Future Ch. 13 filing, please advise...

[NeedOptions]

This is the most humbling post I've ever had on the internet. My wife and I have accumulated a world of debt and can't seem to get out of it. Yes, I will be first person to admit that it is our fault and blame is to be assigned to us. We both have jobs and have been employed for the past 14 years in our field of work. Both of us, due to the economy have gotten a considerable pay cut and because of this, our options are limited. Both of us have never been late on a payment of any kind in the past 12 years of marriage so we have no "negatives" yet. Our problem is that after paying all the minimum payments, we basically have 0 dollars left over. We basically work for the cc companies.sad.gif We are both teachers and get paid once/month and it has been tough lately. After paying all the minimum payments, we have to use the credit cards again to survive for the month. We are basically bankrupt already. We have two wonderful kids that we provide for and it's gotten to the point where everyday is a struggle and whenever we have to spend money on anything, I feel guilty. This year, due to the economy, we have taken a pay cut and this is what will push us over the edge. Here are the facts:

Me: $140k in cc debt spread over 7-9 cards.
Wife: $70k in cc debt spread over 5-6 cards.

Total debt: $210k in cc debt.


Salary (combined): $145k/year

After tax income: $8,500/month

Minimum payments: $4500/month
Child care: $600/month
Mortgage: $2800/month
Car #1: $260/month
Car #2: $775/month (this will be paid off in 3 months)
Utilities: $300/month
Car insurance: $100/month
Food for a family of 4: $600-$800/month


Total monthly needed for all debt: OVER $10k+

I realize that we do not qualify for a ch. 7 filing and need to file for ch. 13.

[NeedOptions]

A lawyer that we saw today mentioned something about our car payment being finished in June and how that was not necessarily a good thing. He recommended that we buy another car and use that as part of our expense. Should I merely trade in my soon to be paid off car or keep it and buy another one? I am considering buying another car because the Honda that we leased will have to be given back in 3 years. It would be tough to buy a car then as our FICO scores would be low. Thus, should I buy a car now and give the leased car back to Honda as soon as we buy the new one? Or, will the trust let me keep my wifes paid off car, the leased car and the new car that we might buy? In a Ch. 13, can we keep 3 cars? One of them would be paid off before we filed. Our lawyer also recommended that we file before the car is paid off and we could use that payment as one of our expenses. Would the trustee fall for that because the car is scheduled to be paid off in July of this year. Would I get the full $775/month benefit over the 5 year repayment period? Thanks in advance.

[SMinGA]

I removed the CC payments as they won't remain in a ch. 13.

There are quite a few things you need to account for, such as:

Gas/vehicle maintenance
Clothing
Household supplies/maintenance
Personal Care
Entertainment, Gifts/holidays (not extreme, but reasonable)
Any education expenses beyond child care?
Medical
Life Insurance
Other insurance?

Before factoring in these things, you show a DMI of $2865/mo. But you don't REALLY have that much DMI so you need to account for your other expenses.

Also, regarding the after tax of $8,500 - do you normally receive a tax refund or owe? You may need to adjust withholdings to come as close to even each year as possible. If you owe now, and go into a plan without adjusting then you'll have trouble paying taxes in the future.

After tax income: $8,500/month

Child care: $600/month
Mortgage: $2800/month
Car #1: $260/month
Car #2: $775/month (this will be paid off in 3 months)
Utilities: $300/month
Car insurance: $100/month
Food for a family of 4: $600-$800/month

[ConfusedinOC]

My wife was leasing a Hummer at $870 a month. The lawyer we consulted stated that it would not look good claiming BK with such a vehicle. At the time we had 3 months left on the lease. We decided to turn in the lease early and luckily GM was forgiving two months of payments on lease returns so we just paid one month.

[NeedOptions]

I removed the CC payments as they won't remain in a ch. 13.

There are quite a few things you need to account for, such as:

Gas/vehicle maintenance
Clothing
Household supplies/maintenance
Personal Care
Entertainment, Gifts/holidays (not extreme, but reasonable)
Any education expenses beyond child care?
Medical
Life Insurance
Other insurance?

Before factoring in these things, you show a DMI of $2865/mo. But you don't REALLY have that much DMI so you need to account for your other expenses.

Also, regarding the after tax of $8,500 - do you normally receive a tax refund or owe? You may need to adjust withholdings to come as close to even each year as possible. If you owe now, and go into a plan without adjusting then you'll have trouble paying taxes in the future.

We pay around $500 or so for our income taxes so it's pretty even.

[NeedOptions]

My wife was leasing a Hummer at $870 a month. The lawyer we consulted stated that it would not look good claiming BK with such a vehicle. At the time we had 3 months left on the lease. We decided to turn in the lease early and luckily GM was forgiving two months of payments on lease returns so we just paid one month.

We just leased the car 4 months ago so we would just have to turn it in without paying the rest of it as it is a 36 month lease.

[SMinGA]

I think ConfusedInOC was pointing more at your $775 car payment than the $260 lease payment. But since the $775 car payment is nearly paid in full, I can't imagine the relatively high payment amount being a problem. Going into a plan with a brand new $775/mo payment might be though.

No advise on whether its best to trade in the nearly paid for vehicle on something newer - though if you do, it should not present a problem as long as its a reasonable vehicle. (At or under the IRS vehicle payment allowance I believe would be fine. Another $775/mo payment would probably not be.)

[NeedOptions]

I suppose my goal is to minimize the payment to the trustees over the next 5 years. I have a problem with getting direct answers from lawyers as I cannot decide on which one to use. I don't want to end up paying for 2-3 lawyers.