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    #1

    New here, have a question...

    Thank you all for your time, this is my first post...

    Early last year I suffered a job loss. In beginning my new job (after two months of unemployment), I have seen a reduction in income of over 60% from what I was earning at my previous job.... I now find myself unable to continue any timely payments to my unsecured creditors (both credit cards).

    For background, for the past 15 months I have been pulling money out of my IRA in order to make my payments while waiting for a promotion that did not occur, now my IRA does not have much left. My home is "underwater" by 50-100k, and other than the usual homeowner furnishings, I have no other real assets except for a part ownership (with family) in an undeveloped .80 acre lot in a rural part of the state. The value of the lot is hard to determine (in an auction, maybe 10-20k?), as there are over 100 for sale and none have recently sold.

    My question is this; since my income is below the means test (with no disposable income), and I would like to keep my home, it appears that Chapter 13 would be best for me. However, because I do not have disposable income, can I be forced to liquidate any assets (such as my interest in the lot) or can I be forced into a Chapter 7? It is my understanding that in Chapter 13 that a debtor is not required to sell anything, only pay out of what would be considered disposable income.

    I would appreciate any thoughts you all may have.

    Regards,

    Skipper
    Tags: None
    #2
    Based on what you've given so far, I don't see the need for a 13. If you're not behind on your home, and you can afford the payments, why not just file 7 and reaffirm on the home?

    The "Liquidation" from which Chapter 7 takes its name is, in most cases, only theoretical. If you don't have any non-exempt assests; and by far, most people dont; you aren't required to sell anything either.

    But if you are behind on your house payments (or any other secured debt where you want to keep the collateral) then you may need 13.
    Last edited by MSbklawyer; 08-28-2009, 06:56 AM.
    Pay no attention to anything I post. I graduated last in my class from a fly-by-night law school that no longer exists; I never studied or went to class; and I only post on internet forums when I'm too drunk to crawl away from the computer.

    Comment

      #3
      Originally posted by MSbklawyer View Post
      Based on what you've given so far, I don't see the need for a 13. If you're not behind on your home, and you can afford the payments, why not just file 7 and reaffirm on the home?

      The "Liquidation" from which Chapter 7 takes its name is, in most cases, only theoretical. If you don't have any non-exempt assests; and by far, most people dont; you aren't required to sell anything either.

      But if you are behind on your house payments (or any other secured debt where you want to keep the collateral) then you may need 13.
      Thanks for the response!

      The biggest concern(s) in Chapter 7 is simply this; would I be forced to liquidate the lot that myself and my family have, and would my wife have to liquidate her wedding band (probably worth more than the $1000 exemption)? This is why I thought Chapter 13 would be best.

      I am current on my secured debt, I just want to protect what little I have remaining.... Again,I appreciate any thoughts you may have!

      Skipper

      Comment

        #4
        Originally posted by Skipper View Post

        The biggest concern(s) in Chapter 7 is simply this; would I be forced to liquidate the lot that myself and my family have, and would my wife have to liquidate her wedding band (probably worth more than the $1000 exemption)? This is why I thought Chapter 13 would be best.

        I am current on my secured debt, I just want to protect what little I have remaining.... Again,I appreciate any thoughts you may have!

        Skipper
        That's an 'exemption' question. Depending on which state you're in, you may have an exemption that will cover your interest in the lot. Each state is different. If not, you could go 13 and pay your unsecureds the equivalent of the value of your interest in the lot in deferred cash payments. Or you could just file 7 and see if the trustee thought the lot had enough value to pursue. If he does, convert to 13.

        Is your wife filing too? If not, her wedding band doesn't even come into the equation unless you are in a community property state.
        Pay no attention to anything I post. I graduated last in my class from a fly-by-night law school that no longer exists; I never studied or went to class; and I only post on internet forums when I'm too drunk to crawl away from the computer.

        Comment

          #5
          Originally posted by MSbklawyer View Post
          That's an 'exemption' question. Depending on which state you're in, you may have an exemption that will cover your interest in the lot. Each state is different. If not, you could go 13 and pay your unsecureds the equivalent of the value of your interest in the lot in deferred cash payments. Or you could just file 7 and see if the trustee thought the lot had enough value to pursue. If he does, convert to 13.

          Is your wife filing too? If not, her wedding band doesn't even come into the equation unless you are in a community property state.
          Sorry for the backa and forth...

          We are in a community property state (where the exemption is $1000 for a wedding ring. It is probably worth $2500.00

          As far as Chapter 13 and the lot (again value maybe 10-15k), why would I be forced to pay an equivalent value in it, but not any other asset that would be above or outside an exemption? Again, keeping in mind that I have a negative number for disposable income, and I truly do not have the resources to pay an additional $300-400 a month (as an aside, how would the value be determined, if nothing is selling at any price?).

          I apologize for the questions, but I am trying to logically understand the process...

          Thanks again for your thoughts!

          Skipper

          Comment

            #6
            Originally posted by Skipper View Post
            As far as Chapter 13 and the lot (again value maybe 10-15k), why would I be forced to pay an equivalent value in it, but not any other asset that would be above or outside an exemption?
            You would be forced to pay an equivalent value in to unsecureds for non-exempt assets. The point I was making is that very few people have any non-exempt assets.
            Pay no attention to anything I post. I graduated last in my class from a fly-by-night law school that no longer exists; I never studied or went to class; and I only post on internet forums when I'm too drunk to crawl away from the computer.

            Comment

              #7
              As far as the wedding ring goes - is $2500 the value it appraises at? My understanding is that they really look at what you could get for it selling it in a garage sale, pawn shop maybe? My guess is that unless we're talking about tens of thousands of dollars appraised value, it may be fine. If it's super flashy, a massively big stone, I wouldn't wear it to the 341, but I wouldn't go for a 13 over a 7 just because of the wedding ring... You really don't want to be in a 13 if you don't have to!!

              Comment

                #8
                Originally posted by MSbklawyer View Post
                You would be forced to pay an equivalent value in to unsecureds for non-exempt assets. The point I was making is that very few people have any non-exempt assets.
                O.K., last question, I promise!

                Just so I am clear, a debtor in Chapter 13 is forced to pay an equivalent value to the unsecureds, even with a negative disposable income number (mine is well negative, like minus $1200.)?

                Thanks, as always,

                Skipper

                Comment

                  #9
                  Originally posted by Skipper View Post
                  O.K., last question, I promise!

                  Just so I am clear, a debtor in Chapter 13 is forced to pay an equivalent value to the unsecureds, even with a negative disposable income number (mine is well negative, like minus $1200.)?

                  Thanks, as always,

                  Skipper
                  If you want to keep the property, yes. But you don't HAVE TO keep it.

                  Disposable income as calculated by the means test is rarely reflects the debtor's actual present income situation. But if you really don't have sufficient income to pay the property out in chapter 13, then, theoretically at least, the trustee takes the property and liquidates it and distributes it pro rata to the unsecured creditors after satisfying any liens on the property.
                  Pay no attention to anything I post. I graduated last in my class from a fly-by-night law school that no longer exists; I never studied or went to class; and I only post on internet forums when I'm too drunk to crawl away from the computer.

                  Comment

                    #10
                    Originally posted by becky20 View Post
                    As far as the wedding ring goes - is $2500 the value it appraises at? My understanding is that they really look at what you could get for it selling it in a garage sale, pawn shop maybe? My guess is that unless we're talking about tens of thousands of dollars appraised value, it may be fine. If it's super flashy, a massively big stone, I wouldn't wear it to the 341, but I wouldn't go for a 13 over a 7 just because of the wedding ring... You really don't want to be in a 13 if you don't have to!!

                    Hi Becky, thanks...

                    That is probably close to a pawn shop price...

                    The reason for the thoughts on 13 was simply the disposition of the lot and the ring. I don't want to put my family in a jam by the lot being sold at auction because of my partial ownership, yet I cannot afford an "equivalent" payment, because I have a serious negative disposable income number.

                    I wonder, can (or are) required "equivalent" payments subtracted from a negative disposable income to determine if a payment truly needs to be made? For my example; my disposable income is a negative $1200 a month and I have (potentially) due $400 a month in "equivalent" payments. Would that not mean my disposable income (for calculation purposes) would still be a negative $800 a month (-$1200+400=-$800)?


                    Thanks,

                    Skipper

                    Comment

                      #11
                      Originally posted by MSbklawyer View Post
                      If you want to keep the property, yes. But you don't HAVE TO keep it.

                      Disposable income as calculated by the means test is rarely reflects the debtor's actual present income situation. But if you really don't have sufficient income to pay the property out in chapter 13, then, theoretically at least, the trustee takes the property and liquidates it and distributes it pro rata to the unsecured creditors after satisfying any liens on the property.
                      Thanks,

                      I understand. It sounds like it is up to the Trustee to make a determination if it is worth pursuing the sale of the lot and the ring...

                      Skipper

                      Comment

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