Chapter 13 Dismissal

[Surviver]

My husband and I filed CH 13 last year because we were trying to save our home from foreclosure. Well, we owe way way way more than the home is worth, not to mention we've spent more than $1,000 in home repairs, and our CH 13 payments are too high. If we surrender the property, and rent, we then have more disposable income. How can we avoid our plan payments from increasing?
We've been thinking of voluntarily dismissing the case, because we have the income to pay our creditors, and the only reason we filed was because of the house. Now we want out.

Any thoughts or input would be helpful

[justbroke]

My husband and I filed CH 13 last year because we were trying to save our home from foreclosure. Well, we owe way way way more than the home is worth, not to mention we've spent more than $1,000 in home repairs, and our CH 13 payments are too high. If we surrender the property, and rent, we then have more disposable income. How can we avoid our plan payments from increasing?

You can't avoid this. If your mortgage payment (including taxes and insurance) is around the same as the allowance for an apartment/rental... then the payment won't change. However, in 90% of cases, the mortgage (taxes and insurance) payment is much higher.

The Trustee will take the difference between the mortgage (taxes and insurance) and your new "housing" allowance since it magically becomes just more "disposable" income.

We've been thinking of voluntarily dismissing the case, because we have the income to pay our creditors, and the only reason we filed was because of the house. Now we want out.

You should still use the process to pay your creditors! The unsecured creditors will kill you with interest and other collection activity! Since you've already done this, you may be able to complete your Chapter 13 quicker (since you have more DMI).

This is about strategy and you should talk to your lawyer about running some numbers to see if staying in the plan is better. If you have large unsecured debt... in plan may be better! Remember, the deficiency from your foreclosure will come back to bight you, if you're out of plan! (This, of course, depends on if your State allows for deficiency judgments.)

[Surviver]

So you're saying that if we include more disposable income in the plan, we can come out ahead? I guess we can do without the home repairs and pay rent, then our plan payments won't be so hard to stick to

[Surviver]

We do have large unsecured debt, and we're in Michigan, of course it is a state "with recourse" meaning the mortgage company will attempt to collect a deficiency balance.

[DeadManCrawling]

Surviver,

Yo misread what justbroke said I think.

Be very careful with this, as there are few outcomes that would benefit you.

If you let the house go, the trustee will know. And let's say you do save money. If you end up with $600 more per month, the trustee WILL increase your payment by that amount. There may be other undesirable results, too, I don't know.

Near as I can tell, the only way for you to accomplish what you are looking for is:

A change in circumstances (job loss, and so on)

Stopping payments altogether, coupled with a change in circumstances, and converting to a ch 7.

Stopping payments, dismissal, and refiling, and a change in circumstances.

It's almost like you (from the court's point of view) are saying, "You know what? This is more expensive than we like. Now I want to renegotiate and pay less, even though we make the same money." That may or may not be true, but this is likely how they will view it.

If you find a way to save money, they will take it from you, if it is any amount of money worth taking. Or they will dismiss your case and it will be open season again, with full interest and penalties.

Good luck, and I do hope you find a way.

DMC

[Surviver]

How do you handle all the home repairs??? We need a new furnace, and the CH 13 program leaves no room for home maintanence, sometimes you wonder was it worth filing. Our home was built in 1940 and a lot of maintenance is needed. Any ideas ??

[justbroke]

How do you handle all the home repairs??? We need a new furnace, and the CH 13 program leaves no room for home maintanence, sometimes you wonder was it worth filing. Our home was built in 1940 and a lot of maintenance is needed. Any ideas ??

If you have a tax refund coming due, you can ask the Trustee to use the funds for that purpose.

Also, you (via your lawyer) can petition the Trustee to forego a month or two payments when you have mandatory (life/habitability issues) with your home. They'll spread out the missed payments over the rest of the Plan life or lengthen the plan (but not longer than 60 months).

They aren't there to cause pain. They (the Trustee) are there to take your disposable income.

[Surviver]

A Tax Refund? Are you kidding?? NOT.

taking ALL of a person's disposable income is VERY Painful. How do they expect you to live?????? On Air I guess....

Was filing CH 13 this difficult before they changed the laws?

Thanks for your input, it's been helpful, however, we may still surrender the home.
Longterm....it doesn't appear to be a good investment. It's like pouring money in a sinking ship!

[justbroke]

If it is consuming all your disposable income (to the penny) then either two things happened.

First, your lawyer did not create a workable plan for you. You absolutely need wiggle room in your Plan. The good Bankruptcy lawyer will make sure there is money left over each month. However, you must take this "reserve" and put it in a rainy day account... for emergencies.

Second, you're just unable to budget. I'm the first one to admit that I can't budget. Even with a very very comfortable amount of money left over in my plan... I spend it quickly ($70 at the movies (and mall) last night... $55 alone in tickets and concession.) Not being able to live on the budget will kill anyone (even someone not in Bankruptcy).

if you are finding the budget difficult... then something may have changed. Your expenses may have increased (higher fuel costs, engergy costs, tolls, etc). You could also be experiencing this budget problem with a reduction in income (fewer overtime hours, spouse out of work,e tc).

In all these cases, you should go back through your budget (the one created by your attorney or when you filed). Check your expense categories to see where you are today. If there are differences, you should consider getting a Plan modification to compensate for the change in circumstances.

If the circumstances haven't changed (less income, or more expense, or both), then you'll need to either make the budget work... or consider a voluntary dismissal.

(Take it from me... it is tough and I haven't had this little money in my pocket... since about 2000. I'm spending almost $600/month just to pay the Trustee!!!!! Wish I could have that money... things would be better.)

[Surviver]

Hey Justbroke,

We did that, and now we are going to set up an appt. to talk to our atty about a plan modification. Depending on what they tell us, will determing is we voluntarily dismiss the case. Like I said, wiggle room is null in our case because of the home repairs/maintanance of $1,200+ that we forked over in the past two months. We cannot keep doing this, and guess what? That's not the last time we will be paying for home repairs which is my point.

In terms of sticking to a budget, we do not have a problem doing so. I must admit, it can be hard at times, but when "unexpected" expenses keep occuring that you have to pay for and cannot wait on them, you wonder if its worth keeping the home.

I don't know if we can continue down this path for the next 4 years. we'll see....I hope it works out somehow, someway, because I am not trying to get extra money to live a lavish lifestyle, I'm just asking for a budget that is realistic and includes some form of "unexpected expense". I'm a surviver, I've been through the ringer in this life, and I do intend to overcome this; the question is, how. I'll find a way.(legally of course)
One way or another we will get through this.

Thanks for your input, it's been very helpful.

[justbroke]

Thanks for your input, it's been very helpful.

Thank you and I do wish you the best in making your plan work for you... and not having the plan work you!

[Surviver]

I'm going to sure try!!!!! Thanks again!

[DeadManCrawling]

Surviver,


Remember, it is JUST a house. A pile of bricks and wood that happen to keep the cold out in winter and the heat out in summer.

I was attached emotionally to my home (which I still occupy) for a long time for all the wrong reasons.

If you have had a change in expenses and can convert to a 7, or get a modification that results in you losing the home, don't worry about it.

Big words, I know. But I am there also, and it really isn't that big of a deal.

I once was looking at a 13 with a mortgage of about 400k. I now have another choice that would change many things and save me about 4-5k per month. It also means uprooting my family and a serious change in lifestyle.

End result is that we will be far better off than I could have imagined, but not in ways I would have EVER imagined. Strange journey, and worth every bit.

Look at this from every possible angle, even the humiliating and embarassing ones, with one thing in mind: WHAT IS BEST FOR MYSELF AND MY FAMILY in the next 5 years, the next 10 years? Surprising things may occur to you.

Again, good luck and best wishes!

[Surviver]

Hey DMC

You know, you are absolutely right! I am attached to my house, because we've been here for 10 years, never had any problems, until the economy went south, and the whole mortgage scam that has caused thousands of people to be in this situation we're in.

But you are right. It's JUST bricks and mortor. I have to remember that.
I have to keep in mind that it's about starting over and doing whats best for me and my family. Its truly about survival. My husband and I really sat down, and looked at everything, and in the long run, it makes sense to let the house go. We are too far underwater. Even if the values start going back up...we'd be on a cain by the time we see any equity! So, hey, it is what it is...You have to look at your specific situation realisticly and do whats best for your family.

I appreciate your comments. Thanks!

[DeadManCrawling]

I own a cavernous mansion of 7k square feet. There are verandas and rooms and walkways and terraces that I haven't even SEEN for the last year. There is a dining room that is set up to entertain 18 people with one of those long tables that runs room to room and old cartoons used to show with characters sliding the salt and pepper shakers about 3 miles to one another.

It is ridiculous.

I don't use or need 80-90% of this place.

Most of my time is spent in my bedroom, my office, a kitchen, and a bathroom.

So, why have I spent 500-700k in interest to keep the damn place?

No idea. First it was probably because it was easy. If had half a brain then I could have paid it off in a year. But the royalties and payments from my work were so big, i thought it would never end. It did end, though, and here I am.

After that, stubborness and the conviction that I could change things and reclaim "my place in the world" took over.

Wrong again.

Now, here I am. 700k or more later (interest payments), with the same pile of bricks and blood. It will be gone soon, a matter of a few months, a year or two at most. And thank goodness.

In the process, I have probably taught my sons all the WRONG things about life and finances, and I hope to rectify that.

You may be in a similar situation, I do not know.

Sell that rockstar mansion and get to a place that you KNOW will be ok. Or let it foreclose, which is what I will be doing. I will answer all the court things though, and delay it as much as I can to save cash.

I am happy for you (and myself). Even at this late date, we have signs of redemption.

All is not lost, for we saw the flood (too late), before the backwash sucked us in.

Best wishes, again,

-DMC