Lump Sum Money and Chapter 13

[spearmint]

At some point in the near future I need to file a Chapter 13 to pay back about 20k. I "may" also be coming into some money - not sure how much but perhaps $20K. I was hoping to use the cash for a land contract home but I am not sure how the Ch13 impacts everything - or what I should do. How long do I leave the BK after receiving cash so it is not taken by trustee, or will it be taken anyway?

[newbie2]

I'm no expert, but I don't think you'd be able to keep $20,000 of "windfall" money while in an active Chapter 13. Especially since that amount is almost identical to the amount of debt you wish to have discharged.

If you think you're coming in to this money soon (or semi soon) why not take it and pay off the debt?

[forgotten]

Yeah, you can't "have your cake and eat it too". If you get $20k while in BK the trustee will take it all and distribute it to creditors, up to 100% of what you owe.

[spearmint]

First of all I am just trying to educate myself on the CH13 issue and what "could" happen if I receive a lump sum of cash - not even sure I will at this point, though.

It sounds easy to say take the 20K or whatever it could be and pay the creditors and not file Ch13, except that the amount I owe is a lot more than 20K but if I file Ch13 it would be reduced to around that amount.

Besides, I didn't think you could "pay off" creditors in a Ch13. I thought any additional funds received was all "extra" for the creditors - over and above whatever you started out owing to them.

What if I got a cash sum and filed Ch13 a year from now. Could the trustee still lay claim to it? What if it was spent?

Surely, they can't lay claim to any monies you have ever received. Isn't there a time period within which they can go back after you file?

I am merely trying to understand the scope of filing Ch13 and what my rights are.

[forgotten]

Okay... lets say you have $100k in unsecured debt.
Your payment plan has you paying back 20k(or 20%) after 5 years.

If durring the 5 years you are in your BK you get a sum of money you are going to have to turn that over to the trustee. That money will be distributed to your creditors.

You will never pay back more than 100%. So in this case, yes, if you got $20k then you would loose it all. If you were to receive $150k then $100k would go to creditors (minus any payments you have already made), and you would keep the rest of it.

If you get the $20k BEFORE you file, spend it, and wait 6 months so it is no longer considered income for your standard 6 month lookback you are probably okay. Provided this $20k wasn't borrowed money. Whatever you spent it on will become an asset however, so keep that in mind for exemptions purposes.

[lrprn]

It sounds easy to say take the 20K or whatever it could be and pay the creditors and not file Ch13, except that the amount I owe is a lot more than 20K but if I file Ch13 it would be reduced to around that amount.

First, there's really no way to predict what will happen to your overall debt owed until your Means Test and Schedules are completed by an experienced Ch 13 bk laywer.

Also you won't know what amount will need to be included in your plan from each creditor until about 3-4 months after your 341 meeting and you see how many of your creditors file claims to be included in your plan. It's fairly typical for a few to not do so. But there's no way to tell ahead of time which creditors will file claims and which won't.

Besides, I didn't think you could "pay off" creditors in a Ch13. I thought any additional funds received was all "extra" for the creditors - over and above whatever you started out owing to them.

100% wrong. You owe your creditors what you owed them on on filing day, and that's what the court goes by. If you successfully complete your Ch 13 plan, then all of your unsecured debts (except for student loans, child support, etc) will be completely paid off. Also any mortgage or car payment arrears can be made up through your plan as well.

What if I got a cash sum and filed Ch13 a year from now. Could the trustee still lay claim to it? What if it was spent?

It depends on your trustee and the amount of money involved. Your Ch 13 lawyer can give you an idea of what your trustee might do.

Surely, they can't lay claim to any monies you have ever received. Isn't there a time period within which they can go back after you file?

The time frame depends on the circumstances of the monies. For example, if you sold one of your valuable assets for $1 to your brother before you file, that's deliberately hiding assets and is bankruptcy fraud. The trustee can go back and undo these kinds of transactions within a year of filing.

I am merely trying to understand the scope of filing Ch13 and what my rights are.

There are some excellent websites that explain Ch 13 very well. Read through these and let us know what other questions you have:

http://www.uscourts.gov/bankruptcycourts/bankruptcybasics/chapter13.html

http://www.abanet.org/publiced/practical/bankruptcy13_whatis.html

http://moranlaw.net/13workings.htm#Chapter%2013%20practice

Another great resource is the NOLO book on Ch 13 - http://www.nolo.com/products/chapter...uptcy-CHB.html. You can get it at Amazon.com http://www.amazon.com/Chapter-13-Ban...4571766&sr=8-1 or at Borders or Barnes and Noble stores for $25-35.