NO disposable income for a Chapter 13

[texanboy76]

What happens if you filed a Ch 7 and they said you can convert to a Ch 13 and there is no DISPOSABLE income at the end of each month to fund the 13? What happens at that point?

thanks

[lrprn]

What happens if you filed a Ch 7 and they said you can convert to a Ch 13 and there is no DISPOSABLE income at the end of each month to fund the 13? What happens at that point?

If both the Means Test *and* Schedule I minus J done by an experienced bk lawyer shows less than $106/month disposable income, then you don't have enough to fund a Ch 13 and can file Ch 7. Any disposable income less than $180 or so makes funding a Ch 13 very questionable but could be possible. Any disposable income over $180/month can fund a Ch 13.

So how do you know that you don't have any disposable income to fund a 13?

[texanboy76]

If both the Means Test *and* Schedule I minus J done by an experienced bk lawyer shows less than $106/month disposable income, then you don't have enough to fund a Ch 13 and can file Ch 7. Any disposable income less than $180 or so makes funding a Ch 13 very questionable but could be possible. Any disposable income over $180/month can fund a Ch 13.

So how do you know that you don't have any disposable income to fund a 13?

my Ch 7 was dismissed but stated by the court they would allow me to pursue a Ch 13. When it's all said and done I won't have a dime for the ch 13 so my question is what will they do? Obviously they can't push me to a ch 7 since the case was dismissed.

[HHM]

What happens if you filed a Ch 7 and they said you can convert to a Ch 13 and there is no DISPOSABLE income at the end of each month to fund the 13? What happens at that point?

thanks

Easy answer, they won't. (assuming you, or your attorney did their job right).

So, in your case, the challenge is this, the court obviously thinks you have money, and you don't. This probably means you are not willing to make some token sacrifices to get out of debt or there is a serious problem with your schedules.

[justbroke]

What happens if you filed a Ch 7 and they said you can convert to a Ch 13 and there is no DISPOSABLE income at the end of each month to fund the 13? What happens at that point?

It means that the UST and/or Court believe that you actually have disposable income.

You may not think you have disposable income, and here's why. As explained in your other thread on this topic, while you can take the actual deductions for payments on secured items like your home or cars, that doesn't mean that get to just pay those amounts. While a home is considered necessary for the effective reorganization, a car that is over the IRS limits, is not.

So, while the Bankruptcy Code states that you can keep all your "toys" (property) in a Chapter 13, going over the IRS limits and basically making the unsecured creditors suffer while you enjoy the "finer" things in life... is... bad faith.

Even though your Form B22C Means Test indicates a Disposable Monthly Income that is negative, you still need to pass not only the Chapter 7 liquidation test, but also must compoensate for secured debt that is not reasonable.

In the other thread, you indicated that on average, you were $300/month over the IRS allowed limit for a car (which is $489 nationally by the way). That right there, and proposing not to pay unsecured creditors, is bad faith. If you went in a Chapter 13, you'd be required to pay that 2 x $300/month or $600/month to the unsecured creditors.

I think you're issue is that you will say that you don't have the $600/month to pay. Well, you don't have it because you want to keep those expensive cars. You just can't do that. That is called "bad faith". You would need to either give up the cars, or squeeze $600/month out of your budget in order to contribute that amount to the unsecured creditors.

As HHM puts it succinctly... this probably means you are not willing to make some token sacrifices to get out of debt.

[texanboy76]

It means that the UST and/or Court believe that you actually have disposable income.

You may not think you have disposable income, and here's why. As explained in your other thread on this topic, while you can take the actual deductions for payments on secured items like your home or cars, that doesn't mean that get to just pay those amounts. While a home is considered necessary for the effective reorganization, a car that is over the IRS limits, is not.

So, while the Bankruptcy Code states that you can keep all your "toys" (property) in a Chapter 13, going over the IRS limits and basically making the unsecured creditors suffer while you enjoy the "finer" things in life... is... bad faith.

Even though your Form B22C Means Test indicates a Disposable Monthly Income that is negative, you still need to pass not only the Chapter 7 liquidation test, but also must compoensate for secured debt that is not reasonable.

In the other thread, you indicated that on average, you were $300/month over the IRS allowed limit for a car (which is $489 nationally by the way). That right there, and proposing not to pay unsecured creditors, is bad faith. If you went in a Chapter 13, you'd be required to pay that 2 x $300/month or $600/month to the unsecured creditors.

I think you're issue is that you will say that you don't have the $600/month to pay. Well, you don't have it because you want to keep those expensive cars. You just can't do that. That is called "bad faith". You would need to either give up the cars, or squeeze $600/month out of your budget in order to contribute that amount to the unsecured creditors.

As HHM puts it succinctly... this probably means you are not willing to make some token sacrifices to get out of debt.

the car notes are $690 and $417

[justbroke]

the car notes are $690 and $417

Well, your issue is the $200 over the $489/month car allowance. That is the very definition of a Chapter 13. That is, having $182.50 to contribute to unsecured creditors over 60 months.Yes, it may not seem like much, but the threshold is actually lower ($109) for a presumption of abuse. The threshold for... you're in a Chapter 13 no matter what.... is $182.50/month.

If you got rid of the $690/month car, what happens to your DMI?

[texanboy76]

Well, your issue is the $200 over the $489/month car allowance. That is the very definition of a Chapter 13. That is, having $182.50 to contribute to unsecured creditors over 60 months.Yes, it may not seem like much, but the threshold is actually lower ($109) for a presumption of abuse. The threshold for... you're in a Chapter 13 no matter what.... is $182.50/month.

If you got rid of the $690/month car, what happens to your DMI?

I have $180k in unsecured debt....I'm meeting with my lawyer tomorrow and advise everyone what he says. He is one of the top attorneys in the state...

[texanboy76]

Also what happens if my wife has $60 k in credit card debt however she isn't filing. I'm able to show and support the payments that are made to her creditors each month. Does that count or go against me?

[justbroke]

Also what happens if my wife has $60 k in credit card debt however she isn't filing. I'm able to show and support the payments that are made to her creditors each month. Does that count or go against me?

Against you. If it is not legally your debt, you can't use that as an expense. Especially because it's unsecured debt.

[debtinohio]

I have $180k in unsecured debt....I'm meeting with my lawyer tomorrow and advise everyone what he says. He is one of the top attorneys in the state...

Your efforts would be better focused on the LOWEST % payback CH13 you could get. You may only payback a few % of that 180K. I know, it sucks - - I have 215K and am arguing with my lawyer over each %. I had one attorney who insisted on 60-80% payback which was like $3000+ per month, my current started at 10% and I'm still discussing it with her.

[texanboy76]

Against you. If it is not legally your debt, you can't use that as an expense. Especially because it's unsecured debt.

that seems unfair. They make me count my wifes income towards the filing however the $1200 a month in credit card payments she pays will go against me and not count as an expense? I'm so frustrated

[justbroke]

that seems unfair. They make me count my wifes income towards the filing however the $1200 a month in credit card payments she pays will go against me and not count as an expense? I'm so frustrated

Well, if your lawyer does your B22C correctly, your wife's income would go towards your wife's debt... therefore offsetting your income. This is called the marital adjustment.

However, your earlier post seemed to indicate that you were paying for her cards. What you do with spousal income is make sure to take the marital adjustment for those amounts that the spouse does not contribute to household expenses.

[texanboy76]

Well, if your lawyer does your B22C correctly, your wife's income would go towards your wife's deft... therefore offsetting your income. This is called the marital adjustment.

However, your earlier post seemed to indicate that you were paying for the her cards. What you do with spousal income is make sure to take the marital adjustment for those amounts that the spouse does not contribute to household expenses.

thanks...that makes sense, also after I meet with him tomorrow I will update you on what he says. When this is all said and done I will post the entire ordeal so everyone can learn from my experience.

[HHM]

If your wife has $60,000 of CC debt, why is this not a joint chapter 13? Does she earn more than $90,000? (unless she has a prior BK), not doing this as a joint BK is simply financial suicide. If you are going to file BK 13, you should resolve as much debt as possible and make it a comprehensive solution. Not doing so is just you buying into unsubstantiated myths about bankruptcy and shooting yourself in the foot as far as your financial recovery goes.