Advice on Ch 13

[julsmom]

Looking to file Chapter 13, home purchased 2006 & is severely underwater, think I found a competent attorney that is willing to work lien strip with us.
Home purchased 286K with that stupid Option ARM that they should personally take out all brokers & shot that sold that product. Now I admit part of that was our own ignorance in not fully understanding what we signed...we even asked, we compared the rate change to that of a VHDA step rate, 1st time buyer, that we had used before & were assured that was "just like that" even the closing attorney appeared confused when we signed the docs...hello should that not have been a clue?! Oh well...live & learn and here is where we are...

Estimate home is now worth 240-250K, owe $253K plus on the 1st mortgage,55K on the 2nd, so looking to have the 2nd stripped in with our bills/unsecured ccs.

I also have a 401K loan repayment for medical bills that were not paid, & at the time, able to combine bills with that, but that's $560 a month out (stopped contributing, just repaying now) & was told those payments would just continue, we are in VA so I read that depends on which state you are in???

We also have a timeshare, and looking into whether we should keep, surrender, or try to sell that. Plus cc debt.

Was told we would be able to keep vehicles, payments decent...actually, just very recently purchased, as mine died, so that is putting us over the top with the bills & making it all work.

Any advice on putting it all together...how do they figure out the payments? It seems there is some formula...as to after we pay the have to pays....
And desparetely trying to figure out if we get to keep this house, or do we just walk away & rent another place? My stress level is so completely through the roof, it is hard to just make it through the day.

[optimistic1]

Payments basically work like this.

Your income, minus your allowable normal expenses = DMI = Disposable Monthly Income.

DMI = X amount, multiplied by anywhere from 36-60 months = X

Then, your debts will be categorized, Secured, Unsecured Priority, Unsecured. Your attorneys leftover fees and a trustee fee is also calculated in the mix.

Any assets that you wish to keep and are not considered exempt also will be in your plan, listed simlilarily like debts, because when you do a 13, you must pay the creditors anything they would have got if you did a Chapter 7, only for assets that exceed the exemption.

If what your disposable monthly income is can pay for everything other than the unsecured claims(to a certain extent), your plan will work. If you come up short, then you have to revisit your expenses to make the plan work, or give up assets.

[lrprn]

Estimate home is now worth 240-250K, owe $253K plus on the 1st mortgage,55K on the 2nd, so looking to have the 2nd stripped in with our bills/unsecured ccs.

If your home is worth less than your first mortgage, then it is definitely possible to strip the second. Great that you've found a bk lawyer that agrees.

I also have a 401K loan repayment for medical bills that were not paid, & at the time, able to combine bills with that, but that's $560 a month out (stopped contributing, just repaying now) & was told those payments would just continue, we are in VA so I read that depends on which state you are in???

It can depend on your local court's position on repayment of 401K loans during Ch 13. Some trustees see repayment of these loans as a preferential payment to yourself rather than paying that money to your creditors. Ask your lawyer about what to expect here, but chances are you'll be able to include the $506 as a legitimate expense and continue those payments after you file. However, be prepared for your trustee to ask when the loan will be paid off - that creates more disposable income and may cause your trustee to ask the court to amend your plan accordingly.

We also have a timeshare, and looking into whether we should keep, surrender, or try to sell that. Plus cc debt.

CC debt is fine - how much of what you owe will get paid back during your 13 depends on which creditors file claims by the deadline.

Time shares are typically seen as a luxury and unless you can protect it with VA's bk exemptions, most Ch 13 trustees will not allow you to continue payments. Ask your lawyer about what to do with the time share before doing anything.

You can try to sell it before filing, and as long as you get fair market value for it, you'll be fine to do that. However, then you're stuck with cash that you have to protect or spend before you can file.

Was told we would be able to keep vehicles, payments decent...actually, just very recently purchased, as mine died, so that is putting us over the top with the bills & making it all work.

Good idea to go into a Ch 13 with a new car.

Any advice on putting it all together...how do they figure out the payments? It seems there is some formula...as to after we pay the have to pays....

Ch 13 payments are based on complicated calcuations on the required Means Test and Schedules. On the Means Test, your income (and your spouse's income if you are filing as a couple) from all sources looking back the last six calendar months before filing is used. Expenses on the Means Test are a mix of your real expenses and expenses set by the bk law for housing, autos, some utilities, etc.

The Schedules are also completed, and it's here that your actual *reasonable* expenses are allowed. Most local courts take Schedule I minus Schedule J to determine how much disposable income you have. This is what determines your Ch 13 payment.

And desparetely trying to figure out if we get to keep this house, or do we just walk away & rent another place?

It's hard to give an opinion with the information you've shared so far. This is a great question to work through with your lawyer.

My stress level is so completely through the roof, it is hard to just make it through the day.

You are at the very worst part of the bankruptcy timeline right now - where you realize that's there really no realistic way out but bankruptcy. It's a very rough time

However, once you understand all your options and have a plan put together for the long-term best outcome for your family, chances are your mood will lighten up and you won't feel so stressed. Knowledge is power, and knowledge is what we are all about here.

Hang around with us in the forums for awhile and you'll see you are most definitely not alone! None of us thought we would be here either. But what many of us have discovered is that instead of bankruptcy being the worst thing that's ever happened to us, instead it's turned out to be one of the best. Hopefully that's where you'll be in a few months too. Hang in there, and keep asking questions. We'll help you sort things out as best we can.