Need Help Understanding Chapter 13 In My Situation and Attorney Fees

[BarbB]

Hi everyone,
I am a bit confused on some things when it comes to Chapter 13. I have been reading through the forum to try and clear up the confusion on my own but seeing as everyone here is helpful...I thought it best to simply just ask

My husband and I sadly are having to file for Chapter 13 as 7 is not an option for us.

We own our own home (since May 2008) Mo Pymt $1416.17

I do not work (homemaker)
My husband is employed and gross income is $3200 mo but net is only around $2400 monthly after insurances and such.
We are a family of 6 in the state of Michigan.

1. We are 1 month behind on our mortgage but we are about to catch that up and all bills are current except the unsecured debt.

2. We have unsecured Debt that is roughly $20,000

3. We have a vehicle Payment that is $316.97 per month and We currently owe about $9,340 on this 2003 Ford Windstar SEL


We went for a consultation with a BK Attorney this week and she honestly did not seem the right woman for the job for me. I felt she rushed through everything and was just seemingly wanting us to do things that seemed scary and so I am going to have another consultation elsewhere to make sure before I committ to anything.

She told us that with $30,000 of debt in our family size of 6 and income we'd have to pay back about 10% of that debt.
And she told us that roughly our pymt would be about $345 mo (she was including the van and saying that we would be better off to add it in since its worth less than we owe and the percentage rate for the repayment was 5.5% and our van's interest rate is 10.5% I believe)

She was also telling us to not catch up our house payment and allow for 2 months to be configured into the repayment plan.

This just seems dumb to do to me (with the house).

She also told us that even though our plan repayment would be around $345 per month that when our income tax return comes in they can take that without a good reason as to why you need to keep it...(IE. Unexpected expenses: Car repairs, home repairs, children's braces,etc) This scares me because we usually get at least $5,000 back per year on our taxes. In 3 yrs time that is $15,000 that they could potentially snag from us. I can nearly pay all my creditors on my own with that much money so why file BK then?
Am I wrong? Does this even make sense?

What do you all recommend?

PS. We do have accts in collections and 2 have sent a summons to sue us in court.

Is there a way to get all of these creditors (ie collection agencies to work together and settle a lump sum payment at income tax time?) Or am I just hoping too much...

One other ? My husband has a 401 K with his company and he also has employee stock (not alot but he does have it still none the less (prob about $600 worth)
Will they take this from him? Force him to sell to pay the debts?

I guess I am confused on what's best and what we should do and if this attorney is trying to line her pocket? Do they get paid more for having you to put more in the repayment plan? She seemed so pushy about it that I suspect something is not right. She also mentioned that there's a standard fee of $3,000 rolled into the payment plan for the BK. YIKES! Is she being a little crooked or is this a typical fee? She also mentioned a $565 (give or take a few dollars) fee for the Credit Counseling that we'd have to pay up front.....

I don't know but something seems fishy here....I filed for 7 before and it cost me $780 roughly (total)

Can anyone help to clear things up for me and I apologize for the length of this posting...I just need to understand things better before making a decision on what we are going to do.

[HHM]

No issue with the fees. Chapter 13's are far more complex and time consuming. The BK court allows attorneys to charge a certain fee for chapter 13.

I assume you cannot do a 7 because of a prior chapter 7 in the last eight years, correct?

With the house, what she is really saying is you don't NEED to waste the money to get the house caught-up, all the missed mortgage payments can be paid in the plan. Nothing particular odd about that advice. Technically, there is no minimum percentage a person must pay back in a chapter 13, but the unsecured creditors must get "something", but this minimum percent issue varies by district. Some chapter 13 trustees are very strict about what unsecured creditors "must" get in a chapter 13.

If you don't feel comfortable with the lawyer, go see another one, but the advice and fee she gave is fine.

[JEM]

Curious why you think you have to file a 13 vs. a 7.

As a family of 6 with a gross monthly income of $3200, I would think you're under the median for your state.

If you only bring home $2400/mo. I don't see any way for you to be able to make a $1400/mo mortgage and a $345 payment to the trustee--even if it does include your car payment.

That leaves *very little* for food, utilities, medical expenses, medications, auto repairs, home repairs, insurance for auto, gas...etc....

[zeezee]

Curious why you think you have to file a 13 vs. a 7.

As a family of 6 with a gross monthly income of $3200, I would think you're under the median for your state.

If you only bring home $2400/mo. I don't see any way for you to be able to make a $1400/mo mortgage and a $345 payment to the trustee--even if it does include your car payment.

That leaves *very little* for food, utilities, medical expenses, medications, auto repairs, home repairs, insurance for auto, gas...etc....

I think it's because (as HHM said) they may have done a 7 already within the last 8 years which would exclude them from being able to do another 7.

[StartingOver08]

Barb, don't be afraid to interview several attorney's. ESPECIALLY if this one gives you a bad feeling in the initial interview! Even if you felt good in the interview, we would still recommend interviewing several attorney's. It does seem very odd that you would have to file a Ch 13, unless of course, HHM put his finger on it (your previous BK is less than 8 yrs from the last filing date).

[BarbB]

No issue with the fees. Chapter 13's are far more complex and time consuming. The BK court allows attorneys to charge a certain fee for chapter 13.

I assume you cannot do a 7 because of a prior chapter 7 in the last eight years, correct?

With the house, what she is really saying is you don't NEED to waste the money to get the house caught-up, all the missed mortgage payments can be paid in the plan. Nothing particular odd about that advice. Technically, there is no minimum percentage a person must pay back in a chapter 13, but the unsecured creditors must get "something", but this minimum percent issue varies by district. Some chapter 13 trustees are very strict about what unsecured creditors "must" get in a chapter 13.

If you don't feel comfortable with the lawyer, go see another one, but the advice and fee she gave is fine.

Thank you for addressing my questions. I just think that this is outrageous! They want to charge people who obviously can't pay their bills now even more money. Seems ironic. That's just me.

I appreciate your information very much. In fact We have decided that we are not going to file for BK. We can get ourselves out of this by settling with these companies and that's essentially what we plan to do. I think in the end saving $15,000 is more important and smarter. These collection agencies paid pennies on the dollar for our accounts and we plan to for go that plan of action first and hopefully we can get this all dealt with and gone soon. Like I said we are essentially not behind on the day to day expenses it's the unsecured debt that looms over us and we can do this. It's just going to take some work TY all for your help.

We've managed to pay $1416.17 mortgage for 1 1/2 yrs without any issues and we eat very very well and our utilities are on and we even have cell phones so I do not see why we cannot continue to do so. If all else needs be we will drop the cell phone bill/we have a 2nd vehicle that is paid for and husband drives company vehicle to/from work. Our cable/internet are free (Husband works for the Cable Company) and our phone is half price. Our bill there is barely $30 mo so that helps us alot. God ultimately provides for our family and we depend on Him. I just wished I understood bondage before I had actually gotten myself into it

Thanks again for everyones help and input. I appreciate it.
Oh and yes we filed Chapter 7 less than 8 yrs ago that's why we can't file it again.

[rrockinggramma]

just be careful when settleing for less

Michigan allows the creditor to file a 1099C which is a form that the IRS gets that says you owed 10,000 and only paid 2500 and therefore 7500 is taxable income to you. When you settle, make sure you specify NO 1099C or any other tax ramifications.

Good luck with this. And yes Michigan WILL TAKE your income tax refund. ALL of it!