Better to give up on 13?

[nazstar]

From what I've been reading, the bankruptcy laws almost make it beneficial for someone in my case to drop to one income and file for 7 vs. 13. Not sure if I understand this, but this is the way I see it...

We make WAY too much to even be considered for 7. With another child on the way, one of us will have to quit anyways since daycare is outrageous for 2 infants. If I quit, then we qualify for 7 and debts get discharged. We have no assets other than a house with no equity - which we don't mind losing. We can start fresh right away. If I continue to work, put my children in daycare (which I don't want to do), and file for 13, then the court takes all that I make for the next 60 months above approved expenses. This includes my yearly bonuses, income tax refunds, and any significant raises I may get.

So, besides the moral issue of paying back what you owe, etc. What's the point in filing for 13? If we had no payments to the court or to creditors, we could live off 1 salary - not grandly, but we wouldn't starve. I don't mean to sound flippant here, but I'm really trying to understand all options.

[Granny]

You're not flippant at all, just looking at the whole process with wide open eyes. I commend you for that. If I were in your situation, I'd be doing the same thing.

Also, you would be surprised at how much one stay at home parent can manage to save the family each month. I've been perusing the frugal forums for quite a while and there's lots of little things that a stay at home spouse can do to save the family money, not counting what is saved on daycare for 2 infants.

Keep reading the bk forum and make an informed "business" decision about your finances and your family's future.

[lrprn]

So, besides the moral issue of paying back what you owe, etc. What's the point in filing for 13?

If you can quit one job and file Ch 7 once your combined incomes for the last six months fall below the median, then that's exactly what you should do. If your mortgage payments are up to date and you can protect the house with your state's exemptions, then it's likely you can keep your house if that makes financial sense as well.

As to why file Ch 13....some folks file Ch 13 because they desperately want to save a high-dollar asset - usually their home or family-owned property - that is threatened by foreclosure, or (like us) both wage earner's incomes alone are higher than the state median income for our family size. Then Ch 13 is the only choice to make.

I believe that most of us who file Ch 13 would most definitely file Ch 7 instead if we qualified to do so.

[TiredandWeary]

Your assessment of the options totally makes sense to me! I also wondered about that very same issue when we were filing. It didn't make sense for me to continue working part-time, but at the time I believe we were right at the cut-off point for our state as far as income earned when only my husband's salary was to be considered. I think (if I remember correctly) that we may still have just barely made a little too much even on his salary alone. I still keep wondering sometimes if I should reconsider converting to Ch. 7 by quitting my job, as it seems we are NEVER getting ahead so far into this Ch. 13 plan (16 months into it). But, even though the state has raised the limit on income for filing Ch. 7, since my hubby just started a new job making more money, he still makes too much on his salary alone at this point to make in under those new figures for 2007. Anyway, I figure maybe in a year or so, if they keep adjusting the salary limits for inflation or whatever, maybe at some point we will still be able to convert to a Ch. 7 if I quit my job, but probably not within the next year. Anyway, I just wanted to reply to your original post and let you know that everything you have said makes total sense and I can definitely see why in your circumstance, with another baby on the way, and the potential added cost of childcare, it seems like it would almost make more sense to file Ch. 7 and quit your job. Let us know what you end up deciding to do and how it goes...I will be curious to see how it all turns out for you!

[Flamingo]

From what I've been reading, the bankruptcy laws almost make it beneficial for someone in my case to drop to one income and file for 7 vs. 13. Not sure if I understand this, but this is the way I see it...

We make WAY too much to even be considered for 7. With another child on the way, one of us will have to quit anyways since daycare is outrageous for 2 infants. If I quit, then we qualify for 7 and debts get discharged. We have no assets other than a house with no equity - which we don't mind losing. We can start fresh right away. If I continue to work, put my children in daycare (which I don't want to do), and file for 13, then the court takes all that I make for the next 60 months above approved expenses. This includes my yearly bonuses, income tax refunds, and any significant raises I may get.

So, besides the moral issue of paying back what you owe, etc. What's the point in filing for 13? If we had no payments to the court or to creditors, we could live off 1 salary - not grandly, but we wouldn't starve. I don't mean to sound flippant here, but I'm really trying to understand all options.

There is absolutely nothing wrong or unusual in your posting above. The majority of folks filing for Chapter 13 want to keep their house and have a large amout of equity in that house. Otherwise, if you are able to do so after going over the entire financial sitiuation with an attorney, I would recommend a 7 over a 13 anyday to anyone after completing a 5 year Chapter 13 ourselves. The only bad thing about a Chapter 7 is that it can stay longer on your credit reports (10 years vs. 7 for a Chapter 13) and many creditors, lenders or employers view it in a more bad light than a Chapter 13, probably because there is no effort to pay back debts owed. That is not a quote from me; that is what I've learned from other postings on the net and from speaking to a mortgage broker and attorney about 7's and 13's. The best thing to do is to do what is best for yourself and your family and not worry about what anyone else says, and to also get good legal advice.

[woeisme]

If I quit my job, my husband's income would be less than the median for a family of 3, so I guess we could qualify for a Chapter 7. However, I'd lose my career, which I really love, and since I'm the higher wage earner in my family, we'd be better off in the short run but much worse off in the long run. So I guess it's really situational. I'm up for tenure this year, so I suppose if I don't make tenure and get promotted to an associate professor, we could do the CH 7 conversion, then once it's over I could look for a new job, but I'd really want that to be a worst case scenario! But if I was working a part-time job and had to spend everything I made on child-care that would be so not worth it to do a 13!

[Flamingo]

If I quit my job, my husband's income would be less than the median for a family of 3, so I guess we could qualify for a Chapter 7. However, I'd lose my career, which I really love, and since I'm the higher wage earner in my family, we'd be better off in the short run but much worse off in the long run. So I guess it's really situational. I'm up for tenure this year, so I suppose if I don't make tenure and get promotted to an associate professor, we could do the CH 7 conversion, then once it's over I could look for a new job, but I'd really want that to be a worst case scenario! But if I was working a part-time job and had to spend everything I made on child-care that would be so not worth it to do a 13!

Life is full of decisions but always remember you do what you have to do to protect yourself and your family. That comes first and you have to handle the situation that is occuring now, not 5 years down the road. You can always restart a career or go back to school. I know that cutting back is hard and it's very hard for anyone filing for bankruptcy to have to face the lifestyle change it incurs head-on. It's a major adjustment. It was a major shock to us. Whether your file a 7 or 13, you will have several years of learning to live a different lifestyle than you did prior to having to consider filing bankruptcy. This is one of the scarier points that many try to learn about prior to filing and one that just cannot be avoided.

[nazstar]

I don't know much about filing for 7. If I quit my job, we waited for 6 months, and the new baby arrived (making us a family of 4), then we would be below the median income for our zip code. So, we pass the means test. At that point, do our expenses even come into play? If we make less than the median, isn't it automatic qualification for chapter 7?

[woeisme]

Life is full of decisions but always remember you do what you have to do to protect yourself and your family. That comes first and you have to handle the situation that is occuring now, not 5 years down the road.

I don't know that I agree with this logic. It's short term thinking instead of long term planning that got me into my current financial situation. For example, I could quit my job, convert to a CH 7 six months down the road, then hope to find another good job after BK is over with instead of paying $1100 a month into my CH 13. But I have a 12 year old son who could get free tuition for 4 years of college if I stay with my current job when he graduates high school. So while it would save me $66K short-term, it would cost him almost the same amount for a private college tuition in the future, plus I would have a very difficult time finding a job with equal pay and perks if I dropped out of the workforce now. I'd probably lose more in pay than I'm paying into my CH 13. So like I said before, it all depends on the situation. If I was a part-time worker, or had child care expenses and a baby like the original poster, quitting a job makes a lot more sense, but what's right for one person isn't always the best for someone else.

[Flamingo]

I don't know much about filing for 7. If I quit my job, we waited for 6 months, and the new baby arrived (making us a family of 4), then we would be below the median income for our zip code. So, we pass the means test. At that point, do our expenses even come into play? If we make less than the median, isn't it automatic qualification for chapter 7?

No one knows what your situation will be like in 6 months especially when a new baby arrives. If you are struggling now, it could be worse 6 months down the road with another new addition to your family or you could hit the lottery and all is better. There are just certain personal financial decisions that only you can make for yourself and your family. In your situation, I would speak to a good BK lawyer who can go over the entire financial sitiuation with you since you are expecting a new addition, will be out of the work force anyway when the baby comes and need to figure out what to do from there. It's hard making decisions when facing the possibility of filing bankruptcy. Work with the facts at hand and your attorney to make the best decision. Remember, no matter what Chapter you file, life will not be like it was prior to filing; you will have to learn to live without credit cards and cash only and having 4 children myself, I know how expensive it can be. Be ready for a lifestyle change for your family for several years after filing. It can be difficult and a shocker to some if they don't learn to save after filing. Best of luck to you.

[nazstar]

After speaking with my husband last night, we came to the conclusion that I would quit my job in March or April. Then we'll wait 6 months and file. The stress of having this hanging over us is too much to bear with a new little one on the way. Plus, now that we are not paying the mortgage and HOA, it's only a matter of months until they come after us with a judgement for the balance. I have a meeting with a different lawyer tomorrow to get more information. My gut is telling me the first lawyer I met with is a bad choice. Maybe it was nerves, but I need to meet with 1 or 2 more before I make a decision to retain one. This is an important decision in our lives and I need to be comfortable with our representation.

[MOMof3]

If you can make it w/out your income, only if for the short term, then I would follow your plan for quitting & filing a 7 and getting it over with. I have a 7 month old as well as two school aged kids & it is SO hard to work. Unfortunately, the 13 is what we used to save our house, so I don't really have a choice since my income pays the 13 payment--which in turn pays our mortgage.
Good Luck to you regardless! My first two are 19 months apart..it is fun, but hard work! Daycare costs are ridiculous--I would avoid them for two infants since you won't have much take home after that whopping bill anyway. Thankfully I stayed home when my 2nd was born for a couple of years & I have a GREAT sitter right now for my 3rd (and final-lol) child.

[nazstar]

My two will be 13 months apart if I go full term, but my daughter was 2 weeks early. It breaks my heart to put a newborn in daycare and honestly, it goes against our personal beliefs to do this. My husband's mother divorced an alcoholic husband who left her to sink with 2 small children. He had bad experiences with sitters - but his mother really had no choice. We do have a choice - it's not a great one, but it's a choice nonetheless. Daycare would cost 70% of my husband's take home pay and at that point, I would be working to pay for the rent, groceries utilities, and whatever is left for a chapter 13 payment. I really don't see the point. AFTER we go through the chapter 7, I guess I am free to take on part time work at night or maybe start sitting another child for extra cash, but until then it will be LEAN in order to qualify for the chapter 7.

[SinkingFast]

We went thru the same decision making process regarding day care.

We weren't in financial straights at the time, but it was the same decision making process none the less.

If I went back to work after our twins were born,............ After paying day care, transportation, and other routine work related expenses,............ I was gonna net $40/week for 40 hours of work. AND someone else was gonna be raising our children. Hubby and I agreed, it was not worth it.

Filing BK is a business decision. You've got to do what's best for you. Regardless of which Ch BK you file.

If quitting work to stay at home and raise your kids is the best decision for your family, then go for it. And file a Ch 7.

About Consulting attnys,............ We saw a lot of them. We were below the Median and most attnys were still pushing for us to go Ch 13. Only 2 out of a dozen said we could file Ch 7. And one of those 2 wasn't worth squat.

Definitely keep looking until you find THE one you're comfortable working with. It may be exhausting. You may wanna quit. But when you finally find a good attny, it's really worth the time spent.

[MOMof3]

If you can't even take the "12 weeks" off for the baby then the 13 wouldn't be worth it. I am with you---a newborn shouldn't be put in daycare. I was lucky that I kept my youngest out until 4 months & was able to find a stay at home mom for her. I think you know in your heart that you have to make the stay at home mom thing happen. Once the 2nd baby is a little older, you could watch children in your home for some extra money, or maybe you could work an opposite shift as your hubby (part time of course). My advice would be to try to get the chapter 7 to work---they took into account my maternity leave & day care expense when figuring out my chapter 13 budget & my baby wasn't even born until a few months into the plan. Maybe you can go for the 7 using "future" income and expenses in the calculations? I would talk to a good lawyer and see! No sense in waiting if you don't have to. Good Luck to you! Are you at least feeling ok physically? I know that the stress of the bankruptcy is part of the reason why my baby was early (10 days)---I was just totally spent from working full time up to the end, to the bankruptcy, to my older two kid's activities, etc....