chap 13 vs Debt management program credit counseling

[Moneypenny]

Hi,

When I talked with a bk attorney about this (their paralegal actually) they kept citing horror stories of the cred counseling agency not paying your debts and then striking a bargain later, or not informing you that your creditor has not accepted the proposal and getting served later. When I tried to ask "what if everything works right" they just kept returning to these things.

I am struggling here to figure out if 13 will work for me (I can certainly show disposable income). But if I am putting my disposable income into the 13 why dont I just do it in a debt management program and not have all the issues with bankruptcy?

What would be the advantage? I am not in danger of losing my home, am current on all accounts, and face only the danger of making minimum payments for the next 30 years, and then enjoying my death at the end. This is the main thing I am trying to avoid here.

But why would 13 be better than DPM?

thanks!

[Moneypenny]

ps i also realize that a 13 is 3-5 years, but so is a DPM.

[DUMBAGAIN]

what made you speak to the attorney in the first place? Your not behind on anything? Do you have a lot of debt? Are you at risk of losing your home?

[lrprn]

But why would 13 be better than DPM?

Here's why - http://midhudsonbankruptcylawyers.co...cy-vs-debt.jsp

[DUMBAGAIN]

Great information! Thanks

[Moneypenny]

I am at about 55K unsecured, and 305 secured upside down 30K, and a salary of 70K, wife just started a job that puts us over the median.

Although i have not missed payments on anything my interest rates are very very high now and I am getting choked. Living frugally, i can manage my minimum payments for the next thirty years. That is the situation I am trying to get out of.

thanks!

MMP

[Moneypenny]

That site is great informative, but of course also a sales pitch. I think the most relevant thing there for me is this:

3. Chapter 13 allows you, in many cases, to repay only a fraction of your unsecured debt (as little as 10%) without interest or penalty. On the other hand, in Debt Repayment Plans formulated by Credit Counselors you typically have to repay 100% of the debt owed, although the interest collected can be at a reduced rate.

What I need to figure out is how going into it I am going to know that my unsecured debt will get reduced, and if so, by how much. I would hate to do a bankruptcy and then just wind up paying everything back. Can that happen?

A cram-down on my secured is an outside possibility also, but I am upside down not enough I think.

MMP

[FunWithDebt]

We are going through this same discussion right now. I've posted in another post about the numbers, but basically....

The DMP would cost me $4500 a month for 60 months for a grand total of 270,000 on only 206,000 in debt.

While as due to income, I might have to pay the full 206,000, but I will pay zero dollars in intrest on it, and likely won't have to pay the full five years.

And I have the protection of the law in bankruptcy, but not with a DMP

[HHM]

That site is great informative, but of course also a sales pitch. I think the most relevant thing there for me is this:

3. Chapter 13 allows you, in many cases, to repay only a fraction of your unsecured debt (as little as 10%) without interest or penalty. On the other hand, in Debt Repayment Plans formulated by Credit Counselors you typically have to repay 100% of the debt owed, although the interest collected can be at a reduced rate.

What I need to figure out is how going into it I am going to know that my unsecured debt will get reduced, and if so, by how much. I would hate to do a bankruptcy and then just wind up paying everything back. Can that happen?

A cram-down on my secured is an outside possibility also, but I am upside down not enough I think.

MMP

That is what an attorney can help you figure out. The big benefit of a chapter 13 over CCC is that you control your budget. When you contact CCC, they basically ask how much debt do you have, and then give you the monthly payment it will take to pay off that debt in the timeframe they use for their program. In a chapter 13, you monthly payment has nothing to do with how much you owe. Your monthly payment is simply income minus living expenses. When you file chapter 13, you are essentially telling your creditors, this is all I can afford to pay you. As a result, for most people, they end up paying back less than they owe.

For example, if you owe $50,000 in credit card debt, but can only afford $300 per month payments, in a chapter 13, you would pay. $18,000 ($300 x 60 months). The remaining balance owed is eliminated in a chapter 13.

You need to go meet with some attorneys, because you have a lot of "basic" questions and are making some false assumptions.

[Moneypenny]

yes i am speaking to attorneys but I find the opposite is true: you should get as much info as possible before speaking with them. i therefore am asking the basic questions here, and looking elsewhere.

[eddiep]

I noticed that you said your wife "just" started a job that put you over median. Did you know that they use the last six months' income and average that out to come to the median income level?

[Moneypenny]

yes that still puts us over. i have been trying to figure out whether i can trust an attorney's assurance that he can get us under the median, eventhough with the second layer of the test we dont pass according to my calculations(done without a lawyers inside knowledge of how to tweak it).

Also, another lawyer said that even if we can get past the means test looking back, the court will still consider my wife new income looking forward and disqualify a 7 on that basis. the first lawyer never mentioned that, but also i got the impression that the second lawyer was trying to sell a 13 to me. so, thats what sent me here looking for info on 13. i dont know who to trust or believe.

[eddiep]

Were any of these lawyers "bankruptcy lawyers". I was advised to find a lawyer that does only bankruptcy.

[Skouris]

Hi. I haven't posted in a while because my chapter 13 was discharged last year. It was 36-month plan and I made it through relatively painlessly. There were some delays at the end, but now life is pretty good. Anyway, I just wanted to mention that I have personal experience with a debt settlement company. It was the kind of program where instead of paying your credit cards every month, you put money into a savings account until you have enough to make a settlement offer. The settlement company deals with the credit card companies and the phone calls, and makes the offers for you. They also charge a monthly fee for this service. Shortly after I stopped paying the cards and started the program, two of my credit card companies sued me. I understand that it is rather unusual to be sued that quickly after missing payments. Maybe they figured that I must have some money if I was in a debt settlement program. At any rate, they forced me into chapter 13, which was a much better alternative for me. They ended up getting about 40% of what I owed them. By the way, debt settlement companies will not refund the fees you pay them, even if you quit the program and they end up doing absolutely nothing for you. I'm not sure if this is the kind of program you are considering, but if so I would avoid it.

[AboutToBK13]

Settlment companies are a very bad idea. Especially when you can settle yourself and most times receive a better settlment in the process.

Mods, forgive me if I am being impolite in suggesting and posting a link to another forum about settling debt yourself.

http://creditboards.com/forums/index.php?showtopic=383818