I need some guidance

[daglo]

We have lost half our income, me losing my job, and my husband taking an income cut. We are in our 50's, and have excellent credit up to this point. Last April, when all this happened, we contacted our creditors when we knew we would not be able to continue paying our bills. We had accumulated alot of debt due to a job loss and having to live on credit until my husband found another after his company closed. We asked our creditors to please work with us, as wed've always paid on time, and asked for a payment plan we could afford until we got on our feet. Well, they refused raising our interest rates to over 30% maiking our payments go up twice as much as they were. I even wrote to the presidents of these companies begging for help. They refused. I was able to get a mortgage modification on our loan, which helped. So, I started to send them what I could afford on our credit cards. They sold our debt or turned us over to a collection agency. Yesgterday, I received my first letter telling me that a judgement has been filed against me, and I have 28 days to respond. I owe the debt, but cannot afford to pay it. I am sick to my stomach. On top of everything else, I had an ovarian tumor removed a few weeks ago ( more medical bills) but it was not cancer, and my father passed away a week before my surgery.My husband says it is not worth worrying about, and we will handle it. We talked to a lawyer who told us our payments for Bk 13 would be 1800, at least. We clear 5400 a month, but with our house, tax bill we pay, utilities, student loan, cars, that leaves us with about 200 for food and anything else that might come up.We are living right now on a strict budget, not doing anything. We were told a 7 is out of the question due to my husband's income. We have no assets, and our home is underwater by about 250,000. We have no savings, no retirement (all was lost when the last company went under). We built this house almost 20 years ago, and it is our family home. We got our payment down to 2290 from 3700, so we want to stay here. I would like some advice. Is a 7 possible with our income? Coudl we keep our home? We owe more on our cars than they are worth. One is a 2004, and the other is an 2007.

[LadyInTheRed]

It doesn't sound like a judgement has been filed. A complaint has been filed and you probably received a summons. You have 28 days to respond to the summons. Check your local courts website or an attorney for guidance on how to respond if you want to delay the entry of a judgment.

We talked to a lawyer who told us our payments for Bk 13 would be 1800, at least. We clear 5400 a month, but with our house, tax bill we pay, utilities, student loan, cars, that leaves us with about 200 for food and anything else that might come up.We are living right now on a strict budget, not doing anything.

The $1800 probably assumes the student loans will go into forebearance during the Chap 13. If the tax bill is for back taxes you owe, those payments may also be included in that amount. Same thing with the car payments. Do you know if these things are included in the $1800? The attorney should have explained what payments were included and what payments you would pay separately. How big are your car and student loan payments?

Consult with a couple more attorneys. Make sure you have complete expense and asset info so they can give you accurate info. Income alone will not disqualify you from Chap 7, but it sounds like the lawyer thinks you have disposible income to contribute to a Chap 13. A Chapter 13 should not make it impossible to live. If you don't qualify for a Chap 7 and would be required to pay so much in a 13 that you only have $200 for food and other incidentals, than either your budget isn't strick enough or you can't afford to keep your home and/or cars.

Listen to your husband. You can get through the financial problems by doing what you are doing: facing them and learning the best way to deal with them. Worry doesn't help, it will only jeopardize your health. Try to focus your emotional energy on getting well!

[SMinGA]

Student loan payments normally go into forebearance while you're in the ch. 13. The automatic stay prevents even those lenders from collecting. You will incur interest, but won't be considered 'late' or in default. Payments should resume when the plan ends.

Taxes are also paid in a chapter 13 - as a priority debt. Priority debts get paid before unsecured creditors. This is very common for IRS and state tax debts.

Car loans may be paid in the plan, may be paid out - depends on the district.

If your home is worth less than the 1st mortgage, the HELOC or 2nd mortgage should get stripped. Meaning it is treated in your plan as regular unsecured debt, and you no longer make your 2nd/HELOC payment.

I believe the $200 for 'food and anything else' was after your current car, student loan, tax payment, 2nd mortgage payment? When you add those payments back to your monthly expense budget: where do you stand?

[momofthree]

If you owe more on the cars than they are worth and you bought them both more than 2.5 years ago, then the attorney may be planning to "cram down" the balances and include those in the plan payment--which could help account for it being so high.

However, even if the cars are included, I don't see how you can end up with an $1800 plan payment with a $5400 income and a large mortgage payment:

$2290 mortgage
$400 utilities (estimate)
$985 food/clothing/misc IRS standards for family of 2
$120 medical expenses IRS standards
$472 operating costs for 2 vehicles IRS standards
$100 home maintenance
$50 recreation, subscriptions, etc.

=$4417 just for basic living expenses--not including car payments, tax payments, etc.

leaves $983 for a plan payment IF cars are included in the figure.

Make sure that the next attorney that you see (interview a couple more) has a complete list of your expenses and fully explains how they come up with your estimated plan payment...$1800 sounds too high unless you have non-exempt assets that you're trying to hold on to, or a high IRS tax bill that needs to be paid off...

[freeatlast98]

Daglo, I know exactly how you feel. My situation is almost the same minus an ex that financially devastated us. I too worry and lose sleep trying to figure out if I'm ever coming out of this. I will file Pro Se in about 60 days. I keep wondering how the situation became so bad. It means so much to me to be able to share this experience with others. I feel we're a big family. Anyway, thank you all that continue to share their experiences with people in the same sinking boat.

[owoody]

We are also in the same income bracket and our attorney is estimating around 1700.00 right now for a ch 13 Since we do have that much DMI left over.We do have a $10,000 IRS debt and also adding our $465.00 truck payment.Credit cards payments alone were $2200.00 plus the IRS tax payment we were making.Our house payment though is only $1500.00 compared to your 2400.00.....I hope you get it all figured out and it works out well for you.It sounds like it has been rough lately and it will be 1 less thing to worry about.........This is enough stress to deal................

[daglo]

We have no other assets except our home that we want to keep, and our cars. Our youngest daughter, who is still in college, is still living with us, so I guess we are a family of three for IRS standards. Yes, 200 was after the 13 payment, with all other payments included. That is what was left for food and misc. This attorney was from one of the BK factories in OH that has about 25 attorneys. She didn't explain much, was in a hurry to talk with us and move us out for the next person, also VERY unsympathetic to us. I don't want pity, but I do want an attorney to work FOR us, and handle us the best way, especially what we are paying for it. I am glad we did not sign with her. Thank you for all the great advice. I lose alot of sleep over this. My emotional state is shot, and I am on the verge of tears all the time. I can't believe this happened to us at this stage in our lives. We would have bet everything against it happening.

[SMinGA]

It would be a good idea to meet with at least 2-3 more attorneys. When you do so, go in with information on your income, expenses, bills, debt. Leave your checkbook at home - do not put yourself in a position where you might feel pressured to leave a retainer that day. You're interviewing - the attorney must work for you.

From what you described, the atty really didn't know enough about your situation to give you an accurate ch. 13 ballpark payment.

Many here will say to avoid the bankruptcy 'mills' that seem to go on volume and spend little time with any particular case. My attorney is part of a 2 attorney team, with a few paralegals. Small enough for personal attention, but has enough support staff to delegate things so he is not overwhelmed with work.

[researchnerd]

I don't have a lot to add other than what's already been said by others (please do go see at least one or two other attorneys), but I wanted to let you know you're not alone. We are in our mid-40s, lost half our income due to job loss 2 years ago, our creditors refused to work with us and jacked our interest rates, I even had ovary surgery last year. We tried to get a mortgage modification several times with no luck, so our home is scheduled for foreclosure in 3 weeks. If you'd asked me five years ago whether we'd be in this situation I'd have said no way - we both have college degrees and professional careers, and we expected to have our house mostly paid off and a little retirement fund saved up by now. Instead, we're filing for Ch13 and looking at a 5-year repayment plan. MY DS is in high school and will likely have to pay for his own college...which sucks.

You can help yourself by finding ways to reduce your stress about the whole situation. It is NOT worth jeopardizing your health over. One thing that really helped me was learning not to care about my credit score for now. I used to monitor it religiously, now I don't even look at it. Unless we win the lottery, there's nothing I can do about it. It will be in the tank for a while, all I can do is move forward in the best possible way for the long term. You can't change the past, just do your best with what you have until the situation improves.

[daglo]

Thank you everyone. Wow researchnerd, we are alike. We are talking with another attorney and we'll see what we can do. I know our credit score is shot also, so at least with a BK, we will not be harrassed anymore for our inability to pay.