Advice please, is CH 13 like house arrest?

[momxx5]

I was in tears an hour ago after finding out from the atty that we failed any & all tests to get us into a Ch7.

DH lost his job last week, however the severance pkg provides income above the means test.

We are meeting with atty next week to discuss our next move.

We are current on house and almost caught up on vechicles. It is our unsecured cc debt that is months behind, over limits, and half are in collections.

Once DH gets a job, it would be highly unlikely that he will make what he has in the past. Those good ole days are gone.

So...............in Ch 13 how is the household budget set? The atty said that we would pay mortgage & equity line and the Trustee would recieve $ X,XXX per month. We would then budget the rest.
I am so worried that what is left will not make it. To me, it seems that every penny would be scrutinzed and we would never be able to go to the movies for 5 yrs.
Then what happens when the income declines? Does the Trustee reassess or is it all set in stone.
I have 5 children. They are in band. My oldest in taking AP classes as a freshman and we have to pay $86 per exam? How is that factored in?

On the other hand, if we don't file now do we wait to be sued and then file?

Thanks in advance

[Flamingo]

First, familiarlize yourself with Chapter 13 - there are "sticky's" in this forum under the Chapter 13 listing. Secondly, a Chapter 13 is not like a house arrest; however, a big lifestyle change is required to successfully complete one. In plain words, you have to learn to live on a cash basis and without credit cards. It is very difficult for most people to do because they are so used to living beyond their means and getting whatever they want. A Chapter 13 (how I feel) is the best possible tool around to teach a person or family how to budget their money and learn how to control it. Most people that finish a Chapter 13 never want to see a credit card again.

Those of us who have been in a CHapter 13 or are in one now felt the same way you do now before going in - it is a place we have never been before and it seems terrifying. It is not easy and it is what you make it. You will have a set amount to live on and if you can stay within a budget and learn even how to save on that budget, it will work. You and your family have to make that commitment and work together. There were many sleepless nights on our part trying to figure out what to do with just $10 left in the checking account and payday several days away and figuring out where we would get the money for gas for both of us to get to work. We learned and we to this day carry many of those lessons learned into our daily lives and are careful with our money and what we purchase.

Best of luck to you.

[chloe0724]

It's not as bad as everyone thinks. You could look at the possibility of stripping your 2nd if your house is apprasing lower than the value of your current 1st. It will give you a chance to get out from under the burden of your unsecured debt. The payment plan is doable. It will help you to learn to live within your budget. Also, I'm sure the Trustee will take into account your husbands lower income when looking at the plan.

[BnkrptcyLwyr]

Uh, ok ... couple of things ... first is ... DO NOT FILE YET!

How much is the severance package? Is it large? Can it be exempted in a Chapter 7 if small enough? If it's large, why would file a Chapter 7 right now? If you can't exempt it, then the Trustee takes it!!!!!!

Frankly, you should spend it down legitimately (and no, don't pay any credit cards with it or do something silly like that).

Next ... Why can't you get into a Chapter 7? How much do you make? Did you fail the means test? Did your attorney claim the lost job as a special circumstance and deduct all of his income right back out again? Why not WAIT six months, and if your husband doesn't get a job THEN file Chapter 7.

Something's doesn't really sound right here. Need more details.

[momxx5]

More details...

DH's severance pkg includes a monthly income. Not a lump sum. That income put us over for the state income. When doing to means test the atty found DMI which keeps us out of a Ch7, thus only choice is Ch 13. We would be paying 75% unsecured cc debt via the Trustee in the Ch 23.

I know that we are quite fortunate for DH to be downsized and yet still pull good income. It just a sucky to know that your family is unemployed yet still "too wealthy". We have over 100K in cc debt which was accumulated over many years a long time ago. It is all old debt, no new charges. I spent over 1 yr in payment programs with cc companies trying to pay down, but the cc industry will just never let us out. Thus I stopped paying them, actually paid them and then had no money for food, so then I stopped paying them. Last payments made in Nov/Dec 08.

The atty mentioned that our car ins. was too high compared to standard. We carry good insurance to protect ourselves in any event. He mentioned that our food bill was too high...hello I have 5 kids - 3 being 12, 14, & 15 yr old growing boys. My 14yr old is 5'10" 191lb football player(he doesn't look like he weighs that much, it always freaks people out because he is so solid).

Our 15yr old will soon be getting his beginer driver lic and then our car ins will go up even more.

I can see now that we don't have to rush to file.

We are hoping to keep the 401K to pay for annual expenses, so we wanted to file and then withdraw after the 341. Now I'm thinking we should take it out then wait out 6 months and rethink filing.

The atty said that in 12 months we would most certainly qualify if DH doesn't have a job by then.

All the phone calls have stopped because we gave them atty info. There is always a chance that the debt could be written off even if we don't file. But it is more likely that some would come after us.
So....if we were to be sued, upon learning such could we then file for BK protection?

Thanks again

[StartingOver08]

Don't touch your 401k - this can be exempted in your BK.

Don't be in a rush to file - did you interview several attorney's? 75% to unsecured seems high. The most important part is retaining the right attorney for your BK.

[BnkrptcyLwyr]

DO NOT TOUCH 401K PRIOR TO FILING - THIS IS (OR SHOULD BE DECLARED BY THE CHURCH TO BE) A CARDINAL SIN.

NO, NO, NO, NO, NO, NO, NO, NO.

401Ks ARE FULLY EXEMPT IN BANKRUPTCY.

[fltoo]

I agree. Don't file yet. Find out your state's garnishment laws and research all to protect yourself during the waiting period.

Spend down the severence salary on living expenses and when hub gets a job, revisit BK.

Don't be afraid of the creditors calling. There are ways to handle them so that you stay calm.

What state?

[momxx5]

We are in NC.

Okay, we are down to 1-2 collection calls. That is good. We just tell the cc companies that we have retained an atty. We have indeed paid him $300 after the inital free consult. He is very good, so I am not worried in that area.

The fact is that we have DMI. I am going to do the means test on my own again, but I still feel we'll have MDI. That simple fact is what disqualifies us from Ch 7.

So, our DMI x 60 = $76K. The payment plan in the CH 13 would include both leased vehicles, and would be around $2,800/month.

We are now thinking of delaying in filing BK. Live and save/stash away as much cash as possible. Under the mattress is looking really good.

I am worried about being sued.
Is it correct that we would get a summons and that would be how we find out that we are being sued?
Once you are served, can you then file BK to avoid the judgement?
If a judgement somehow does get awarded, can you them file BK, thus putting the judgement into the Ch 13 plan?

[fltoo]

[momxx5]

Wow, thanks so much for that info.

Just so I understand it correctly, if we were to be sued we would recieve notice and then have a time frame to respond. It is during that time frame that we would then file BK thus avoiding the judgement.

Is that correct?

If we recieve notice of being sued can a settlement be worked out to avoid the judgement? Would that set a presedence(sp?) thus showing that we would be acknowledging the debt and would be expected to pay it?

[fltoo]

Noooo, if you get a judgment, you do nothing. It just sits there until you are ready to file BK.

That's the reason for knowing your garnishment laws and closing bank accounts and using money orders.

I had to wait two years, had a judgment for a year before I filed.

Your wages are safe, close the bank accts. and there is nothing to garnish even though they have the judgment. I didn't even respond, no point to it.

Then, when you are ready to file, the judgment will be vacated in the BK. (gone)

I would never allow a judgment to determine when I filed, if at all possible.

[momxx5]

Oh, thank you so much.

Again, this forum has been a Godsend to us.

I guess we really do not have as much as I thought to worry about.
We have no assets.
Wages cannot be garnished.

I'll talk to DH and we'll see how we want to proceed.

Thanks again.

[MommyMc]

momxx5- I have 4 kids, 3 boys ages 12,9 and 4 and a 10mo old little girl. We are all doing great with the chapter 13! We sat our kids down and had a family meeting to discuss a budget. We explained that we could no longer go to movies when we wanted to (we only went about every other month) and that we could no longer go out for breakfast every Sunday. They all grumbled and groaned in the beginning but now they are all on board. We had to adjust our lifestyle. We were use to eating out 3-5 times a week, now it's once a month. All 3 of my boys play baseball (my oldest starts football this fall!), the oldest plays select baseball, so we are on the go all the time. We use to "drive thru" somewhere to get a snack or dinner, but no more. We bring plenty to eat in coolers. The kids are actually eating healthier now! What was once a snack of french fries is now a banana. We do eat out... no fast food, but an actual restaurant, about once a month and the kids appreciate it so much more.
Of course all their sports was not allowed in the budget by the trustee..
So, I have to come up with creative ways to spend less in other areas of the budget to save for the sports fees. I had a huge garage sale back in March (I live in Texas, so I can do that without the snow!) It brought me in over $600... it all went in the sports envelope. The "budget" we were given allows us $100 a month for "entertainment". I use a lot of coupons and only buy things when on sale and when it's a good sale- stock up. I save money every where I can.
Like you, we too had over 100k in CC bills, from a long time ago. My now 9 year old was a very sick baby, in and out of the hospital his entire first year of his life. (He's perfect now!) The bills really added up fast, we ended up paying for our $1600 house payment with our credit card, we did that for a year!
Any way, I just wanted to share with you that it is so "do-able" with kids. It is a lifestyle change and everyone in the family needs to be accepting of it.

As far as your sons AP tests and the fees... do you have reciepts or documentation of these? Find them all and turn them in to your lawyer, maybe they can be included in your budget.
We were told we spent too much on gas and medical, once we had proof (receipts) the trustee approved the "extra" for these.
Good luck to you!

[momxx5]

MommyMc- thanks for all your advice.

We have cut back on everything for over a year. The kids go to the movies 2x a year, we only eat out for someone' birthday (still owe Jan & Mar birthday dinners), I think we had McD once in the past 5 months. The kids do not get any extravagant gifts, nor do I pay high prices for clothing, etc.
I strictly shop sales, I do need to use more coupons than I have been, I grocery shop at Walmart (they price match).
So, all that said we are pretty tight already, which is why I'm so sad that we are broke with nothing great to show for it, except a mountain of bills.

It really was all the cc interest rate changes that put us over the edge. Once that kicks in there is pretty much slim chances of getting out from under it without help (i.e. BK)

Thanks again