Chapter 13 and Commissioned Sales

[FS09]

My wife and I have met with our attorney and are just getting the ball rolling. We will be filling either June or July 1st to get 6 months of "low income." I am self employed and paid 100% commission. My income is up and down every month and always will be. We have built up $120K in unsecured debt over many years of overspending, but always paid every bill on time. Then 2009 hit and my commission has dropped to 30-40% of what is was! No more on time payments. I was making $12-$20K per month pre tax, it is now $6-$9K We might qualify for a chapter 7, but it will be close. On top of the unsecured CC's, we owe $406 on a first and $100 on a second mortgage. The house was just appraised at $358. We also owe $22K in back taxes for 2008. This sucks! It seems like there are some advantages to filing a 13 versus 7...roll the taxes in and striping the 2nd mortgage. Am I correct here? My main concern with the 13 is my attorney said that due to my regular monthly income fluctuation, the case trustee will want to reevaluate our monthly payment every 90 days. Is this correct? At that rate I will be stressed to the max until we pay back our plan. Don't know if my body can deal with that for 5 years! Any feedback is greatly appreciated.

[Trixie007]

I can understand where that would seem stressful! For me, I guess I would look at it this way: You will never (in a Ch 13) pay pack more than you owe, and you will always be allowed to budget for necessary living expenses. So, yes it's ongoing paperwork and communicating with the trustee for the five years, but what will you be gaining?

Stripping the second and cutting off high interest rates on cc's alone are worth the hassle! Just for fun -- take that 100k second, plus estimate your interest savings on cc's over 5 years (at least 100k?), and calculate your hourly rate for doing the paperwork over the course of five years! Ha-ha. Sorry for the mini-rant, my glass is half full this morning.

[FS09]

One more question I forgot to add to my original post. I thought my attorney said that the most they would add to my monthly payment plan would be 40% of any pay increase. Is that true? I could probably live with that. I do want to do the right thing and pay people back, I just need 6-12 months breathing room to catch up and save a little money.

[FS09]

Anyone else with any thoughts, suggestions or experience?

[Trixie007]

Maybe I don't see enough info in your post to understand why your attorney would say that about the 40%... My understanding is that your plan payment is based on your disposable income, not any set percentage. Him saying that makes no sense to me, because if your income goes up by 10k a month, I'm sure the trustee would want more than 4k of that!

[FS09]

Maybe I don't see enough info in your post to understand why your attorney would say that about the 40%... My understanding is that your plan payment is based on your disposable income, not any set percentage. Him saying that makes no sense to me, because if your income goes up by 10k a month, I'm sure the trustee would want more than 4k of that!

I will clarify with him again, I may have misunderstood. I'm just hoping they allow you to save a little to get ahead. Life will have it's little emergencies that are not covered under the normal "allowed" expenses...car problems, doctor bills, furnace dies, etc.

[HHM]

When it comes to commission sales and BK, the Trustee will typically have increased oversight, usually quarterly. (i.e. every 90 days). So that doesn't surprise me.

Averaging $6-9K except in the most expansive of states, I am thinking a chapter 7 is a long shot, possible, but highly unlikely.

Chapter 13's do not allow for savings (at least not explicitly). You need to budget in your plan one time expenses.

As for the 40% thing, I am not sure what your attorney is getting at, but I think it has to do with an allowance for taxes on increased income (but where the actual percent comes from, I am not sure). But hey, if your attorney is correct in that the trustee will only take 40% of any increase, that is great.

[FS09]

What is the likely hood of getting a 36 month plan versus 60 months? What all is taken into account...total debt, income, etc? What are the cutoffs? Sorry for all the questions, I just hate to throw 50 questions a day at my attorney.

[StartingOver08]

You have to be under median income to get 36 months.

[FS09]

You have to be under median income to get 36 months.

12 months ago that would not happen, it just might right now. I would feel much better about 36 months than 60! I'm just scarred to death not being "allowed" to save a little money on the side. Life happens. For example, my starter went out this morning which is going to cost me $500 to fix. I MUST have this car by Wednesday to do my job. If we are not allowed to save some money, how does one deal with this sort of stuff?

[chloe0724]

In a 13, you budget monthly for everything. This includes things like car repairs and the like that don't come up monthly. The most important thing in a 13 is to get an experienced attorney that knows 13's. They will know the Trustee in your district and know how to budget for you to have wiggle room.

I am also commisioned, but not at 100%. I have to turn my tax returns over each year to the trustee and if my income is up 10% or more from the amount that I filed at, he may increase my payment. Filed last year, and definitly had no issues with increased income due to the ecenomy.

[FS09]

When it comes to commission sales and BK, the Trustee will typically have increased oversight, usually quarterly. (i.e. every 90 days). So that doesn't surprise me.

Averaging $6-9K except in the most expansive of states, I am thinking a chapter 7 is a long shot, possible, but highly unlikely.

Chapter 13's do not allow for savings (at least not explicitly). You need to budget in your plan one time expenses.

As for the 40% thing, I am not sure what your attorney is getting at, but I think it has to do with an allowance for taxes on increased income (but where the actual percent comes from, I am not sure). But hey, if your attorney is correct in that the trustee will only take 40% of any increase, that is great.

The $6-$9K is pretax. I am self employed, so I think that will help? It's really more like $5-$7K after taxes. Plus I have 3 kids. Meeting again with attorney this Tuesday. Wish me luck.