Stuck filing 13-panicking over monthly repayment :(

[sheilaE]

We met with a lawyer yesterday. Both my husband and I really liked him-he had a nice personality,didn't put any guilt trips on us & seemed to know his stuff. We really felt good about him. Now the bad part. We don't qualify for a 7 and will have to go with a 13. Our monthly re-payments are the same as what we were paying out prior to stopping all the cc payments. We are STILL going to be struggling every month to get by. We have 3 children- our payments will be in the ball park of $1300.00 a month for 5 years. We couldn't make ends meet now and had to use credit cards to fill the gap each month-I don't know how we can afford this. How has anyone else dealt with this situation? I know we got ourselves in this mess, but I was hoping if we had to file 13, that we'd still have some sort of relief.
Thank you!

[Faust]

What are your expenses?

[sheilaE]

Take home: $5700.00
Living Expenses:

1st. $2000.00
2nd. $550.00 (might be stuck with this, so I'm adding it in)
Electricity: $350.00 in the fall & spring, $450.00 in the summer& winter
Life Insurance: 200.00
Groceries: $600.00-$700.00 ?
Garbage/water: $80.00
Gas:$250.00
Cell phones $150.00
Cable/internet $175.00
School lunches: $50.00
Chapter 13 repayment plan:$1300.00

The plan doesn't leave any extra for
home or car maintenance
Clothing for children
School supplies/fees. Our kids go to public school, but we still have to pay for things like elective fees, PE clothes, field trips.

I guess we're expected to get rid of extras like cutting off the cable and cell phones? Are those considered luxury items and not needed? Right now if one of the kids asks for say Taco Bell on the way home from school-I feel so bad saying "sorry, we can't afford it". I'd love to be able to say yes-and not stress over spending $5.00. We don't eat out at all.

I guess I was just hoping by filing that we could get by better and this would all be a big relief, but instead it's going to keep the stress going-at least for 5 years.

[SMinGA]

What does that $1300 include? ARe there any vehicle loans to be repaid in the plan? If so, then you'll no longer need to make the car payments.

If you truly can't afford the payment recommended, then you need to go over the #s and understand how the attorney is arriving at that figure. If there are expenses unaccounted for, or some expenses you have now that will not be allowed, you need to figure out a workaround. (Such as cutting back on some things, or getting anything that was overlooked into the calculation.)

[SMinGA]

Is your home worth less than the 1st mortgage? If so, you will no longer be paying the 2nd. That could be the missing link.

I'm not sure if this will help you - but I budget 'bills' (payments to be made) monthly and 'expenses' (things we must buy/spend) weekly. But that works for us because I get paid every 2 weeks from my main job, hubby gets paid weekly, and I get tips daily/weekly from my 2nd job. Doing some of it weekly helps to avoid the problem with getting paid for only 4 weeks at a time for a month's worth of bills.

[SMinGA]

Just saw you add your expenditures.

In addition to the 2nd comment, a few other things... How is your income received? $5700 net once per month, $2850 2x per month? Make sure to account for actual average monthly. If you get $2850 every 2 weeks, that is $6175/mo since you get 26 pay periods & not 24. Not fun since things are due monthly, but that is the math... On the bright side, your plan payment can be deducted in the same manner you're paid. So $1300/mo would be $600 per pay check if you're paid bi-weekly.

You must account for car insurance, car maintenance. If you didn't include them on your paperwork to the atty he made an honest mistake in omitting them. Can be fixed. Also something monthly for clothing. And for household items (laundry supplies, cleaning supplies, paper products) and personal care items (shampoo, soap, hair cuts, etc.). Any pets? Pet supplies are not unreasonable. Also add in an average monthly for school supplies/expenses.

Its best to consider things now and have your schedule J correct so you are in a reasonable plan.

Last - what is required to be paid in your plan? Any car loans, any mortgage arrears, taxes? If so those items MUST be paid in full in the plan and can set sort of a minimum you must pay in the plan period. This is where it can be a problem. Like if you owe a combined total of $60,000 in priority payments, and your trustee has a fee of 10% (some districts lower but none higher) then $1300 x .90 (what goes to creditors) x 60 = pays $70,200 and you've got room to lower your payment slightly. But if you had $70,200 in required payments you would HAVE to make $1300 monthly or would not be able to do a 13.

[klandsb]

I am thinking you went for a free consult. If he quoted you that amount it is not written in stone. He needs to do it again after you retain him to get the real picture of what you might be paying. It may not be that big of difference but may be enough to give you breathing room. Do yo have pets ?? I included pet care every mth as an expenses. Also, I would go thru your checkbook for the last 6 mths and see if there is anything in there that u pay for that u may have missed .

[sheilaE]

The $1300.00 is the chapter 13 repayment amount the lawyer came up with. Said it could go up or down a little. We need it to go down...a lot, lol. We have no vehicle loans or payments that we make.

We're keeping our fingers crossed that he can get rid of our second. We won't know for sure until we find out the value of our home. We think what we our is pretty close to the value, so we may not be able to get rid of the second.

Here's another question: If we were able to get rid of the second-would they apply the extra to our chapter 13 repayment plan? Are we not going to be able to keep any extra funds that come our way? He told us that if we were expecting any kind of inheritance that it would be taken from us. what about over time? My husband is a police officer-sometimes he's at a crash site right when his shift should end-can't just pack up and leave. So when he make over time-can we keep it or will we have to report it?

[sheilaE]

Hubby gets paid once a month.
The car insurance is taken out of his paycheck before he see's it.
Credit card debt= $80,000.00

[SMinGA]

Ok - so you don't have to worry about the 4 wk pay vs. 1 month average. That is good.

Since $5700 is his net after car insurance, then you don't need to budget for car insurance. Car maintenance is a different story though. So is clothing, school supplies, etc.etc.etc.

You are not supposed to have 'extra' in a 13, but that is why its important to account for everything in your budget. Some things you won't spend every month. Like I budget for $40-50/mo school expenses for the kids. Might spend $200 in August for supplies, class shirts, etc. for the start of the year but then just a little here & there for projects, field trips, replacement supplies in other months. And its important to be realistic. I can perhaps do $75/week on groceries (food only) if I work really hard at it, but planning to do that for 5 years is asking for trouble. So we go with a more reasonable approach of $100-110/week. Again, food only and that doesn't count school lunches. So we spend more in the summer, and the school lunch money then gets added to groceries.

You can however save up here and there, by cutting back from time to time.

I'm guessing the atty is assuming you will not be paying the 2nd, in coming up with the $1300 figure. If so and that were to change - the plan payment would be adjusted to allow for the 2nd payment.

[sheilaE]

That's what I'm hoping for as well-to add the second into the monthly amount that we can keep. I'm going to call him today with my new set of questions.

I didn't think to add in pet expenses-we have 2 dogs and 2 cats. There's so much that I didn't think of yesterday when we met with him. I guess after he said $1300.00 I was in such shock-my mind went totally blank. I really thought the dollar amount would be less-like maybe $500.00. I guess there is a formula that they follow to get that amount?-even though our monthly expenses are also high?

Thanks for everyone's help-this site is a lifesaver!

[SMinGA]

The payment formula is simple: Net income - Net expenses = Plan Payment. It is IMPERATIVE that you budget well, and you'll end up with a failed ch. 13 otherwise.

It can be hard to think of everything on the spur of the moment, so take some time. Get a pen and paper and think of what you spend money on. Some things may be best to estimate an annual figure and divide by 12 to get a monthly average. Your atty will ultimately group some items together. Compare to the IRS guidelines if you think you have anything unreasonable.

Some thoughts:

*Car tags - do you pay a fee or ad valorem tax to renew? (Just renewed ours, so its fresh on my mind)
*Parking fees/tolls
*Life/Health Insurance
*Copays, medicine
*Pet food, supplies, vet expenses
*School Lunches
*School Supplies/Expenses
*Food-grocery store
*Food-eating out (for an occasional family night out, or if someone buys lunch at work, etc.)
*Household supplies (cleaning, laundry, paper products, etc.)
*Personal care (shampoo, soap, toothbrushes/paste, etc.)
*Clothing
*Entertainment (While it should not be excessive, something here is reasonable.)
*Home maintenance
*Car maintenance (oil changes, tires/brakes and such that wear and need replaced occasionally)
*Summer camp for the kids (fingers crossed - have applied for a 50% 'scholarship, at a very reasonably priced $375 per child camp about 2 hrs from home)
*Bank fees, safe deposit box fees
*Magazine subscriptions (like entertainment - not excessive but you're not expected to cut out EVERYTHING)
*Gifts/HOlidays (family understands we can't spend excessively, but some planning for holidays and such is ok)

[Lissy]

You've received good advice. You need to look at EVERYTHING you spend money on, whether you do it on a monthly basis or not. I don't buy new clothes every month, but I figured out what I typically spend in a year for myself and divided by 12. Take every allowable expense that you can. Good luck! If this atty did this for you as part of an initial consult and didn't have ALL of your paperwork in front of him, it was just his best guess. It will likely change. My atty initially told me my proposed monthly payment was going to be $1200 (with a DMI of $1400, which could have bumped UP the payment even more) and I freaked too. After making some adjustments (one of which was his error that I caught when I reviewed the petition), it's now down to a manageable $950.

[momofthree]

Is that the list of expenses that you gave the attorney? They are VERY low and you are missing some necessary and (most importantly) allowable expenses.

You ARE allowed to account for home maintenance. You are allowed an entertainment expense. You are allowed up to the IRS standards for food and clothing. For a family of 5 this is $1186 per month (I know because we are a family of 5). You have only allotted $700/mo for that. Your attorney should be advising you of where to pad your budget to allow you to survive with some wiggle room over the next few years. I would be very wary of an attorney who didn't help you try to get your payment as low as possible.

My attorney flat out told us we could pay back pretty much however much we wanted. However, we didn't have a minimum we had to pay into the plan because all of our assets were exempted and we didn't have mortgage arrears or anything...It is possible that you have to pay a minimum of $1300 into the plan. If that's the case, you either have to get rid of some assets, make budget cuts to make it work, or just not file at all, depending on your particular circumstances.

ALSO, if you plan to go ahead with a chapter 13, you need to buy a reliable new(er) car that you know will last you thru the next 5 years with minimal maintenance expenses. Having a car payment will also lower your plan payment (again, that's only if you don't have a minimum amount you HAVE to pay into the plan).

Changes you could make to your budget (using standards for family of 5):

1st. $2000.00
2nd. $550.00 (might be stuck with this, so I'm adding it in)
Electricity: $350.00 in the fall & spring, $450.00 in the summer& winter
Medical: $300 (IRS standard)
Life Insurance: 200.00 (is there a reason this is so high? Medical issues? Whole life?)
Groceries: $750 (IRS standard)
clothing: $240 (IRS standard)
Home maintenance: $150 (just a guess, but this should be reasonable)
Garbage/water: $80.00
Car operation expense (using Northwest region--don't know where you are): $422 (IRS standard)
Car ownership expense (car payment--go buy a car!): $489 (IRS standard)
Cell phones $150.00
Cable/internet $175.00 (don't know if trustee might view this as excessive?)
Entertainment: $100
School lunches: $50.00
Total expenses: $6006 before chapter 13 payment

This is based on IRS standards. I find it absolutely APPALLING that the attorney thinks you should be paying $1300 a month into your plan. (Again, this is assuming you don't have a minimum you HAVE to pay into it)

IMO, you need to schedule a few more free consults with different attorneys.

As a side note, have you checked your home value on zillow? It's not at all reliable for actual values, but it might give you a general idea of whether you'll be able to strip your mortgage or not.

[sheilaE]

I thank you all for the great responses!!! He was just giving us an estimate-we haven't signed anything, but that estimate shocked me. I need to give him a call -I feel so much better after reading all of these posts! Thanks again. I'm sure I'll be on here every single day for quite a while. We are only at the very beginning of what looks like will be a very long process.