Tight budget and High mileage vehicle in chapter 13...

[baguy]

Filed 13 in northern district of Illinois last week. I'm married, but filed singly. Both myself and my spouse own our vehicles outright. Spouces vehicle is over 6 years old and has over 75,000 miles.

Means test shows negative, but the budget comes out to a payment of about 800 dollars a month. The budget all seems pretty reasonable, except for a few things. Apparently (according to lawyer) in our district nothing is allowed for entertainment or pet expenses. Things are going to be tight. Anybody have any hints or areas that we can add any padding for a little entertainment?

The most difficult thing and tightest thing looks like the allowed auto expenses. The big difference between the means test and schedule i / j is due largely to the allowed auto expenses. On the means test, we get a 434 vehicle operation expense for 2 vehicles, plus a 489 ownership expense for each vehicle, for a total of 1412.


Because we both own our vehicles outright, our lawyer came up with a Schedule J amount of 360 for auto expenses for both of us. That seems like it would barely cover gas, tolls, registration, and regular maintenance. Money for any type of repair does not seem to be factored in. I read somewhere that if a car is over 75,000 miles or 6 years old, you can claim 200 dollars on both the means test AND the schedule J. I asked my lawyer and he says that that is ONLY for the means test, and not to be included in the J. Does anybody have any experience with this? Is this more of a local thing, or is there any national case law involved with this that anybody can point me to?

Thanks everyone.

[baguy]

Bump...anybody have any experience with high mileage cars in a 13?

[optimistic1]

I know that both of the Chapter 13 trustees in my District utilize a sheet that shows what they deem as "normal" expenses, expenses that are different than the IRS standards. What I did, was actually called the State Bankruptcy Court and asked for the names of the Chapter trustees and then called them and asked for this sheet. They basically use it to raise red flags to anything that is exceeding what they deem as normal. Your attorney needs to be providing you cushion in your plan and not strapping you down by exact numbers for your cars.

The means test standards are fixed, so your vehicle could be 2 months old, and you still get the amount it gives you on the test. Now, when you put it in for schedule J it might be lower, but honestly all maintenance is expensive, so just list it.
See if you can do that for starters.

No offense and not to ridicule you, but since when is 75,000 miles considered high? I could see that as the case back in the 1950's, 60's, 70's. Your car should be ok while you are on the plan. Have you looked into food expenses to possibly have some cushion.

The trustee expense guideline for my district shows a allowable expense as $300 PER VEHICLE! So I would say that your attorney is making you pay more into your plan than you should be. I would try to seek a motion to modify your plan payment and change your expenses.

[thistoowillp]

Hi Optimistic:

Can you please clarify that how do they (trustee/lawyers) decide the monthly allowance in a chp 13 case? OR how is your monthly allowance gonna be decided?

I thought they follow strictly the IRS guideline, don't they? Does it have anything to do with what you are current expenses are (rent/transportation/food/medical, etc)? Can you share some of the allowance $ numbers on the sheet your trustee use for red flag? Beside the $300 (gas?), do they allow any extra $ for ins./maintenance? DO they have any number for apt leasing allowance (rent/utility)?

Thanks !!!

[optimistic1]

As far as I knew, they were supposed to follow those guidelines, but my Trustees here in Arizona, have their own, and I have never sat down and compared the two. Now, if you exceed any of the guidelines they set forth, then they would probably just ask for proof.

Here is the link from their website. Keep in mind that your district trustees have their own policies.

http://www.maney13trustee.com/TrusteeExpenseGuidelines2008.9-25-08.pdf

My budget is tight, and I fall below in all categories for how much is going out each month, so I should be fine.

[thistoowillp]

Thanks - optimistic

Thanks optimistic! Almost all of the people on this board are the nicest, caring, understanding people and advises from people like you make this hard time so much more bearable! I run into this perfect financial/stock market storm (with everybody else) and on top of that an "unexpected divorce and child support bill.

The follow up question is for 35% of gross income is quite a lot, and my rent is less than that. It seems that if I see the writing on the wall, and I would be forced to file chap13 later, it is better off for me to stay in the current apt rather than moving to a cheaper place, if the Trustee actually considers the actual rent I am paying now, right? What would happen if I move to a cheaper place later after my current lease expires, do I get to keep the difference? I will have to pay a hefty penalty if i move out now. But I am trying everything I can to delay default on my cc debts, which is all I have.

Thanks!

[optimistic1]

I mean, it all depends on your budget and the numbers you come up with. If you can handle the rent you are at right now, then stay, because it would decrease the amount of money that goes into your plan. If you moved later, it all depends on the trustee, some trustees want you to send them updated expenses on a yearly basis, some could care less and just want the monthly payment on time every month until your plan is complete.

If you know you are going to file a bankruptcy, why are you trying NOT to default on your cards?

In my opinion, it is just like flushing money down the toilet.

[woeisme]

In my district, you can claim higher expenses for vehicles than IRS, but have to have justification. In our case, hubby has long commute, so had higher allowance due to gas expenses.

[thistoowillp]

Thanks Optimistic!

I guess I am not quite there yet. I would assume that the Trustee will take hold everything you have in your bank account along with stocks, etc. and split them up among creditors as the first step of BK13. Is that right?

[optimistic1]

It varies among states what your exemptions are for money in a bank account, and its usually not that much, here I think it is only $150, anything above that is theirs the picking.

Stocks etc, I suppose it all depends, most retirement accounts like 401k, 457b, etc., are exempt from the trustee, meaning he cant take them.

[thistoowillp]

Thanks optimistics!

From reading your previous post I realize that you have hired an attorney. If I understand it right, it usually takes about 3~6 months from the day you file chap 13 till the court approve the payment plan, how does one manage the 6 months (rent, transportation expense, food, etc)? With $150 it is apparently impossible. When does the 36/60months count down start?

Thanks!

[optimistic1]

What I mean by the $150, is that, the day you file, that is what you can have in your checking/savings account in terms of cash on hand.

A chapter 13 does not leave you with $150 per month to spend on your normal expenses.

It does usually take that long for the court to confirm your plan.

Your plan payment is a complex number that is determined by subtracting your allowable expenses from your income.

It leaves you with enough money to live and pay for all the normal things, including entertainment.

[thistoowillp]

Hi optimistic, Thanks.

My question is for the 6 month transition period. say if I file on the 30th and they take over everything except $150. Then my next paycheck comes in a couple of days (the 1st of next month), do they leave that alone until the plan is confirmed 6 month later? What happens during the transition period?

[optimistic1]

Im not familiar with a 6 month transition period, Im not sure what you mean by that.

When you file, your first plan payment into your Ch.13 plan is due, I think when you file, or weeks thereafter.

They wont takeover anything, they simply deduct it from your payroll check, and your plan payment is determined with the help of your attorney.

[thistoowillp]

Thanks optimistic.
I thought the payment plan does not kick in until court approves it (6 month after file?) - so it starts right as soon as you file? Thanks.