Chapter 13 basics

[sdevine6910]

In a nutshell, my attorney and I figured my DMI is around $500. In determining my expenses, he did not include my arrears, back property tax or what I owe to IRS and State of California. I'm just confused as far as how these will be figured in.

[SMinGA]

Those would be paid thru your plan.

To determine DMI, you count all bills & expenses you would pay directly. The DMI becomes your plan payment.

About how much do you owe on arrears, taxes, etc.? Can they be resolved with a payment of around $500 per month? That is the important question, when you have debts that must be paid in full during the plan.

[sdevine6910]

My arrears are around 14k, back property taxes around 7k, IRS and State of California are around 85k. I asked my attorney if I should do an "offer in compromise" with taxes now before I file. He thought maybe I should. As far as arrears go he said he's been able to negotiate just paying interest on them.

[SMinGA]

I have no info on IRS/offer in compromise...

@ $500 per month over 60 months, you'd pay $30,000. Trustee fees would be 10% max, so leaving $27,000 to pay debts & atty fees. (If atty fees are not paid in full in advance.) Unless the $85k IRS & state of California is a typo, you have a BIG problem as you won't come close to paying it off. Would need much more DMI to file a feasible plan.

Did you perhaps mean $8.5k instead of $85k?

Have you tried to contact your mortgage co and try for a modification? Perhaps to reduce your mortgage rate and amortize the missed payments?

My arrears are around 14k, back property taxes around 7k, IRS and State of California are around 85k. I asked my attorney if I should do an "offer in compromise" with taxes now before I file. He thought maybe I should. As far as arrears go he said he's been able to negotiate just paying interest on them.

[sdevine6910]

Yes $85k as in $85,000 total for IRS and State.

I initially went to an attorney (paralegal actually) who does "mortgage modifications". Long story short, ING Direct (my first mortgage) would only do a 1 year modification if A) I showed pay stubs (I'm self employed and showing them my last 6 months of bank statements from the work I do left them uneasy because it wasn't consistent) B) they wanted to see that the back property tax was paid. $7k which I can't pay in one lump.

This law firm then suggested CH 13 would be best, which would strip my second lien. They were also confident we could do an "offer in compromise" with the State tax and IRS since I'm in hardship. I felt I was being "taken for a ride" by them. I'm praying this attorney I'm working with now isn't just taking my money. He's very confident "everything will be fine", but I wake up in fear every day that this is not going to be fine. I really need to find out more information on what I need to do with the IRS and State.

[Universal]

I would just want to be sure that the attorney is well versed not only in bk matters, but specifically IRS and tax matters also, which may require you to seek additional consultations.

[SMinGA]

When you calculated $500 DMI, did you count your 2nd mortgage payment as an expense? If so you would need to add that back to your DMI due to the lien strip.

At this point, do free consultations with attorneys. DO NOT pay anything until you have reviewed your options. If you have to repay $85k taxes (plus other debts) then you'll need a plan payment of around $2k per month. Plus must make regular mortgage, taxes, etc. payment going forward after filing.

If you gave up the house - could you reasonably rent elsewhere for less than your first mortgage payment?

[sdevine6910]

SMinGA, yes I did count my second mortgage into my expenses. My second mortgage is $1100/mnth. Are you saying I should add this $1100 to my DMI assuming it will be stripped?

[SMinGA]

Yes. If your home is worth less than your first mortgage, and you're going to strip the 2nd in ch. 13 then the 2nd becomes general unsecured debt. You will no longer make a 2nd mortgage payment.

Don't count anything in bills/expenses that will not remain after filing. SUch as if you're giving up a car w/ a loan - you would not count that payment in your budget either. If you have student loans, check with your atty - but many districts do not consider them as an expense for ch. 13 because they go into forebearance while in a plan.

SMinGA, yes I did count my second mortgage into my expenses. My second mortgage is $1100/mnth. Are you saying I should add this $1100 to my DMI assuming it will be stripped?