Chapter 13 DOs and DONTs!!!

[kolCh13]

[SMinGA]

First a couple of questions if you don't mind? Are you sure you're filing ch. 13? Reasons could be you don't expect to qualify for a 7 based on means test, of you filed chapter 7 more than 4 but less than 8 years ago, or hope to strip a 2nd mortgage? (You don't have to answer in the forum if you don't want to, its more food for thought type questions.)

As of right now - what do you think your DMI looks like? Take that amount, multiply it by .90 (max trustee fee is 10%, so this accounts for it) and multiply by 60. This is about what you would pay in, total, to your plan right now. DMI = Net income, less bills and expenses? (Only counting what you'll still pay after filing. So if stripping a 2nd, do not count it.) Keep that answer in mind...

Do you have any priority debts at this point? Mortgage arrears, taxes owed? The total you pay into your plan must be enough to cover all priority debts.

1. I think yes to replacing the old, high maintenance vehicles with newer. But be reasonable... And make sure you'll still have sufficient DMI. Secured car loans are usually priority debts and must be paid in full during the plan. Mentally round up what you'll borrow (to account for some interest paid on the loans in the plan) and deduct that from what you anticipate paying into your plan.

2. Probably not a good idea. My opinion? Start living now as you'll need to live thru the plan, kind of a trial run. Will help you to file a solid plan, because you won't be adjusting to your new 'budget' after filing it. That doesn't mean you have to twiddle your thumbs, never doing anything. But keep it reasonable. An elaborate vacation just seems like a bad idea.

3. If you're sure you'll file, then do stop paying credit cards. If you're going to give up the house, stop paying all mortgages. If you expect to keep the house, then you could stop paying the mortgage a few months ahead of filing (the arrears becomes a priority debt to be repaid in the plan) and use that $ for appliances, etc. BUT keep in mind your DMI will become the plan payment, and must be enough to resolve priority debt, trustee fees, etc. If you stop paying now and run your priority debt up to a point where you can't pay it off in your plan - you have a big problem. If your DMI is fairly low, I'd say don't create more priority debt. If your DMI will pay back a decent amount over the plan, you should be fine with adding more priority debt though.

4. No. Hiding assets is a bad idea.

5. Don't retain, but interview a few. Ask questions about your situation, and get a feel for what attorney you ultimately want to work with. Also start learning your state's exemptions, so you'll know whether you can keep some cash on hand when you file.

[Flamingo]

"2. Since we cannot take any vacation next 5 yrs in the plan, would like to take one before filling (one month worth of vacation left at work. Take it or lose it method)?"

You are struggling to make ends meet and you are worried about taking a vacation? How are you going to pay for it? If you are actually going to file a Chapter 13, realize that your lifestyle is giong to change tremendously during the 3 to 5 year period in the plan. In fact, the main reason for a Chapter 13 dismissal is the filers not being able to budget or cope with cutbacks and living discount, without, staying home, not eating out, etc. etc. Yes you can take vacations during a Chapter 13...you can save funds during your Plan and take weekend trips somewhere via car or just stay in your own backyard. You need to focus now on gettingout of debt and not on vacation brochures. That can come later when you successfully complete your plan and get our life back in order.

If you are not already robbing Peter to pay Paul you are one step from the practice. Realize you are broke and need to make some changes. Hard to face (we were there) but reality hits hard.

Best of luck to you.

[daglo]

I got my first judgement against me. I am sick to my stomach. I asked Chase to please work with me after our income loss (my husband took a cut in pay and I lost my job) They refused. They hired a law firm (low-life debt collector) and I tried to give them what I could afford each month, but they refused, wanting more. They were verbally abusive to me, questioning me on how I got in this situation. So, now they want me to appear in court. I have 28 days from today. We want to keep our home, and cannot afford the payment that an attorney told us we would have to pay in a 13. She said we make too much for a 7. Our house payment isn't half of our take-home, so I guess that is good. Anyone have any suggestions? Must we file or can we try to work out something with Chase's lawyers in court?

[SMinGA]

Daglo, its usually best to start your own thread...

If you can't afford the 13 payment, then one of 2 situations exists... Either you need to work on your expenses - either to cut back in some areas or to communicate your expenses better with your attorney. Your plan payment is your DMI, so if your attorney does not have all of your expenses he is coming up with a DMI that is not accurate for you.

If that is not the issue, then you may be trying to save a home that you truly cannot afford. I'm assuming you are behind on your home? Mortgage arrears does become a priority debt but it must be paid in full in your plan. As well as attorney fees (if your atty does not require payment in full in advance) and trustee fees. Plus any other priority debts. If arrears is your only priority debt, and you pay your atty in advance, then take your mortgage arrears and divide by 60 as that is the max plan length. Then take that amount and divide by .9 to account for the trustee fee. That is the minimum plan payment to resolve your mortgage arrears, and if you can't make it AND your regular mortgage payment along with utilities, groceries, transportation, etc. then ch. 13 is not an option to save your home. Unless you can cut other expenses or increase your income.

I got my first judgement against me. I am sick to my stomach. I asked Chase to please work with me after our income loss (my husband took a cut in pay and I lost my job) They refused. They hired a law firm (low-life debt collector) and I tried to give them what I could afford each month, but they refused, wanting more. They were verbally abusive to me, questioning me on how I got in this situation. So, now they want me to appear in court. I have 28 days from today. We want to keep our home, and cannot afford the payment that an attorney told us we would have to pay in a 13. She said we make too much for a 7. Our house payment isn't half of our take-home, so I guess that is good. Anyone have any suggestions? Must we file or can we try to work out something with Chase's lawyers in court?

[catleg]

1.Yes replace cars with sensible used cars.
2. Heard of a staycation?
3. Yes when you're sure you're going under stop all credit card and mortgages. Mortgage arrears will be 'cured' in the plan.
4. Yes save whatever you can.
5. No hurry. Research,research,research.

Convert cash to exempt assets or pay down student loans, but not taxes or secured loans.
May want to take 401k loans for strategic purposes (home repairs, pay student loans).

[forgotten]

I'm personally all for taking a vacation whenever you can. Obviously it shouldn't be somethinge expensive. Even in my 13 I am taking 2 vacations away from home a year. I'm actually splurging and driving to florida next week, nothing compaired to the vacations we took on credit... but still.

I feel its important to enjoy yourself and have time with your family any way you can. Everyone says you can wait and go on vacation in 5 years, but what if you don't make it 5 years?

My view is weighted by the fact that my life expectancy is shorter than my chapter 13 plan, but its still something to think about.

[Jmgonzales]

Need advise

I did my own Chapter 13. My court hearing is June 9. I am worried I did not do the repayment plan correct. My spouse gets 400.00 dollars VA disability income monthly. The book advised the money is exempt so I listed the income under property but did not include in the debt repayment plan as income. I was reading the BK book last night and it says to list on the forms and may be included as disposable income. Should I amend the forms and take them to the court? Also my daughter 24, her son who is 4, and my 20 year old son live with me. They are not working... I am supporting them. They receive unemployment and its very little. They are part of my household so can I claim them as members? Will it be to my benefit

[SMinGA]

I think you may want to consider filing a motion for voluntary dismissal - and then refiling with an attorney.

Before filing, did you consult attorneys to find out about the income/household questions? My understanding is that other household members income gets counted as far as it goes to household expenses. So the VA & unemployment that helps with rent/mortgage, utiltities, groceries: counts in your plan. Their income used for their own debts, entertainment, etc. does not.

Filing ch. 13 without an attorney is not likely to go well. Even of those cases filed with an attorney, only a small % make it to plan completion.

I did my own Chapter 13. My court hearing is June 9. I am worried I did not do the repayment plan correct. My spouse gets 400.00 dollars VA disability income monthly. The book advised the money is exempt so I listed the income under property but did not include in the debt repayment plan as income. I was reading the BK book last night and it says to list on the forms and may be included as disposable income. Should I amend the forms and take them to the court? Also my daughter 24, her son who is 4, and my 20 year old son live with me. They are not working... I am supporting them. They receive unemployment and its very little. They are part of my household so can I claim them as members? Will it be to my benefit

[catleg]

Filing ch13 pro se is really a false economy, since you can roll legal fees into the plan; essentially, unsecured creditors pay for your lawyer. You have to front some of the cost such as the filing fee.

[daglo]

Daglo, its usually best to start your own thread...

If you can't afford the 13 payment, then one of 2 situations exists... Either you need to work on your expenses - either to cut back in some areas or to communicate your expenses better with your attorney. Your plan payment is your DMI, so if your attorney does not have all of your expenses he is coming up with a DMI that is not accurate for you.

If that is not the issue, then you may be trying to save a home that you truly cannot afford. I'm assuming you are behind on your home? Mortgage arrears does become a priority debt but it must be paid in full in your plan. As well as attorney fees (if your atty does not require payment in full in advance) and trustee fees. Plus any other priority debts. If arrears is your only priority debt, and you pay your atty in advance, then take your mortgage arrears and divide by 60 as that is the max plan length. Then take that amount and divide by .9 to account for the trustee fee. That is the minimum plan payment to resolve your mortgage arrears, and if you can't make it AND your regular mortgage payment along with utilities, groceries, transportation, etc. then ch. 13 is not an option to save your home. Unless you can cut other expenses or increase your income.

Our mortgage is current, as are the car loans. How do you start your own thread? I looked but cannot figure out how, only how to reply.

[daglo]

1.Yes replace cars with sensible used cars.
2. Heard of a staycation?
3. Yes when you're sure you're going under stop all credit card and mortgages. Mortgage arrears will be 'cured' in the plan.
4. Yes save whatever you can.
5. No hurry. Research,research,research.

Convert cash to exempt assets or pay down student loans, but not taxes or secured loans.
May want to take 401k loans for strategic purposes (home repairs, pay student loans).

We owe18,000 in back taxes, and are paying 500 a month towards them. Do they ever reduce them or can they be put in 13 payment?

[newbie2]

Daglo, at the bottom of the main screen on the left is a button called "new thread". That is how you start a new thread.

[SMinGA]

Taxes are a priority debt, and can be repaid in a ch. 13.

We owe18,000 in back taxes, and are paying 500 a month towards them. Do they ever reduce them or can they be put in 13 payment?

[Lissy]

Back to the OP's questions, my answers are based on my own experiences.

1. Yes, replace the cars, but as SMinGA said, be reasonable. Don't go buy a Mercedes with an $800 per month payment. Try to finance as little as possible and definitely keep your car payments at or below the IRS standard for a 2-car household.

2. There's nothing that says you can't take a vacation for the next 5 years, you just have to save like a maniac and plan and budget. But I agree with the poster who asked how you are going to pay for it if you take one now. DO NOT rack up your existing credit cards on a lavish vacation and then file for BK a few months later. You will get raked over the coals.

3. Yes, if you know you are going to file, stop paying on your credit cards (I won't advise on the mortgage, I don't have one so no experience there). Use the money for new appliances if you must, but honestly, I would save it. Start a mattress fund. That is what my atty advised me to do (of course, you should do whatever your atty advises). There were 5 months between my initial consult with my atty and the day I filed. I stopped paying on everything during that time and used some of the money to pay atty fees and socked the rest away in a fireproof safe I bought at WalMart. It's my emergency fund and I don't touch it, only add to it whenever I can. Personally, I wouldn't buy any new appliances until the old ones actually die. Who knows, they may have more life left in them than you think. And if not, then you'll have an emergency fund when they do die so it'll be no biggie.

4. See #3 above.

5. This is totally up to you. Once you stop paying, you will receive nonstop calls from creditors. One way to get them off your back, if only temporarily, is to tell them you are filing for BK and give them your atty's name and number. You don't have to tell them when you are filing. It may hold off a few from filing lawsuits as well, giving you more time to plan and save. So it's your call.