Chapter 13 - Voluntary Dismissal Advice

[dillion1]

I need some advice in regards to a chapter 13 filing. I filed Chapter 13 back in 2008 and have yet to have the plan confirmed. I had some large business debts that I had guaranteed personally that were a big part of our filing bankruptcy. Also I had an active lawsuit that was very costly. The lawsuit was settled after I filed the Chapter 13 and I have been making my regular monthly payments to the Trustee. The Trustee has sent a final set of recommendations that our attorney is working out and we are very close to confirmation. I had not done my taxes for several years and of course to file the Chapter 13 we had get them all filed. I received a refund for around $13,000 which I must surrender to the Trustee prior to confirmation. So far I have paid approximately $5,500.00 in plan payments. I had a small arrearage on my mortgage and a couple of credit cards but the bulk of my debt was unsecured (business debts). My plan is for 5 years and totals about $50K dollars in payments. My question is this. If I were to make a settlement offer with the business debts that were unsecured and have the judgments satisfied, make up the small arrearage on my mortgage, and possibly settle with the two credit cards for say $15,000.00 would it be a wise move. My thought is if I did this I could voluntarily dismiss my chapter 13 since it has not been confirmed yet and I save myself $35,000.00. Granted this would hinge on my business creditor settling for much less than is owed, but the way the plan has worked out they will be getting only a few hundred dollars over the course of the 5 year payments. If they were to take a settlement they would be getting way more than they would over the next 5 years. Any thoughts, suggestions, or ideas would be appreciated.

[catleg]

Do you have any assets to protect?

If most of your debts are non consumer you would potentially be eligible for a chapter 7, as long as your budget (sched I&J) doesn't show disposable income to fund a chapter 13 plan.

The problem will be, if you get 1099'd by these people, you'll owe a bunch in income taxes on debt forgiveness. So you need to look at how all these figures play out in those 3 scenarios (dismiss&settle, ch7, ch13).

In any case the nice thing about ch13 is you can take some time to decide what your ultimate plan is. (about the only nice thing).

[dillion1]

When we originally filed I don't think we were eligible for a chapter 7, it has been a while so I will have to look into that again. I don't think 7 was possible due to the property we owned. Great point in regards to the 1099, I never thought about that. I will have to have our CPA look at that issue. I guess if negotiations went well enough I could try to structure that 1099's would not be issued. I am probably dreaming here, but it never hurts to ask. Sometimes the answer surprises you.

When you say the nice thing about the Chapter 13 is that you have some time to decide - are you referring to the time prior to the plan being confirmed, or do you mean after the plan is confirmed.

Also I kind of thought my payment plan was high, but after seeing some of the payment plans on this forum I might be crying wolf. Is $50k worth of payments over 5 years a bad deal. How would you rate it on a scale of 1 - 10?

[lrprn]

Is $50k worth of payments over 5 years a bad deal. How would you rate it on a scale of 1 - 10?

Only you can decide if it's a bad deal for your family or not. In our case, the freedom and joy we now feel finally being able to climb successfully (and legally) out of the debt death spiral we were in has proven to be priceless. Way more than a 10 for us!