Negative $990 on 22C, can I still file?

[momofthree]

Hi all. What a great forum. I've been reading over stickies and post for a couple of hours now and haven't seen a question regarding my situation. I'm sorry if this has already been answered elsewhere. I'm very new to this.

My situation:

We are a family of 5 under the median income in CA. We have suffered a pay cut in the last year and had a son diagnosed with autism which has increased our monthly expenses (treatments not covered by insurance).

We currently have around $30k in credit card debt and a $31k 2nd mortgage that we hope to strip (reason for going with ch. 13 rather than 7--which we would qualify for based on our income). Home is worth around $170k-$190k tops. Owe $218k on the first and recently received a permanent HAMP modification. Owe $31k on the 2nd--clearly unsecured.

I have a consultation scheduled with a recommended attny at the end of the month (couldn't get in any sooner), Jan. 27th to be exact.

I've been browsing the bk forms to try to figure out what our situation looks like and how a budget would be prepared. The problem I'm finding is that when I fill out the 22C form, we end up with -$990 each month. The national standards of living offer very liberal amounts. For example, it allots us $1186/mo for food/clothes. We currently only budget $400/mo. When I fill out schedules I & J with our actual expenses, I still only come up with about $50 surplus. Is there a minimum disposable income that we have to have in order to qualify? We could mess w/ the numbers even more, I guess, but as you can imagine, our budget is already tight, I hate to make it even tighter, kwim?

Also, if we get a raise and trustee wants to modify our payment schedule, can we then increase our grocery expenses as long as it remains under the "national standard" or are we automatically locked into the fixed expenses that the initial plan sets up? It would be nice to use a raise to loosen our belts a little rather than it automatically going straight to creditors.

TIA for any help you can provide.

[momofthree]

Oh, and under chapter 7 in our state, there is a "wild card exemption" which amounts to around $20k, which would make us a non-asset case if we went chapter 7, even though we have a couple of paid off vehicles and a motorcycle. I think that somehow comes into play with a chapter 13, but not really sure how. Thought I would include the info just in case though....

Oh, and yes, we bought a new car in July in preparation for filing.

[lrprn]

The big issue I see with you trying to file Ch 13 is that it seems pretty clear that you don't have enough disposable income keeping all your assets to maintain plan payments for even three years. Also an experienced Ch 13 lawyer in CA needs to determine if your creditors would receive at least as much as they would in Ch 7. If they don't, then that another reason that you couldn't file Ch 13.

Since you are below the CA median income and have assets you wish to keep, you really need to sit down with 3-4 experienced bk attorneys in your area for free initial consultations and find out what's possible to do in your situation and what's not possible. Set those appointments up and keep us posted what you find out.

As you work through your options and decide what to do, please keep in mind that sometimes to get a new financial start, it's necessary to give up things you really don't want to give up. It's best to look long-term rather than short-term. Things like houses and cars can all be replaced eventually, but your family's peace of mind and being able to live together with a lot less financial stress is priceless and irreplaceable.

[optimistic1]

The 22C is just a means to determine applicability, and since you are under the median, you wouldnt really be using that number anyway, you would use your income - expenses to determine if your DMI can cover your debts/assets.


If you say you only have $50 leftover each month, that equates to only $1800 for a 36 month plan, or $3000 for a 60 month plan.

If you have nothing but unsecured credit card debt, and you have no assets, meaning you dont have any equity in a house or car, or any property that exceeds the state allowable exemptions, then you are proposing a plan that will be confirmed.

There are lots of complexities to the numbers game that is played when a petition is filled out, but it sounds like you are on the right track, with the consults and such.

If you get a raise, and if the trustee even cares or pays attention to it, and wants more per month, you do have an argument with increasing your expenses, and you could fight it, as long as they dont exceed what is considered reasonable, just make sure you can prove it, with receipts and documentation, etcetra.

[momofthree]

The big issue I see with you trying to file Ch 13 is that it seems pretty clear that you don't have enough disposable income keeping all your assets to maintain plan payments for even three years. Also an experienced Ch 13 lawyer in CA needs to determine if your creditors would receive at least as much as they would in Ch 7. If they don't, then that another reason that you couldn't file Ch 13.

Since you are below the CA median income and have assets you wish to keep, you really need to sit down with 3-4 experienced bk attorneys in your area for free initial consultations and find out what's possible to do in your situation and what's not possible. Set those appointments up and keep us posted what you find out.

As you work through your options and decide what to do, please keep in mind that sometimes to get a new financial start, it's necessary to give up things you really don't want to give up. It's best to look long-term rather than short-term. Things like houses and cars can all be replaced eventually, but your family's peace of mind and being able to live together with a lot less financial stress is priceless and irreplaceable.

My creditors would get nothing if I filed chapter 7. We don't really have any assets aside from an extra truck and a motorcycle, and they both have exemptions that would cover them. If we were to sell them, it wouldn't really put us in a much better financial position, to be honest. They're both paid in full and only worth a few thousand a piece.

We're not pursuing ch.13 in order to keep assets, we're pursuing it to strip our 2nd lien.

Our mortgage was modified and the payment is now similar to renting a comparable house (standard 3 bed 2 bath home), so walking away from the house wouldn't be a benefit either, especially since we only have 13 years left on our mortgage.

Do you know if there is a minimum payment required in a chapter 13 filing? Obviously, we're surviving now (credit ran out a few months ago), but we're not paying any bills. It would just be really lousy if they tell us that we don't make enough money to file bankruptcy and then we're stuck where we are. If we end up garnished, I truly don't know how we'd buy groceries!

[momofthree]

The 22C is just a means to determine applicability, and since you are under the median, you wouldnt really be using that number anyway, you would use your income - expenses to determine if your DMI can cover your debts/assets.


If you say you only have $50 leftover each month, that equates to only $1800 for a 36 month plan, or $3000 for a 60 month plan.

If you have nothing but unsecured credit card debt, and you have no assets, meaning you dont have any equity in a house or car, or any property that exceeds the state allowable exemptions, then you are proposing a plan that will be confirmed.

There are lots of complexities to the numbers game that is played when a petition is filled out, but it sounds like you are on the right track, with the consults and such.

If you get a raise, and if the trustee even cares or pays attention to it, and wants more per month, you do have an argument with increasing your expenses, and you could fight it, as long as they dont exceed what is considered reasonable, just make sure you can prove it, with receipts and documentation, etcetra.

OMG, thank you! You've put my mind at ease. At least now I know there is hope! So there is no magic minimum amount of disposable income that you have to pay when you have a no-asset case, correct? We just need to make sure that we have enough to cover attorney and trustee fees then, right?

[optimistic1]

Not really, unless you are some weirdo anal retentive district or court. Yes, there have been lots of people that pay just that. Dont quote me though, you wont know until its all said and done.

[ChaseDidThis]

I don't think $400.00 a month for a family of 5 is realistic at all, I understand you want to keep your house, but you need to start with a real budget for necessities or i'm afraid you'll find yourself right back to where you started. Your house payment must be huge to be able to pay off what you owe in 13 years. I wish you and your family all the best.

[momofthree]

I don't think $400.00 a month for a family of 5 is realistic at all, I understand you want to keep your house, but you need to start with a real budget for necessities or i'm afraid you'll find yourself right back to where you started. Your house payment must be huge to be able to pay off what you owe in 13 years. I wish you and your family all the best.

Our modified house payment is $1850.44 per month. Which in California, is about equivalent to renting a house. In 5 years the rate will increase by 1%, then the year after it will increase by another 1%, until we cap out at 5% interest until it's paid off. We were very lucky (blessed really!) that we were able to qualify for a HAMP modification under Obama's new making home affordable plan. Luckily, we were already on a 15-year mortgage and have worked hard to pay the balance down in the last 4 years. We've just hit some hard times in the last year like the rest of America and gotten ourselves into debt. We just need to get rid of our 2nd mortgage and credit cards and we'll be fine!

We're used to living on a very fixed budget. We actually have lived on a budget of $400/mo for food and household supplies for nearly 4 years now. I coupon. And I don't just mean I save a few dollars here and there couponing, I coupon HARD CORE! I save literally about 50-70% on groceries on a regular basis. It's not easy, but it is do-able. I just really really really don't want to have to try to cut it lower than that.

For anyone else interested in learning how to coupon. You should check out www.hotcouponworld.com and click on the "forums" tab. It's a completely free site and I don't get anything for referring anyone, but if you're interesting in learning how to cut your grocery budget, you should check it out! There are some really amazing people on there who spend closer to $200 a month for large families. I'm not that good yet, and probably never will be because we have some dietary limitations (no gluten or dairy), which increase our bill. But it's definitely possible. Not easy, but possible. We do envelope budgeting to keep us on track. Necessity is the mother of invention.

I was just concerned that there was a minimum payment required to qualify for a 13. I'm feeling really positive right now!

[catleg]

I suspect that for 13's they're looking for some percentage of recovery for the unsecured creditors. Like maybe 10 or 20 percent, more than zero. Since your unsecured will be about 60k, you should probably be prepared to pay back 6k in your plan, plus your attorney fee, divided by 36 months. So let's call that 9k/36 months or about $250 a month. You could try going in lower than that as long as you're prepared to give up $250. (always better to let them think they squeezed you a little bit). They might look for more, it all depends on how solid your budgets looks. Fortunately the family size works in your favor.

[optimistic1]

I have completed some digging, and as much as I would like to post what I found here, I cant remember, nor do I wish to read the forum rules, I have better things to do, like help you.

I came across several webpages belonging to california bankruptcy attorneys, that actually talk much about 0% to unsecured plans, meaning they exist, granted there are probably more than a couple dozen trustee's out there.

Google - percentage payback chapter 13 plan California, and check the pdf files.



Also, searching some older posts will yield great results showing peoples % payback, I believe I found one that is by user JustBroke, who posted he had a at 0.2% to 2.0% payback, granted he probably had other debts to pay though.

[momofthree]

Thanks, Opimistic1, you've been a lot of help. I am seeing everything in regards to CA says that your debt payback is anywhere from 0% - 100%, so I'm going to think positively.

Catleg, I will seriously cry big fat tears if they tell me that we have to pay $250 a month. We simply don't have it! We'd just have to go with ch. 7 and hope that the 2nd doesn't foreclose. I'd feel much more secure if the 2nd disappeared.

[catleg]

What is your monthly payment on the 2nd mortgage?

At a bare minimum you have to pay your attorney which if you put it in the plan is going to be 80-100 a month. If you only have 50 to spare it's going to be tough, but then it's going to be tough anyway right?

It all kind of depends on how aggressive the chapter 13 trustee is.

It's just a numbers and negotiation game. It could very well be, that you are a perfect candidate for a 0% payback 36 month chapter 13. You'll just have to explain it a few times because it's a little unusual.

And figure out a way to pay the lawyer somehow.

But we're all hoping that you're successful.

[momofthree]

What is your monthly payment on the 2nd mortgage?

At a bare minimum you have to pay your attorney which if you put it in the plan is going to be 80-100 a month. If you only have 50 to spare it's going to be tough, but then it's going to be tough anyway right?

It all kind of depends on how aggressive the chapter 13 trustee is.

It's just a numbers and negotiation game. It could very well be, that you are a perfect candidate for a 0% payback 36 month chapter 13. You'll just have to explain it a few times because it's a little unusual.

And figure out a way to pay the lawyer somehow.

But we're all hoping that you're successful.

Thanks!

We have $1860 cash that we can pay the attorney up front because when we modified our first mortgage, we got to skip a payment, so that will help with the attorney fees. Also, if they allow us to use our tax return, then that should cover the fees 100%.

Monthly payment on the 2nd mortgage is currently at $229 (modified for 4 years) and will increase to $360 a month in Mar. 2013.