was part of the reason for the prior litigation. I am going to fight them vehemently on the escrow waiver that is in my contract. They have proven time and again that they can't manage it and the real reason they fight it is so they can invest your money for themselves. Anyway, there is some argument on who the secured creditor for the mortgage is. Fannie Mae shows it as owner but RCF II Loan Acquisition, LP has made an appearance. I'm pretty sure my loan was part of the litigation between Fannie Mae and Bank of America. It was a predatory loan, I recently found the home is not correctly titled to me. I am working again on a complete life of loan accounting. I had gone through this painful process once before but lost my Quickbooks data. If you did not know this, if you round up your mortgage payments or try to pay it down and you do not request a payment history of your account to see how those are applied, you will probably miss the fact that they put those funds in a UAF or suspense account and earn interest of those funds when they should be applied immediately to the principle. This can affect the interest that you pay over the life of the loan and you might find as I did, I paid over $1000 more in interest than I should have. No, it is not a lot of money but just think how much these companies earn on your money when they do it across the board. The entire mortgage system needs an overhaul in my opinion but that is another story for another thread.

On Credit Karma, my TU credit score jumped up 113 points and my EQ jumped by 205 points. Not sure exactly how accurate CK is but I thought that was interesting. Is this usual?

341 Meeting of creditors is over the telephone and scheduled for January 7th.

So my questions today are this: Does the Trustee immediately distribute the payments to all creditors or does she hold the funds until all the claims are in and determined?

What if I dismiss the case after a while? I will come out owning less to all the creditors that filed claims right because of the monthly distributions.

I should wait to apply for credit until the plan is confirmed correct?

What happens to credit scores if a case is dismissed?

[shipo]

A few comments:

• Ignore the scores from TU and EQ, they are Vantage 3.0 scores and utterly meaningless/worthless; that said credit scores while in a Chapter 13 are kind of meaningless anyway.
• What the Trustee holds and pays varies by Trustee.
• I could be wrong, but if you dismiss, my understanding is any creditor who didn't file a claim can still come after you for the debt.
• The rules for applying for credit while in a Chapter 13 vary by district and possibly by Trustee as well; you'll need to read the terms in your plan.
• As a general rule, if a Chapter 13 is dismissed, scores will drop like a rock.

[justbroke]

On Credit Karma, my TU credit score jumped up 113 points and my EQ jumped by 205 points. Not sure exactly how accurate CK is but I thought that was interesting. Is this usual?

I would not measure anything using Credit Karma's "FAKO" score. They do not use FICO and I can't gauge anything using them. However, whether or not an individual gets a bump from filing bankruptcy is too fact specific (based on their credit bureau and what it looks like). I would not pay attention to anything going on in the credit report at this time.

So my questions today are this: Does the Trustee immediately distribute the payments to all creditors or does she hold the funds until all the claims are in and determined?

This depends on the Trustee. Generally they don't pay the unsecured creditors for some time and may actually pay all the secured debt first! Except for the secured debt like a home, which extends beyond the Chapter 13, the Chapter 13 Trustee could payoff other secured debt like a car early. My trustee paid off my car in less than 18 months!

What if I dismiss the case after a while? I will come out owning less to all the creditors that filed claims right because of the monthly distributions.

Not necessarily. They get to tack on all the fees and interest that accrued as well. The interest is the killer and the fees can be significant.

I should wait to apply for credit until the plan is confirmed correct?

Generally, a Chapter 13 debtor can't apply for any credit. Whether you can, and for how much the court will overlook, is specific to your District. You'll have to ask your attorney.

What happens to credit scores if a case is dismissed?

Too fact specific.

[womanonfire]

So in my case, the only secured debt I have is the house and it is disputed. All of the other debt with the exception of the IRS tax debt was charged off.

Is there a report of distributions that is uploaded on a monthly basis?

As for apply for credit, I was going a bit by flashoflight's post about refinancing in a Chapter 13. I have no credit cards anymore so how to you build credit in a chapter 13 if you can't apply?

Thanks again for all of your answers, they are helpful!

[justbroke]

So in my case, the only secured debt I have is the house and it is disputed. All of the other debt with the exception of the IRS tax debt was charged off.

They would pay the IRS first since it is "priority" debt. (The exception is that if the IRS debt is more than 3 years old, more than 240 days since accessed, and more than 2 years since filing, then it would be subject to discharge and treated as a general unsecured claim without priority.)

Is there a report of distributions that is uploaded on a monthly basis?

You can register for the National Data Center (NDC) at https://ndc.org. That site is the clearinghouse for all Trustee data. Some Trustees may also use things like TrustWin, 13Network, or other tools to manage the case, but it all flows into the NDC. The tool is real-time as far as I know (but may only be fed overnight by a nightly batch from other systems). The NDC will give you general case information including which claims the Trustee is expecting to pay (or not pay). It includes a ledger where you can see when the Trustee paid a creditor, along with the date and amount and remaining balance of the claim.

As for apply for credit, I was going a bit by flashoflight's post about refinancing in a Chapter 13. I have no credit cards anymore so how to you build credit in a chapter 13 if you can't apply?

To rebuild credit both shipo and I obtained secured cards. I was able to obtain this in the "ordinary course of business" because I travel for work. Your mileage may vary (pun intended).

[womanonfire]

My tax debt is non priority because it wholly meets the 3 year 240 day rule but it is being paid in full because I am in a 100% plan. This is why I asked about distributions being made immediately.

That database sounds awesome! I found it over the weekend by searching for my Trustee's info but I'm getting this error:

• We have located your case, however we DO NOT have all of the case information available. The Trustee assigned to your case has not supplied us with a list of your Creditors. It is possible that it may take up to 30 days, or longer, from the day that your petition was filed for the Trustee's Office to enter all of the case information. Please call the National Data Center at 866-938-1313

Also good to know about rebuilding credit. I will give it until spring and then ask attorney. I have a bad habit of wanting to put the cart before the horse!

My husband and I have been living without credit cards since 2018. I have read this is the biggest challenge for some, so for us, it is already easy. I have a very detailed budget and I am good at that. My husband, not so much. If I had never sued my mortgage servicer, I would likely not be in this mess. Oh well, no time for negative thinking anymore. Not worth it.

[shipo]

I had to live without credit cards from mid-2013 through late spring 2020; the only real challenge I had was renting a car at major airports and renting rooms at some hotels.

[womanonfire]

I had to live without credit cards from mid-2013 through late spring 2020; the only real challenge I had was renting a car at major airports and renting rooms at some hotels.

You can use debit card and I think Paypal through Priceline. We booked a hotel New Years Eve 2020 this way. Not the best way but where there is a will, there is a way!

[despritfreya]

womanonfire

Just FYI

1. Nothing is being paid by the Trustee until there is a court order authorizing payment. Typically, the court order is the order confirming the Plan. It could also be some sort of interim order if your mortgage is a conduit payment - meaning you are paying the post petition mortgage payment to the Trustee. Until there is a court order the funds are held by the Trustee.

2. Your claims bar date has not passed. There is no way for you to know today what claims you have to pay in the unsecured class. Assuming you correctly listed all creditors, each has until that bar date to file a claim. Creditors you failed to list in time for the filing of the claim will not be subject to the bk. Just remember, a debt being "charged off" does not mean you don't owe it. You need to make sure all creditors are listed.

3. Living without credit cards means you are living within your means. You should not be in a rush to change that even if you want to "improve" your credit score.

You need to let the process unfold. It just takes time.

Des.

[womanonfire]

When I mentioned the credit cards being "charged off" I did so only to note that they are no longer accruing interest or other fees.

The only reason I was interested in improving my credit with a card was because it was mentioned in another post. I will never carry credit card debt again. ;)

Thanks for your input.

[flashoflight]

womanonfire

If you are permitted by the trustee and the court to seek credit during your 13, you can get credit cards during the first year. Your mailbox will have pre-approved offers from predatory lenders with very high fees in a couple of months. Secured cards are better due to the lower fees. You might get lucky and get an Ollo or Mission Lane preapproval with no fees. Always be preapproved by the lender before burning a hard inquiry. Get three tradelines and you should be good for an FHA purchase or refi mortgage at the 12th month.

Your access to credit will improve somewhat after the 24th month with a few of the mainstream lenders willing to take a chance on you (most of them still won't touch you though).

In general, the chapter 7s have a much better credit rebuild result than 13s. It's a much longer slog with somewhat poor results. The most common denial reason is "the presence of a non-discharged bankruptcy". You can't overcome that denial reason until you are done.

[shipo]

You can use debit card and I think Paypal through Priceline. We booked a hotel New Years Eve 2020 this way. Not the best way but where there is a will, there is a way!

I had work arounds for hotels which for the most part worked; renting cars at major airports, that was a non-starter.

[Zombie13]

I had work arounds for hotels which for the most part worked; renting cars at major airports, that was a non-starter.

Hey shipo. So, what did you do, for car rentals then? Thanks!

[shipo]

Renting cars was a challenge, I found Enterprise would often rent cars in their small local offices (i.e. away from airports) when one only has a debit card; when I really needed a car when I was on the road I would take either an Uber or local transportation to an Enterprise office and rent from there. Last year after my discharge I went out and plunked down $5,000 for a secured credit card so I made darn sure I could rent a car where and when I wanted to. Of course Mr. Murphy (of Murphy's Law) had something to say about my move, COVID put a complete halt to my traveling, and now, nearly two years after my discharge, I have yet to rent a car.

[flashoflight]

Before I got credit cards back, I found that Enterprise locations located next to a body shop are reliable as far as accepting a debit card. A lot of these are insurance rentals so they need to be more forgiving as far as not requiring a credit card to rent a car.

Due to the post-pandemic ridiculous Uber/Lyft prices and unreliable service, I'm glad I have the credit card to rent a car from the airport in an emergency. I'll rent a car or park my own car at the airport before I take a chance on rideshare. I used to do rideshare super often when shared rides were allowed.

[Zombie13]

Thank you shipo and @flashoflight, much appreciated!