Question for MOMOFTHREE / Advice?

[andysmom]

Hi, Momofthree and anyone else with experience in this situation!

I've been reading alot on this forum & read alot of your posts. You give a ton of great info and I was wondering if you can read my situation & see if it sounds plausible to you?
I see on your signaturen line your's says 0% to unsecured creditors/ essential that is what our lawyer has come up with for our plan too and while I'm thrilled at the concept I'm still very scared & not believiing that it could be possible.
We are only over the median by a few hundred dollars & failed the 7 means test. When he did the chapter 13 test, because we have a 401k loan (which he said is completelty acceptable, allowed & not even questioned here) and all of the allowed expenses using the irs standards (nothing at all padded or anything) we come up with a negative dmi of a few hundred dollars.
So he said our payment would be zero, but in all of his years of practice he never had one come out to 0 for a chapter 13, he said ususally there's a few dollars left over. So he said he called the trustee's office and spoke to their lawyer who said it would not be problem- the numbers are the numbers essentially.
The only thing he said the trustee would want is say at the end- i think the 401k payment would end about 5 months or so before the chapter 13. The payment is about $375/mo. Instead of paying the $375 /mo at the end for the 5 months, he'd want the balance (5months X $375/mo) about $1875 spread out monthly over life of plan instead- so about $32/mo plus atty and trustee fees.
Does this sound like it can actually work and that they'd really go over that?

We were going to file the end of this month, but to make sure we have enough money to pay they atty fees, our mortgage & utilities/food; we've decided to file the 3rd or maybe 4th week in April.

Thanks for any inight anyone can provide. I realize every chapter 13 is different, I just am overly anxious & nervous to begin with - I have an EXCELLENT Lawyer that doesn't even deal with paralegals- handles the entire case himself and answers the phone himself / email himself no matter when you call. I even got through on the weekend at 7pm (was just going to leave a message but he answered).

Thank you to everyone for all the guidance, support & advice

[SMinGA]

Sounds a little fishy to me. You have to have funds available to fund a ch. 13 plan. I have never heard of a plan that pays $0 per month. A 0% plan is not the same thing. 0% refers to what is going to unsecured creditors. Secured creditors, priority debts, etc. are getting paid.

Is this the only atty you've consulted?

[andysmom]

only atty. He's past president of the bankruptcy bar association & has 20+ yrs experiece.
we were over the chapter 7 median by only a few hundered dollars. Failed the means test by $371.00. when he did for a chapter 13, because our 401k loan repayment is allowed, (about $350) and other expenses that were allowed in a 13 not a 7 , we had negative dmi in a 13 of close to -$400/mo. so he said he called the trustees office & spoke with their atty and that's what he was told.
Our lawyer actually has an excellent reputation and originally thought we'd be a chapter 7, but my husband's quarterly bonus put us over the median by a few hundred dollars and then had to do the means test & because the only secured debt we have is our mortage (no car loans, helocs, etc) we passed the 7 means test. But because the 401k loan is allowed we are negative dmi for a 13 so he thought we'd be 0% payback, but when we called the trustee, this is what he was told.

[SMinGA]

But 0% does not mean $0 per month in payment.

[andysmom]

I'm sorry I'm completely confused. So the plan my lawyer is proposing doesn't sound legit?
Should I be considering other options?

[SMinGA]

I think you may be misunderstanding what your atty means. Did he say 0% payback, or did he say he is proposing you file a plan with a $0 monthly payment? 0% payback would mean 0% to unsecured. He may be proposing a plan where your secured (home) debt is paid in the plan. That is all I can think of since you said you have no other secured loans - unless you also owe taxes or any other priority debt.

For schedule I & J, actual income/expenses - what is the bottom line if you were to file ch. 13?

[andysmom]

He didn't say 0% payback - he said $0 payment to creditors because we have no disposable income. 0% payback to unsecured since we only have unsecured debt except the mortage. We don't owe any back taxes or priority debt ; the only thing we owe is alot of credit cards and our mortgage. He said we would continue to make our mortgage payment as usual & just make sure to be on time even if they don't send us statements.
He has all our paperwork and said that it would be $0 payment, except for the 401k loan at the end (the 5 payments that we'd owe) spread out over the life of the chapter 13. He said if our dmi goes up by 10%-15% then we'll have a payment.
We didn't get our taxes back yet- expecting a refund around $6000- cpa didn't finish them yet- if we get back before hand- spend down on reasonable expenses & keep receipts (fix roof / fix cars/ food / school clothes for son) - if it doesn't come before we file, he said he could exempt most if not all of it in.

I'm sorry to make this sound so complicated; I'm a nervous wreck- we tried to hang on for 2 years to try and avoid bankruptcy, only making things much, much worse & ending up here anyways.

Sad part is, if we filed when we should have (not even entering our minds at the time) we would have easily qualified for a chapter 7.

Thank you for all your info!

[sheilaE]

This thread is very interesting to me because I'm also confused by the re-payment plan. We have yet to file, but during our consultation, the atty came up with a re-payment plan of $1300.00 for $80,000.00 worth of cc debt, BUT we have so many other monthly expenses with 3 children and we are keeping our mortgage, so we're hoping we'll be able to get that payment down. I would love it we could get it under $500.00. Which leads me to the following question: Can the creditors come after our home if we don't pay back 100%? There is no equity in it-and we want to hold onto it. We have a 2nd and the the atty is going to try to strip the lien off it.
Just really interested in how a 0% payback works-won't they fight it and try to get something?

[andysmom]

HI, SheliaE
I'm completely confused too about this whole process. We didn't file yet either but plan on doing so the mid/end of april. We've retained our lawyer & his done the means test, etc.
Here's our situation: husband makes jsut barely over the median income for our state; so lawyer did chapter 7 means test which we failed by $300 and some dollars a month - that we'd have that much dmi - so we would have to file a chapter 13. When he did the test for chapter 13, we have neagtive dmi, because of the 401k loan repayment so he said it would be 0% payback to unsecured until the 401k is done- last about 5 months of plan. He called the trustee & spoke w/his lawyer who said that was fine but that would want instead of the last 5 payments at the end - they would want that amount spread out over the life of the plan, bringing our payment somewhere under $50/mo (depending on trustee / lawyer fees) etc.
We owe a little over $100,000 in credit card debt, our 401k loan and our mortgage w/ no heloc or 2nd- no car loans- so no priority or secured debt- all cc's.
Because our income is barely over median and our other expenses are pretty high (amt taken out of my husband's check for medical ea month is close to $500) that it leaves us no dmi - that's not padding or adding in any expenses and not even including our paltry 2% contribution to our 401k plan. I'm a stay at home mom w/ 1 toddler- family of three.
This is all the info I got so far.
SheilaE- I'm a nervous wreck & scared too, so I know exactly what you're going through. Does your payback include your mortgage (s)? Our's does not- it would be paid outside the plan and is approx $800/mo with tax and ins. feel free to private message me if you like at anytime & I wish you the best.
Thanks to everyone who's taking the time to answercontribute & help all of us "newbie's" out!

[SMinGA]

The only obligation to unsecured creditors in a ch. 13 is that they would get 'at least as much' as they would get if you filed 7. In a no asset (meaning no non-exempt assets) case, this means $0. Its not a matter of them liking it, or wanting to fight it - it is just the way it works.

Other than that, it is based on your disposable income - and the plan payment goes first to secured/priority/atty fee/trustee fee. Only if anything remains after that can the unsecured get anything.

Creditors can not 'go after' your home or anything else. They have to play by the rules.

[sheilaE]

Thanks! This is all beginning to make more sense to me. I would hate for anyone to go into a bankruptcy without spending time on this site. I've learned TONS in the last 2 weeks. Stuff I had no clue about. I'm so thankful I found this forum!!!

[momofthree]

HI, SheliaE
I'm completely confused too about this whole process. We didn't file yet either but plan on doing so the mid/end of april. We've retained our lawyer & his done the means test, etc.
Here's our situation: husband makes jsut barely over the median income for our state; so lawyer did chapter 7 means test which we failed by $300 and some dollars a month - that we'd have that much dmi - so we would have to file a chapter 13. When he did the test for chapter 13, we have neagtive dmi, because of the 401k loan repayment so he said it would be 0% payback to unsecured until the 401k is done- last about 5 months of plan. He called the trustee & spoke w/his lawyer who said that was fine but that would want instead of the last 5 payments at the end - they would want that amount spread out over the life of the plan, bringing our payment somewhere under $50/mo (depending on trustee / lawyer fees) etc.
We owe a little over $100,000 in credit card debt, our 401k loan and our mortgage w/ no heloc or 2nd- no car loans- so no priority or secured debt- all cc's.

Okay, I admit, I was really confused until I got to the above post. So they're spreading out those last 5 payments (which will go to credit cards, so you're not completely in a 0% payback) over the life of the plan. So, that would be around $32 a month + $3 trustee fees + $35-ish attny fees = $70/mo payment.

IF the trustee will go for that, then that's AWESOME! I think you stand a good chance of the trustee objecting to something in your budget with a payment that low though.

Also, I find it REALLY hard to believe that when your 401k loan is paid off, they'll just let you keep that additional DMI since you "spread it out over the plan term." But, again, all districts and trustees are different and if your attny already got the green light directly from the trustee, then hopefully it'll work out well.

We are paying our car payment + trustee fees + attny fees in our plan, which amounts to $610 a month ($98/mo over our car payment). Our attny says it shouldn't be an issue because we're "both working, $20k under the median, have an autistic son, and the trustee is still getting his cut." In your case though, the trustee isn't getting much ($3 per month if you're in a 10% state, could be as low as $1.50 a month?), so he might start poking around in your budget & question things more, who knows?

Also, speaking of car payments, how old are your cars and how much of a transportation expense are you claiming each month? You may want to consider using your tax refund as a down payment on a new(er) car. With a super tight budget, you don't want to have to deal with expensive car repairs and 5 years is a long time....

[andysmom]

Thanks momofthree.
the atty claims he spoke w/the trustee's lawyer and said sounds okay but whos knows?
Our cars are old (2001 &1998 -husband's work truck) both in good condition but I doubt anyone would finance us with how much we owe out & per atty's advice we stopped paying all cc's so we're aout 30days, maybe 45 days late on everything- except house.
Atty did explain how he came to that figure for the budget but I'm so confused right now, I don't remember. We didn't fill out paperwork other than 1 sheet that I had to put in our mortage,taxes,insurances,utilitites,transportation ,food,etc.
He said since we're above the median they use irs standards for food & things like that- said absoltuley won't be questioned. No daycareschool expense cause I'm home with my son. Didn't count the 401k contributions. Said he used only the necesseties basically and nothing was even included for entertainment, misc, etc. Transportation he told me how much he put down but I forget- he said he was a set amount (i guess for our district) I didn't add anything in that we weren't paying; Our utilities are kind of high (heat) because we have an old house (115 years+) but not out of line with anyone else's in our area and he said no one will blink an eye at it & I do have my bills from the previous 2 years. (averaged between summer & winter months to maybe $225 month or so- about $400 in winter and very cheap in summer).
I don't even have a cell phone to include. My husband's in paid for by work. The only thing that could be questioned he said was the telecommunications - $75/mo for home phone & cable. We didn't even include internet.
He said if it wasn't for the 401k loan we'd be a little over $200/mo payback (if I recall correctly) plus fees. Still much better than the credit card minimums of $2600/mo.

If it sounds lke I should be worried, how worried do you all think I should be?

Thanks in advance to everyone

[andysmom]

thanks sminga!
he said we are a no asset case / we don't have much of value at all and our home equity is exempt. The only thing that he may not be able to exempt all of is our tax return cause CPA doesn't have it done yet so not sure exactly how much it'll be but I'm okay with giving up a portion of it to make this work.
I just keep getting more nervous the more i read of payments of like $1000 - $1500/mo. We just don't have nor bring in that much- once the mortgage, utilities & food is paid, there's not much left over at all.
Thanks for explaining it to me.

[SMinGA]

Try not to dwell on other people's payments since you don't have enough info to know if you're comparing apples to apples. Someone else's $1500/mo may include a mortgage and/or car payment. Not to mention cost of living is different in different sections of the country.

thanks sminga!
he said we are a no asset case / we don't have much of value at all and our home equity is exempt. The only thing that he may not be able to exempt all of is our tax return cause CPA doesn't have it done yet so not sure exactly how much it'll be but I'm okay with giving up a portion of it to make this work.
I just keep getting more nervous the more i read of payments of like $1000 - $1500/mo. We just don't have nor bring in that much- once the mortgage, utilities & food is paid, there's not much left over at all.
Thanks for explaining it to me.