Is trying debt consolidation better than CH13?

[alaska708]

Went to my local TX attorney the other day and was telling me to do a CH 13 at a 100% payback. I told him if I could afford to pay back 100% of my debt that I wouldn’t be in his office! I’m broke!

thought about either going through a debt consolidation company to help with dealing with my creditors or not paying at all on the unsecured debt that I have, almost $35,000 worth. Not much they can do here in Texas if I don’t pay! No house, no assets, work for a large Texas based company, just opened an offshore bank account.

[TurnThePage]

Ch. 13 usually is not, and generally does not have to be 100% payback to the unsecured creditors. Unless your income is well above the median, but a 13 does not exceed 5 years.

Never waste money on a Debt consolidation company -- they charge you an arm and a leg for negotiating or settling your debts with creditors -- something you can easily do yourself.

[shipo]

I agree with TurnThePage, the odds of you being better off with a debt consolidation company are somewhere between slim and none. As for what the attorney told you, meh, my recommendation would be to interview three or four more attorneys and pick the one you feel most comfortable with.

[alaska708]

Thanks for the info. I am having to finance a newer used car before I file so that I have reliable transportation to and from work. Car payments are unreal.

Going to see other attorneys as I do not make enough in my opinion, Dallas Texas to make ends meet with a 100% payback on a salary of $59,000! Rent $1,600, car $550, food, gas, 401K…..

[justbroke]

It was recently stated that the average car payment for Americans is $675-700/month!!! That's ridiculous because you then have to add insurance and many drivers can't afford a $2,000/year policy on top of that high car payment.

As for what your first attorney said... I think you should shop around 3-5 more attorneys. The "median" income for Texas is $55,441 for a single person. There's no way that I can think of that you'd be in a 100% plan... unless you have some sort of huge (non-exempt) asset.

I mean, I did simple math and your anticipated allowed expenses come to $3,444.00 for a single person living in Dallas-Ft Worth. I estimated $8.316 a year for you in tax (15%) which give you $47.124 of net pay. That's $3,927/month. If you have over $30K in claims, then that's not 100%.

In fact, if you take out the 401(k) of say 10% per month, then you'd have less than $20/month to pay to creditors. I think you should definitely be talking to more attorneys. I didn't even take out money for medical (that is deducted via payroll). You're just barely over-the-median.

My simple math...

(Allowances for a single person)
Texas Median Income: $55,441
Dallas Rent: $1,151
Dallas Non-rent: $600
Texas Food, Clothing, and Other: $785
Dallas-Ft Worth Car (Operating): $320
Dallas-Ft Worth Car (Ownership): $588

[shipo]

Thanks for the info. I am having to finance a newer used car before I file so that I have reliable transportation to and from work. Car payments are unreal.

Going to see other attorneys as I do not make enough in my opinion, Dallas Texas to make ends meet with a 100% payback on a salary of $59,000! Rent $1,600, car $550, food, gas, 401K…..

Maybe I'm missing something, but you sound like a candidate for a Chapter 7.

[alaska708]

I can’t as I filed a Ch 7 four years ago. Have no choice but to file a Ch 13. Had a job loss this the reason I’m back in debt along with bad luck.

[flashoflight]

It was recently stated that the average car payment for Americans is $675-700/month!!! That's ridiculous because you then have to add insurance and many drivers can't afford a $2,000/year policy on top of that high car payment.

I thought I was the only one with a $2k/year policy. I've shopped around too. Clean record. Auto insurance is unreal nowadays. I'm pretty sure I have a zipcode penalty.

[shipo]

I thought I was the only one with a $2k/year policy. I've shopped around too. Clean record. Auto insurance is unreal nowadays. I'm pretty sure I have a zipcode penalty.

While I was in my Chapter 13 I noticed my insurance went up on an annual basis, but I was too freakin' busy to pay much attention to it. Back in 2020 I signed up for AARP because I'd heard their partnership with The Hartford was a great deal for home and auto insurance; my annual insurance bill for a couple in their 60s with spotless driving records with a 2006 Acura TL and a 2016 Mazda3 was nearly $2,900 per year; the AARP/Hartford plan for better coverage (i.e. lower deductibles and extra goodies like glass coverage) dropped my annual to $1,080!

[Barbisi]

flashoflight, what's a zip code penalty?
Is that for a nicer neighborhood? Or one more prone to auto thefts?
Just curious if we might fall under one of these categories now or in the future.

[flashoflight]

flashoflight, what's a zip code penalty?
Is that for a nicer neighborhood? Or one more prone to auto thefts?
Just curious if we might fall under one of these categories now or in the future.

Zip code prone to more accidents, thefts of catalytic converters or vandalism in the zip code, higher claim rate by people in that zip code etc. That's when you have a spotless record then try to change insurance to find out every insurer is expensive. I live in an upper class neighborhood with exceptional public schools and it doesn't help as far as auto insurance. Thankfully homeowners insurance has not been bad as far as increases.

[justbroke]

All of Florida is a zip code penalty. We are a "no-fault" State with a lot of octogenarians on the road.

[Carmella]

About negotiating with creditors, if this wasn't said since I skimmed through--you have to have money available to settle so if Mastercard says they will accept $5,000 instead of $8,000 you have to pay out $5,000 and then the $3,000 they forgive is added to your income so you end up paying taxes on it. I forget the technical words to explain that scenario.

My first reaction to your situation is what justbroke mentioned to shop around for another attorney. Get more than one opinion. I think one of the most important things when venturing into Chapter 13 is finding a good attorney that is knowledgeable. If they give you bad vibes/doesn't feel right keep looking.

[shipo]

There is a downside to negotiating down a debt, if one negotiates say a debt of $8,000 to say, $5,000, then one can expect to received a 1099-C in the mail for that $3,000 difference. What this means is you are now suddenly on the hook to pay taxes on the money you didn't pay back to the creditor.