Met With Attorney, Have a Question

[funcritter]

I was planning on filing chapter 7 to get rid of my car and CC debt. Because I own a car valued at over $7500, I would need to pay $2500 to the creditors so my lawyer advised me to file chapter 13.

Can I still get rid of my CC debt by filing 13? Thanks

[lrprn]

I was planning on filing chapter 7 to get rid of my car and CC debt. Because I own a car valued at over $7500, I would need to pay $2500 to the creditors so my lawyer advised me to file chapter 13.

Let's back up here for a minute.

If you indeed qualify to file Ch 7, it's going to be very hard to show enough disposable income to fund a Ch 13 plan without eating Ramen noodles for three to five long years. Just to save $2500??? Don't be crazy! File Ch 7 and pay the $2500 if you can't bear to part with the car.

Can I still get rid of my CC debt by filing 13?

It would help you sort this out better if you understood the differences between Ch 7 and Ch 13 better. Yes, you can get rid of your cc debt by filing Ch 13.....but depending on how much disposable income you show when a lawyer fills in the required Means Test and Schedules, you'll very likely pay some of the cc debt back to each of your creditors who file claims to be paid in your Ch 13 plan. 99% of the time the only way to wipe out your unsecured debts quickly in about 90-120 days is to file Ch 7. It takes three to five years to successfully complete a Ch 13 plan and be debt-free.

Some questions that will help us help you better:

• * Did the attorney you met with tell you that you qualify to file Ch 7?
• * Looking back the last six months and adding up all your income from every source, do you make less than your state's median income for your family size?
• * Are you filing alone or with a spouse?
• * Do you have kids you are supporting at least 50% of the time?
• * Are you trying to protect another asset besides this car?

[momofthree]

We don't have the whole picture since you didn't provide your state, income, household size, and other assets, but any lawyer who tells you to file ch. 13 SOLEY to save a $7500 car (and how did you arrive at that value, btw?) of which only $2500 is un-exempted, should be kicked to the curb immediately.

[SMinGA]

Useful things to know:

1. A chapter 13 is a repayment plan, where you make payments to the court for 3-5 years.

2. You can 'save' non-exempt assets in a 13, as long as you pay enough so that creditors get at least as much as your non-exempt assets are worth.

3. Attorneys tend to charge more for a ch 13 than a ch 7. This could be in the form of higher up front fees, or by adding some to what gets paid into your plan.

4. The trustee gets a part of your plan payment, generally 5-10%.

So if you are eligible to file ch. 7, but find some way to get a ch. 13 plan confirmed, you'll most likely end up paying much more than $2500. Your attorney will probably charge another $500-1500, and 5-10% of what you pay goes to the trustee.

You'd most likely end up paying at least $4000-5000 minimum just to save the $2500.

Generally a ch. 7 can be successful and still show $75-100 disposable income. (Your district may vary.) If you are eligible for a ch. 7, then double check your car's value (consider condition, mileage, any maintenance issues) and if you truly have non-exempt equity in it - offer the trustee $75-100 a month for a year. If he were to sell the car, he'd have to take the proceeds and pay selling fees and give you your exempt amount. He would not get the full $2500 overage.