Layoff and Chap 13

[esmith1515]

My wife is in the citrus business and it looks like because of the freeze in California she may be layed off for anywhere from 6 months to a year. We are in month 36 of a 60-month Chapter 13. She can draw umemployment, but I'm pretty sure our monthly bring home will drop by at least $1000. Our payment is $2000/month. From what I know from reading this forum, we can either try to amend our plan for a lower payment or we can try to convert to Chap 7. Since we filed in 2004, would will still be under the old laws if we wanted to convert? She should get her job back next fall, but there is no guarantee. Would that play a factor? Would we have to redo our monthly budget if we wanted to amend our Chap 13? Any advice from someone that has had a similiar experience would be greatly appreciated.

[HHM]

If you wanted to amend your chapter 13 plan, then yes, you would need to amend your income/expense schedules because you need to show the changes. As for conversion, I am reasonably certain that you would file as an old law chapter 7 (but I am not 100% sure). In any event, you need to be proactive about this and file whatever you need to file BEFORE you miss a payment.

Another factor to consider which you haven't mentioned is why you filed chapter 13 in the first place. If it was to save an asset (like your house), then you should probable amend your plan. But, if you filed 13 simply because you income was too high at the time, then you will want to look at conversion to a 7.

Future job prospects don't mean much, the trustee is not really going to inquire about it.

In any event, if you filed with an attorney, you best get in touch with him/her and get the ball rolling.

[esmith1515]

We do not own a house. We just had two cars included in the plan. I think we would prefer to amend our plan as opposed to converting. One negative thing would be we would have to re-convert if she got her job back in August or Sept. As far as converting to a chap 7, we cashed out a 401K that my wife had two jobs ago, about $15,000 worth, in two dispursements over the last 18 months or so and that money has been spent. I'm afraid they will expect us to pay creditors with that money if we convert to a 7, unless we can come up with a good reason why we had to spend it. We have been in a 100% plan in our chap 13.

[HHM]

to re-convert if she got her job back in August or Sept

No you would NOT.

401K that my wife had two jobs ago, about $15,000 worth, in two disbursements over the last 18 months or so and that money has been spent.

Again, probably will not be an issue. The money is gone, there is not much they can do. You were in a chapter 13, 401K's are exempt assets. The only issue would be whether the money was withdrawn and used for non-permissible uses, thereby creating a tax penalty. But it will not effect an amended plan or conversion to a 7.

It appears you are under some misconceptions about what your options are. If you did not file with an attorney, go speak to one ASAP. If you filed with an attorney, call his office and make an appointment. Whatever you do, you do not want to let your chapter 13 get dismissed for non-payment. Take action now, before you miss your payment.

[esmith1515]

We do have a lawyer, so we will go meet with him. I know I don't want to miss a payment.

[CATCHMEIFYOUCAN]

Lay-off and Chapter 13

Almost sounds like my case, but I wasn't laid off. I filed for Chapter 13 because I was working 2 full time jobs. I was paying back about $250 into the plan until I decided it was best to quit one full time job, convert to Ch7 and pay nothing ! IT WORKED ! Discharged happened within a couple of months for converting:

July 2007 - Filed Ch13
Aug 2007 - Ch13 341
Oct 2007 - Objection to confirmation
Oct 2007 - Quit one job - converted to Ch7
Jan 2007 - Discharged !

You mentioned your wife may be laid off up to 6 months ! That could be plenty of time to convert and be discharged, than you can pickup another job!

Best of Luck, Catchmeifyoucan