Can I file a CH13 with Negative Disposable Income?

[WhatMoney]

Flowers: Home: equity is $125,000
Income: in addition to the $60k, I receive an additional $50,000 each December 31 as part of my divorce settlement, this payment is yearly and the last one will be 2015.
I drive a Mercedes ML350 (I pay pmt $700/mo)

AT $9,166/mo pretax income, you want to file Ch. 13. You could reduce your standard of living a bit and still pay off your CC bills and avoid BK. Is the Mercedes really necessary? The home equity could almost pay off your debt if you sold it, assuming you can sell it.

You want to keep everything (expensive house and car) and discharge $120K in CC debt? I don't see anything but a Ch 13 for you. How much disposable income do you have left with $9,166/month coming in?

[Flowers]

* I am locked into the car because the lease is still for another year. And with a low low credit score I am unlikely going to even be ale to get another car when the lease is up.


* thanks for you help everyone, I can not believe the mess I am in, and I can hardly sleep anymore.

* selling and moving is going to be expensive too, and I have no where to go. At least I feel safe here.

No need to answer this post, I am just feeling sad. My dog seems to be sleeping well next to me.
Ugh, that ex-husband of mine!

(ok enough self-pity, time for bed and tomorrow is another day)

[Help!]

If you can get caught up on your payments, you can file a 7 and reaffirm the car loan. If you want to do that, stop using and paying all of the credit cards and get after the arrears on your car.

I agree. If you reaffirm the car loan it will count as a continued expense. A word of caution, though... you can only reaffirm the car payment if your trustee permits you to do so. If the trustee feels the car payment is too high for your income, you may not have any say in whether or not you keep it. Whatever you do, don't pay the vehicle off and then file BK (in case there's any chance you were thinking along those lines). You are much more likely to be able to keep it if you have very little or no equity in it.

If you do decide to file, 7 is appropriate for your situation based on what you've said. Unless you have some other assets that need protection, there would be nothing gained by filing 13 instead. Know that it can be a complicated process and that there are things you can do in the months before filing that will help your case and other things that can really hurt your case. You're in the right place for good advice - you'll be much better prepared than I was.

[Help!]

I am going to be in the same boat as reb512: I am over the mean income for the state.
Can someone consider my situation:

Income $60k
credit card debt: $120k
monthly mortgage $4415
I have 20% equity in the home, and I am nervous that when i file chapter 13, and the lack of income to pay the trustee comes to light and I have to switch to chapter 7, that I will have to get rid of the home.

This is going to be one of those posts where the person who asked the question is not going to like what I have to say. Here's what I think is best for you (but definitely not easiest):

I'm assuming $60K is what you are making now, not what your average income has been over the past 6 months. The "lack of income to pay the trustee" is not going to allow you to switch to Ch. 7 in this case. The expenses you're using right now to calculate disposable income (a very big mortgage payment and a very big car payment) are going to be forcibly adjusted downward when you file. Filing Ch. 13 does not protect your standard of living, only your assets (and only to the extent that they can be made exempt in your state). The trustee will only allow you to keep expenses which can reasonably be supported by your income.

If I were you, I would sell the home while you still have equity in it and rent something you can afford while paying down the credit card debt. I would then turn in the expensive car and get something with a more reasonable payment ($300-$400). If you are still unable to make a dent in the unsecured debt, you would at least be filing BK with expenses viewed as "reasonable" instead of having the trustee (and possibly the U.S. Trustee) determined to shoot you down.

$60K sounds like a big income, but by today's standards it really isn't. Keeping the house and car would be continuing to live far beyond your means.

Probably not what you want to hear, but I'm giving you a straight answer based on what I've been through as an above-median filer.

[laurannm]

Can the Chapter 13 (or UST) trustee "forcibly" adjust your mortgage and car payment downward? I was always under the impression that you can use your actual mortgage payment, regardless of how high, when determing your eligibility for a Ch 7\13.

That being said, from a practical standpoint, $4415 is an awfully large mortgage payment, particularly on a $60k annual income. Without seeing your financial situation in more detail, if it were me I would be asking myself if I can truly afford such a large mortgage payment (even if all of my CC debt was discharged).

I agree with Help, I would seriously consider selling the house, rent something much cheaper and take the available funds (along with your equity ) and try to make a dent in that CC debt.

[Help!]

Can the Chapter 13 (or UST) trustee "forcibly" adjust your mortgage and car payment downward? I was always under the impression that you can use your actual mortgage payment, regardless of how high, when determing your eligibility for a Ch 7\13.

To clarify, you can be held to the IRS and local standards on housing, transportation, etc. by the trustee and have to get a judge to decide whether or not you can exceed them. I found several cases where the trustee and debtors did not agree on disposable income and the judges stated in their decisions that the debtors' mortgage payments were extravagant and that the only way to avoid dismisssal was to amend their petition to include surrender of the home, indirectly forcing them into a lower monthly housing expense in order to pay back their creditors.

[WhatMoney]

What about the $50K a year for 5 years she receives as a divorce settlement plus the regular $60K salary? Does that count as income or is it exempt from the means test? Can a once a year payment be ignored if they only look back 6 mos for income?

[laurannm]

To clarify, you can be held to the IRS and local standards on housing, transportation, etc. by the trustee and have to get a judge to decide whether or not you can exceed them. I found several cases where the trustee and debtors did not agree on disposable income and the judges stated in their decisions that the debtors' mortgage payments were extravagant and that the only way to avoid dismisssal was to amend their petition to include surrender of the home, indirectly forcing them into a lower monthly housing expense in order to pay back their creditors.

Ouch...hadn't heard that one with mortgages ( I have heard that if you rent however)

[sick of debt]

EVEN WITH THE 50,000 FROM THE EX, THE MORTGAGE PAYMENT SEEMS HIGH. I WOULD IMAGINE THE UPKEEP IS COSTLY AS WELL. DO YOU HAVE TO PAY TAXES ON YOUR ALIMONY? JUST CURIOUS.

[ThreadsSnapping]

Alimony is taxable. Well, if it's reported it is taxable.

TS

[Help!]

What about the $50K a year for 5 years she receives as a divorce settlement plus the regular $60K salary? Does that count as income or is it exempt from the means test? Can a once a year payment be ignored if they only look back 6 mos for income?

It is most definitely income on the means test, and I can't think of how she could get around it. Even if she filed before she received the first $50K payment it would be dangerous not to include it as projected income on schedule J as she will surely be asked at her 341 hearing if she is aware of any other money coming her way. It won't be viewed as $50K more to support her current standard of living... the local trustee will see it as $50K more to give to creditors.

[reb512]

well I feel a bit silly, I just retook the means test and I exluded other househould members ( I was able to do so because they are not my dependents) and I came up with $155 a month that could go towards my debt repayment plan. since I have a car payment, I'm sure this is on top of my car payment, but since my auto loan is older than 910 days I know I could get a cramm down. But even with this information i'ts much more livable than what I working with right now. Chapter 13 sounds promising to me.

[Flowers]

Hi all, thanks for your input.

The $50k has gotta count as income & is also taxable. It was part of how I planned to afford my home. So then the income is $110,000.
I simply can not move again. I have to be able to stabilize my life.

The bank is considering lowering my rate. When I first bought the home the rate was 7%, then the mortgage lender went bankrupt (August2007), and I ended up with Chase at a 10.25% rate.

[Flowers]

hi there, again.

I just wanted to mention that when I found this home, I put a $30k deposit down. Once the mortgage business changed after August, I was unable to back-out and the home builder would not refund the $30k.

So on the one hand I could have walked away from the situation without the $30k, or proceed and put in my additional money down on the home.

I found $30k too much to just leave, you know.
Thanks everyone.