Can I be denied a chapter 13?

[worriedmom]

If I well qualify for a 7 but want a 13 to strip my HELOC of $36k, can they deny me based on the means test if I come up negative? Is there a minimum monthly payment that has to be made? Say I could only pay like $40-$50 a month to trustee...am I screwed and forced into a 7?

[optimistic1]

No, but your disposable income, determined by subtracting your expenses from your income, must equal an amount to pay something, like attorney fees, etc.

I have seen people with very small payments, so it is possible, $40-50 a month is pretty low though, to be more realistic, consider $100-$150, just to be on the safe side.

[momofthree]

I think we have twin situations. I posted almost an identical post earlier this month. I am still waiting on my consultation (eep, it takes FOREVER to get into a good bk attny these days!), so I'll just pass along what the good people here told me. Keep in mind, I'm in CA, your state laws may be different.

#1. It depends on your assets. When you file ch.13, your creditors need to get as much as they would if you filed ch.7 and all of your assets were liquidated. If you're under the median income and you're filing to strip a HELOC rather than hang onto a ton of assets, then chances are, you'd be a no-asset case in a ch.7, so there would be no minimum payment above your attny and trustee fees.

#2. Even if you have a negative value on your 22c (which I have a -$990!), as long as you can show some disposable income on your income/expense forms (schedules I & J), then chapter 13 should be available to you.

#3. Speak with an attorney and be sure to take your last 6 months of paystubs and your monthly budget with you. Most attnys offer a free initial consultation and he can give you regional-specific and situational-specific advice.

Good luck!

[forgotten]

Just to echo, yes, the means test can be negative as long as your budget according to schedule I & J shows something available. I was negative on the means test but +$950 on I&J.

My district says the minimum payment must be $15/mo to qualify. Not sure if anyone actually has a payment that low (considering it probably wouldn't even be enough to pay the attorney), but...

[worriedmom]

Yeah, only asset is a 2005 Chevy Silverado crew cab fully paid for. But our other car is junk. We wanted to replace with a used car w/ less miles before filing (with our tax returns), but see that will make us totally lose the $ we put into another car since we are already at the limit for car exemption. So hoping we can call it even with the $10k exemption on cars in AZ. Our house is upside down, but it is crucial we keep it.
And to momofthree, does sound like we are in the same boat. We too are about -$900. But once one of our 401k loans are paid off in 2 yrs, we will have an additional $700 per month that I'm worried they'll take.
Thanks for the quick replies! MUCH appreciated!

[forgotten]

Yeah, only asset is a 2005 Chevy Silverado crew cab fully paid for. But our other car is junk. We wanted to replace with a used car w/ less miles before filing (with our tax returns), but see that will make us totally lose the $ we put into another car since we are already at the limit for car exemption. So hoping we can call it even with the $10k exemption on cars in AZ. Our house is upside down, but it is crucial we keep it.
And to momofthree, does sound like we are in the same boat. We too are about -$900. But once one of our 401k loans are paid off in 2 yrs, we will have an additional $700 per month that I'm worried they'll take.
Thanks for the quick replies! MUCH appreciated!

Since you are in a chapter 13 your vehicle can be worth more than the exemption limit. For example, if your exemption limit is $10k and your car is worth $20k you simply need to ensure that you pay $10k in to the plan.

Unfortionatly your payments would go up $700/mo in 2 years to account for the 401k loan being paid off. If your payments end up being $100/mo now they will be scheduled to increase to $800/mo when the loan is paid off.

In the above example you would pay over $30k in to the plan over the 5 year period, which means you could keep property valued at $30k over the exemption limit.

[momofthree]

And, actually, since you're under the median income, you should qualify for a 36-month term, so you'd only have the increased payments for 1 year.

[forgotten]

And, actually, since you're under the median income, you should qualify for a 36-month term, so you'd only have the increased payments for 1 year.

Good catch, missed that part.