How difficult is the Chapter 13 budget to live with?

[razmom]

Hi all--I've lurked for a while and appreciate all the info I've found here! I have questions about the struggle people seem to have with living on the Ch. 13 budget/payment plan. I've seen random comments about it being a prison sentence, tough to live on, etc. Here's my situation (briefly):
Took out payday loans to 'make ends meet' over the last 2 years; embarrassed to tell you how many (!) but suffice to say, I've reached the point of paying them about $2200 each month. For payday loans. Believe me, I've called myself all kinds of stupid, but lesson learned! We filed Ch. 13 on June 19th, and our payment is supposed to be $547 for 5 years. Considering I've been paying $2200 each month just to payday loans, then struggling to make credit card payments (all late, but averaging about $500 a month) and behind on mortgage, cars, etc.--I'm thinking the Ch. 13 payment will be a breeze. Am I missing something? We haven't lived on credit for years, because of the lates and maxed out...is it primarily a struggle if you're used to using your cards to make ends meet each month?

[lrprn]

Welcome, razmom - glad you found us and have been learning here!

We filed Ch. 13 on June 19th, and our payment is supposed to be $547 for 5 years. Considering I've been paying $2200 each month just to payday loans, then struggling to make credit card payments (all late, but averaging about $500 a month) and behind on mortgage, cars, etc.--I'm thinking the Ch. 13 payment will be a breeze. Am I missing something?

This is overly simple, but think of the total amount of income you bring home each month to live on. Subtract what must be paid out of that money each month - mortgage, car payments, other secured loans, reasonable living expenses - all of which were included in your plan with a set amount allowed.

Everything left over is your *disposable income*. After filing ALL of it is now going to your trustee every month to pay back your creditors who file claims to be repaid through your plan. You don't get to have the extra $2200 minus $547/month - your creditors do.

The real reason Ch 13 is so hard is because there's no money in your confirmed monthly Ch 13 budget to pay for new debts or expenses that come after filing - a hospitalization, car accident, job slowdown, job loss, divorce, etc.. Three to five years is a long time and stuff happens. If through sheer bad luck one of them happens to you, what can you do? You've signed a legally binding agreement that you will pay regardless. Your only option is to have your lawyer amend your Ch 13 plan or if the new problem is big enough, potentially convert your case to a Ch 7. Either usually entail new legal costs.

I'm happy to have filed - Ch 13 was our only option - and grateful for a second chance to start over financially. But don't make the mistake of thinking that Ch 13 is going to be easy. Only 30% of Ch 13 filers make it to the end of their plan successfully - not the best odds.

[aa06a47]

Hello all, I will put my 2 cents in here.

When I went to my attorney I was floored by how low my payment actually was. Using your thought process I figured I would be paying about 2k per month. However, what I had failed to figure is that I wasn't really paying 2k per month, I was writing them checks, then borrowing the money right back using my card to live on.

If you had a good lawyer when you filed who worked up a good plan, and a Trustee who doesn't want everything plus your kitchen sink, I think it should be considered a doable event, provided you do save when you can for those emergencies. It is a belt tightening experience.

I've had my fair share of problems since filing, 3 deaths now in my family (no inheritance) which required expensive travel / flowers / etc/, my basement turned into a swimming pool (water was 4 feet deep). But somehow, I have made it. Just cross my fingers nothing else happens...I have almost 4 years left.

[razmom]

thanks for your input--I guess it just still feels too 'easy' to go from over $2700 in payments (to unsecureds) each month, without making any dent in the debt, to $547 and knowing it will be gone after 5 years. No way could I do that without filing bankruptcy. I know my confidence in myself to manage money is way down, after what I've been going through these last 2 years, so I guess I'm just looking for the other shoe to drop on this mess and someone to tell me it won't work after all. That's stress & anxiety talking.

There are so many items in our Ch. 13 budget that I haven't been able to pay for in a long time--or at least, not as much as our attorney budgeted for--like car repairs, charitable giving, clothing, entertainment, etc. And we definitely haven't been charging those things. I know everyone's case is different, so I guess I'll just try to look at this experience as a blessing in disguise and know that things can only get better from here...

If anyone else has Ch. 13 budget stories to share, good or bad, I'd appreciate hearing them!

[Granny]

If anyone else has Ch. 13 budget stories to share, good or bad, I'd appreciate hearing them!

As Lrprn pointed out, there's always those unexpected things that pop up and catch you off guard. As you pointed out, you haven't been spending on some of the things that your attorney put in your budget, but the day will come when it will be a necessity, such as major car repairs, home maintenance or who knows what else. Unless you have the discipline to sock away some money for those things, you will find yourself scrambling.

Now that I am six months into this and finally getting all the kinks worked out of the whole filing and monthly payments etc, I am enjoying looking for ways to save some money here and there so that I can have some extra things. For instance, I am going to try making my own laundry soap. From what I am reading it works out to about .02 per load...quite a savings over the name brand stuff and even the store brand stuff. Since groceries was the largest expense in our budget, that's where I am starting my attack plan to reduce what I spend for that as much as possible. Lucky for me, when hubby lost his business this month, I had about 2 months worth of food in the freezer, all bought at rock bottom prices. Only thing we have had to buy is milk, bread and peanut butter.

I've worked out monthly menus and know exactly how much meat we need for the month. I have been tracking the sales at the stores to know what is truly a sale and what is just a come on ad. I will start analyzing my price book this week to determine what the cycles are for the true sales so I will know how much to stock up on to last me to the next sale. My laundry room now looks like a mini-mart.

The good thing about all this is that after turning 50, I finally decided what I want to do when I grow up. The sad thing is, it's the same thing I wanted to be when I was 18 and my father talked me out of it....I want to be a housewife and a mommy (I'm raising my grandkids). It's a shame I wasted all those years in college and borrowed and paid back all those student loans. I could have been Martha Stewart, and my dad said there's no money in homemaking. Little did he know.

With just a little effort, I can save us just about as much as I would net working in my professional career when you include the day care, clothing, transportation etc.

So to conclude this rambling, I can say that filing bk has truly made me a happier person. I am at peace with my life, at least till the next kid up chucks again.

[$$only4ever]

We have been in a Chapter 13 for over 2 years; 34 payments to go. As long as we budget and stick to it, it has not been too bad.

[rrockinggramma]

I am rounding the home stretch and this chapter 13 has been fairly stress free. There have been a few tense moments but pretty much sending in that payment (for me 556.50) each month was a lot easier than phone calls and trying to figure out how to keep everyone happy. In less than 1 year I will be debt free. That is a great feeling. I treated that payment to the trustee like it was gold and always made sure no matter what else, that was made. I went without a few times but it will all be worth it in the end.

[BKOnce]

Amost like a homeless way...

[CityGirl]

Can you tell me how much was your debt and what were the payments?

Hello all, I will put my 2 cents in here.

When I went to my attorney I was floored by how low my payment actually was. Using your thought process I figured I would be paying about 2k per month. However, what I had failed to figure is that I wasn't really paying 2k per month, I was writing them checks, then borrowing the money right back using my card to live on.

If you had a good lawyer when you filed who worked up a good plan, and a Trustee who doesn't want everything plus your kitchen sink, I think it should be considered a doable event, provided you do save when you can for those emergencies. It is a belt tightening experience.

I've had my fair share of problems since filing, 3 deaths now in my family (no inheritance) which required expensive travel / flowers / etc/, my basement turned into a swimming pool (water was 4 feet deep). But somehow, I have made it. Just cross my fingers nothing else happens...I have almost 4 years left.