A few Chapter 13 questions

[jonance]

Hi,

You seem very knowledgeable about chapter 13 so i had a few questions for you if you don't mind.

1. If i filed Chapter 13 to surrender some investment properties and a $40k business line of credit, how is my non-filing spouse affected beyond her income factoring into the payment plan? Would an inheritance that she receives be subject to surrender or raise payments, or even have to be reported? Can she accept gifts and save money in her individual account?

2. When i pm'ed you before, i mentioned the deficiencies (or potential for them) from investment properties being the reason behind filing. Is there a possibility that i can surrender the properties in full satisfaction? Or can i, as one poster was attempting, file and pay 100% of the unsecured debt ($40k line of credit) before the sale and deficiency and close the case?

3. What about an inheritance i may have coming? Would that be automatically surrendered in a 13 like in a 7?

4. If my expenses were to decrease over the life of the plan (like my car gets paid off), will i need to report that? Or do i just send in tax returns, pay my original plan payment for 5 years...and they don't really care? Just wondering how closely scrutinized I am, or if they are just happy getting the check each month.

Any help is appreciated....thanks!

[lrprn]

1. If i filed Chapter 13 to surrender some investment properties and a $40k business line of credit, how is my non-filing spouse affected beyond her income factoring into the payment plan? Would an inheritance that she receives be subject to surrender or raise payments, or even have to be reported? Can she accept gifts and save money in her individual account?

First, will you be filing in a community property state - Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, or Wisconsin? If yes, then filing alone could be problematice. Although the law varies somewhat between the states, it's very difficult to file Ch 13 (or 7) and discharge the entire amount of debt owed by both you and your spouse that accrued during the marriage. You will need expert legal advice to ensure that filing alone is possible and desirable in your situation.

You asked how your wife would be impacted if only you file. If that proves the best way to go (in other words, you aren't filing in a community property state), then only you are filing, not your wife. Her income that goes toward maintaining the household will count toward your disposable income determination and final Ch 13 payment determination. However, since she didn't file bk she can accept gifts and save money in her individual account as long as the gifts and money are hers alone. Any inheritance that is left to her alone is hers, not yours, so it shouldn't impact your 13 case. She just needs to be sure to not use the inheritance to support the household in any way.

Of course, you really do need to discuss this with several experienced bk lawyers in your area to be certain this is accurate for your local court and trustee and for your individual financial circumstances.

2. When i pm'ed you before, i mentioned the deficiencies (or potential for them) from investment properties being the reason behind filing. Is there a possibility that i can surrender the properties in full satisfaction? Or can i, as one poster was attempting, file and pay 100% of the unsecured debt ($40k line of credit) before the sale and deficiency and close the case?

This is a question to ask each lawyer you interview. We suggest interviewing at least 3-4 and be sure that each lawyer is experienced filing 13s (not just 7s) and that they are knowledgeable about how investment properties impact filing a 13.

3. What about an inheritance i may have coming? Would that be automatically surrendered in a 13 like in a 7?

Any inheritance received after 180 days after filing but while your plan is still active may be property of your bankruptcy estate. In addition, your Chapter 13 trustee may also contend that good faith requires devoting any excess funds or property to the plan. This is another good question to ask during your lawyer interviews.

4. If my expenses were to decrease over the life of the plan (like my car gets paid off), will i need to report that? Or do i just send in tax returns, pay my original plan payment for 5 years...and they don't really care? Just wondering how closely scrutinized I am, or if they are just happy getting the check each month.

The answers depend on the customs and legal interpretations of your local trustee and local and district judges. Most trustees provide a written explanation of what they expect to be notified about shortly after you file or at the 341 meeting.

In general, most 13 trustees will be happy if they receive your payment on time every month without fail and receive a copy of your annual tax returns. What matters most over the life of your plan is how the plan is structured. If the car is included in your plan and your trustee knows it will be paid off during the plan, then your trustee *might* decide to petition the court to increase your payment accordingly. However, you and your lawyer have the opportunity to show other changes in your disposable income that may offset the increase in income - increases in expenses since filing, for example.

Bottom line is there's no way to 100% predict what your local trustee and local court will do in this situation. Add one more question to your lawyers' interview list.

[justbroke]

Thanks lrprn... my responses are similar.