Saw three Atty's today - questions

[nojusticehere]

Hi everyone. Well I saw three atty's today., wewww, tired. They all basically said the same things has here on this site. Each wanted $3500 to file,. which inlcuded all my counselling fees (before and after), filing fees, etc. Two would not budge on the fee, and wanted it all up front and would not include any in the Ch 13. The other one reduced his fee to 2500 and will take payments. The other $1000 he will include in the Ch 13. All three said that Vehicle 1 was the cause of my downfall (which I agreed). He said that I would probably have to pay 90% of all my debt (which I was sure I would) because of I'm almost double the median income here in florida, but he was also certain that I could justify the extra that I pay above the median for rent and expenses based on the area that I live, the lease agreement, and basically the cost of living here in my county is far above the average of the other counties here in Florida. At least, that has been his experience at the 341 meeting. Based on his figures I would only have to pay between $200 and $400 if he works the numbers and the trustee approves. At this worst it would be $600 (which is a lot better than I'm paying now). This is after all allowable deductions. This of course is above any of my allowable living expenses.

Now he said something that I really didn't understand. He said that I may not have to pay the deficiency amount on the Vehicle 1 after it's repoed. (I'm about $20000 updside down and deficient now approx $5000) This is what he said "after they repo your vehicle, place all the fees, atty's fees, legal fees, add the deficiency etc, it may be well above what is actually owed on the loan and you may not have to pay any of it in the Ch 13." I didn't understand this. Can anyone shed some light on this?

As for Vechile 2 (I'm a co-debtor) I will be keeping this and will be included in the BK and the co-debtor will not be harmed in any way since I will continue the payments under the Ch 13.

So anyone have any incite, recommendation, or opinions? I'd really appreciate any feedback you can offer.

[nojusticehere]

I guess no one as any input.

[HHM]

Not sure what to make of it. Essentially, any deficiency balance plus fees etc becomes a general unsecured debt in your BK, so it would be treated like the rest of your unsecured debts. I think what you attorney is probably telling you is that, when you include that deficiency balance, you would no longer be in a 100% plan...so in that respect the deficiency balance does not get paid in full, but they would probably get something if they filed a Proof of Claim in your BK.

[nojusticehere]

Oh, ok, I understand now. Thank you. Now that makes more sense having looked at it this way. He threw so much info at me, my head was reeling. Thanks again!!! He also advised me to continue making payments on any "secured" item that I wanted to keep, ie. Vehicle 2, but to stop making payments as soon as I decided what I was going to do. Any idea how long after I stop making payments on CC's before I start receving calls? 1 week perhaps? Also, still waiting on the repo of Veh 1. AFter it's repo'd, usually how long is it before it's sold and I receive a notice of deficiency, and then how long before I receive a summons to appear in court on the defiency. Just trying to get a "window" so that I can prepare to have my legal fees paid in order to file before it gets to the point of lawsuits/garnishments, etc. Thanks again.

[SinkingFast]

How long on the repo will probably depend on the Lender.

Here's a site for you with some information about Repo's in Florida:

http://myfloridalegal.com/pages.nsf/0/9707bb48d49ce38985256cc9004e3ee5?OpenDocument

I'd suggest you remove any personal belongings you do not or cannot afford to loose from the car.

One thing that can help you plan better is to voluntarily surrender the car yourself. Then you don't have to worry the Repo Guy will show up at your place of business or 3 am in the morning. Possibly leaving you stranded somewhere or waking your neighbors. Plus, voluntary surrender saves you some on the Lender's legal and repo costs.

[rrockinggramma]

actually if you file, and then let the vehicle go back, it could take months for them to even come and get it. Usually 3 payments behind gets their attention etc. but if you are in a chapter 13 already, they will just file a claim and ask to be given relief from the stay so they can auction it off etc. In my situation, the trustee ask them to file their claim and any monies made from the sale of the car turned over to him. And I think your lawyer was saying that you can't pay more than the vehicle was worth (cramming down to FMV) for deficiency balance. Once you file and include a vehicle, the lender cannot add in interest or any fees. Only claim is on principal. When we did it , it pissed off big time the lender we had, Drive Financial, cause they claimed they lost money due to the fact that only principle of loan was paid, not all their fees and interest charges. If you repo and then file, you probably won't get taken to court at all, they will just file a claim in the BK.

[CityGirl]

I'm so confused about you paying 100%. What does that mean? If you're only paying 600 a month, how is that 100%?

[lrprn]

I'm so confused about you paying 100%. What does that mean? If you're only paying 600 a month, how is that 100%?

CityGirl, you are still trying to match up income minus expenses to the Ch 13 monthly payment and % payback. It just doesn't work that way.

Everything in Ch 13 rides on how much disposable income you show on the Means Test or Schedule I&J and how many of your creditors file claims.

(Warning - many dollar figure manipulations about to commence...)

Let's say that the Means Test shows my disposable income is $500/month. If I add up all my debts, I owe $50,000.

If my plan is confirmed for a $500 monthly payment and I pay that payment for 60 months (five years), then I will pay a total of $500 x 60 = $30,000 into my plan.

Out of that $30K my trustee's fees are paid at 8%/month and the remaining $2,000 of my Ch 13 lawyer's fees are paid too. The trustee also pays my car payment from the plan money - my car loan is $7000.

Since only 2/3 of my creditors file claims in time, those claims add up to $30,000 - the remaining $20,000 of my original $50,000 unsecured debt is wiped out.

So let's see where my total $30,000 of payments is going over the 60 months of my plan:
Trustee's pay $2,400
Lawyer's fee $2,000
Car $7,000
TOTAL $11,400

That leaves $30,000 minus $11,400 = $18,600 to pay my unsecured creditors. I owed $50,000 to all my creditors when I filed, but because only $30,000 worth of creditor claims were made, $30,000 to my unsecured creditors is all the plan has to pay. Now the trustee has $18,600 to pay $30,000 of unsecured creditor claims over five years. $18,600 divided by $30,000 = 62% payback.

Now think about what happens if all my creditors file claims to be paid = $50,000. The trustee has $18,600 to pay $50,000 worth of claims. $18,600 divided by $50,000 makes a payback % = 37%

Another twist...let's say at the start rather than owing $50,000, I only owed $20,000 debt total. In this same situation, now it's $18,600 divided by $20,000, so the payback % = 93%.

Notice my monthly $500 payment has never changed. What changed was the amount of total debt I owed or how many of my creditors filed claims.

This is why it's impossible to compare what someone else's Ch 13 payment, income, and expenses are and try to fit it to your own situation. You are comparing apples and oranges.

(Sorry for the length, everyone. Hopefully this will help all of our potential Ch 13 filers understand how the finances work inside a Ch 13 plan. And this is a very simple Ch 13 plan! )

[SinkingFast]

And that's not even counting in if,...............

Let's say you pay your CC payments right up to filing. And you pay any unsecured Creditors, line of credit by line of credit, in excess of $600 within the 90 days prior to filing,...............

Ok, so,................

Your Chase minimum is $500/mo x 3 payments = $1500

Your Citi minimum is $600/mo x 3 payments = $1800

Your BoA minimum is $450/mo x 3 months = $1350

Three CC's minimums totaling $4650.

That's all money the Trustee can go after in "Preferential Payments". Make the Creditors pay all $4650 to the BK Court. Take a %'age of the monies recovered "on behalf of your Creditors" and add extra $$$'s to your Payment Plan Pot.

[CityGirl]

OHHH! Thank you so much for that explanation!!!

It seems though that many here are paying 100% back. I doubt I will if I use the numbers I came up with.

[benniebear]

I thought that the trustee and attorney fees are tacked on to the total debt being repaid. I think this may only apply if you are paying back 100% of your unsecured debt and have no secured debt being paid into the plan. My unsecured debt is $50,000 and my attorney said my total payment plan would be $60,000.

My understanding was that the additional $10K was for the trustee and attorney fees.

Am I misunderstanding?

[HHM]

I thought that the trustee and attorney fees are tacked on to the total debt being repaid. I think this may only apply if you are paying back 100% of your unsecured debt and have no secured debt being paid into the plan. My unsecured debt is $50,000 and my attorney said my total payment plan would be $60,000.

My understanding was that the additional $10K was for the trustee and attorney fees.

Am I misunderstanding?

Note quite. benniebear...

the way LRPRN described it is how it works. The payment is all based on your disposable income. When we talk about unsecured debt in a chapter 13, we are talking about the "existing" unsecured debt that is owed when you file, this is the debt you are filing BK on. Trustee Fees and Attorney's Fees are Administrative expenses of your chapter 13. In a sense, yes, those Admin fees are tacked on, but when we ask, what is the percentage you are paying to your unsecured's, we are asking about your unsecured debt that existed at the moment you filed, (i.e. all your credit debt and any other unsecured debt).

[CindyLou]

If you are well over the median chances are you will be in 100% payback....

[nojusticehere]

Another Atty

Hi everyone, well I've been busy seeing some more atty's. I saw another today, and felt very comfortable. All she does is BK and Foreclosures for consumers. She provided me with basically the same info as the rest. I would have to file a CH 13, which I knew because of this forum. But she advised me to do a couple of things differently than the other atty's I saw.

(1) She did say stop paying all CC, but continue to pay the secured, the vehicle that I want to keep (I'm a co-owner) and the furniture payments since I want to keep them. However I did say that the furnture is over a year old now and they can come get it if they want it. She then said I could stop paying them as well if I chose to.

(2) Because I had been depositing my son's paycheck in my bank account for about 6 months, and then giving him his money (he didn't have a bank account) through June, she said I should wait until June's Bank statement falls off the 6 month requirement to file. If I chose to file prior to that, then I would need to supply the court with proof that it was my son's pay, and then get my son depo'd to show that he did receive his pay and that he did not contribute to the household. That would be a pain in the butt since he's out of state and that would cost me even more money. So I would need to wait until December to file.

(3) I should wait to file until my other vehicle is repo'd (any day now, it's 4 months past due), wait for the sale, and once I get the letter stating the deficiency that's when I should file. Of course it becomes a unsecured debt and I would have to pay it, but I already knew that too.

She stated that my case is pretty cut and dry, don't have alot of things that should cause any difficulties, etc. or red flags with the trustees. Her fee is $2000 up front, and the other $1000 would be included in the case. Once I give her some money to retain her, (she said any amount) that I could advise all creditors to contact her, when they start calling, but of course she couldn't file my Ch 13 until the $2000 is paid. She would also take payments in any amount until it's paid. Also she said based on what I gave her, pay stubs, bills, etc, and without her actually running all the figures, worse case scenario, I would have to pay between 500-600 per month. This figure is still alot better than what I'm paying now. Plus I won't have the other car payment on a vehicle that's so far upside down, I'd never get out.

So, what do you guys think?

[HHM]

As a rule, I don't like second guessing attorneys, after all, she sat in a consultation with you for 30-60 minutes, in any event, here are some thoughts.

(1) Without more background it is hard to say whether this is good advice...but in a chapter 13 context, you want to give some thought to your credit rating (unlike in a chapter 7). Assuming you can afford to continue to make the minimum payments, you might as well do so...granted, your credit will get trashed because of the chapter 13, but there is no need to compound the problem by having late payments on your report as well. Ultimately, it comes down to whether you can afford the payments and how long it will be before you can file. If you are going to be filing in the next month or 2, keep making the payments if you can afford them. If you cannot afford them, or the money could be better sent elsewhere (within reason), then stop making the minimum payments.

As for the furniture, do you want to keep the furniture or not. If yes, keep making the payments, if not, again, wait until you actually file and surrender the furniture.

(2). This depends on your district...Usually a sworn affidavit from your son should be sufficient to deal with this situation, doing a depo is overkill. But, the attorney is correct, there is some risk, and it may take some leg work on your part to get the necessary evidence together (i.e. images of your son's deposited checks, and old bank statements to match them up).

(3). You don't have to wait to get the deficiency balance, but if you don't want the car; yes, go ahead and wait for at least the repo to occur. The finance company will file their proof of claim in the BK when they have the deficiency balance, so you don't really have to wait for the sale in order to file.

There is nothing wrong with what this attorney told you, but, as I hope I was able to point out, there are some caveats to what she said.