Much larger payments than expected -- panicking!

[timecoloured]

I just got back from meeting with my lawyer and am utterly panicking about the numbers he came up with. I have $50k in unsecured debt that I would technically be able to pay back with my income, but am doing the Chap 13 because I have to walk away from a flooded condo my HOA won't fix (so I'm surrendering the property and this is to strip the 2nd mortgage).

Before this, my minimum credit card payments were about $1000/month and I was getting more and more underwater using credit cards. I figured with a BK13 I could get on a budget and pay back 100% of the $50k in 3 years. But my lawyer came back with a 2 year plan for $2000 a month, and I just don't see how that is possible. I didn't know there were 2 year plans! My expenses on the schedule J came to $4500, and my take home every month is $5500. I had just received a bonus a month prior that was an incentive to buy stock in our company so I was expected to (and did) pay it right back for stock options. So that random bonus drove up my 6 month average to look like I make an extra $1000 a month. My lawyer said we had to include it because it was technically my income, but I have no reason to think I will get any more bonuses. The owner of my company has done a random bonus once or twice before in the many years I've been there, but I never know when it's coming or how much it is.

I am just sick about this. I would have been better off just paying the 2nd mortgage and all my CCs (which would have cost about $1700 a month) and not had a bankruptcy on my record, but now it's too late to go back. Is there anything to be done here?

[keepinitreal]

It's not too late to go back. Don't sign the papers. Wait until the bonus drops off of the 6-month look-back, then file.

[ColoradoBell]

Ask your lawyer about the recent Supreme Court ruling in Lanning (see sticky at top of page).

Your 'look back' income isn't what your payment should be based on...its your future income and that wouldn't include bonuses. Why are you looking at a 3 year plan and paying back 100% ? Why not a 5 year plan that is more affordable?

[timecoloured]

It's not too late to go back. Don't sign the papers. Wait until the bonus drops off of the 6-month look-back, then file.

I guess that would be an option, except in that case we would be past the trustee sale and 2nd mortgage would be added to the BK (another 80k)

[timecoloured]

Ask your lawyer about the recent Supreme Court ruling in Lanning (see sticky at top of page).

Your 'look back' income isn't what your payment should be based on...its your future income and that wouldn't include bonuses. Why are you looking at a 3 year plan and paying back 100% ? Why not a 5 year plan that is more affordable?

Thank you -- I did slog through that document and was going to ask my lawyer about it.

As I understand it, the reason for the 2year plan is that I am required to pay it off as quickly as possible. Is that not the case?

[tigergem]

Thank you -- I did slog through that document and was going to ask my lawyer about it.

As I understand it, the reason for the 2year plan is that I am required to pay it off as quickly as possible. Is that not the case?

No, but the plan IS based on your DMI. If your DMI allows a faster payback time, then that is how the plan will be calculated. But as the previous posters explained, this should be forward looking and feasible. Not backward looking and impossible to live with.

[epiphany]

Well something is amiss. BK is to be a fresh start...not strap you with payments you can't afford. (not to imply that chapter 13 is a cake walk because it's not). You may have to wait to file or you may have to plan something else but you need to talk to your attorney ASAP. It's also possible that there is something you are not understanding.

A huge problem that many filers have (and I was no different though I tried) is that they are afraid to talk to/bother their lawyers. If you want to make sure that your bk is successful, you need to call your lawyer and ask him/her all the questions that you are asking right here, right now. Unless your attorney is completely inept (sadly that does happen once in a blue moon), I'll bet there is some miscommunication somewhere. I certainly hope that's the case.

Good luck to you,

ep

[muzzey58]

I have only heard of 3 to 5 year payback plans. You have the right to seek other counsel. I would not sign anything until you talk to a new lawyer. Also, I would almost let the condo go to foreclosure before filing bankruptcy. My husband lost his job and wasn't able to keep up the mortgage payments on his condo. He let the bank repossess his condo in 2005. When we went to file bankruptcy the condo was sold at a sheriff's sale and he did not owe anything on the bankruptcy case for it. But $2000 a month is a little steep. You should get better representation than this lawyer. I had a bad attorney who messed up our case and we're still trying to clean up after him. I had to hire a new attorney, modify our plan again because he had our payback at such a high price. I had to quit working in 2006 because of a serious shoulder injury. However, my income was still listed in our confirmation plan. I asked him to modify the plan because I hadn't worked for almost 6 months at the time of confirmation and he wouldn't do it. We were losing close to $1000 in income. I was a nurse for 14 years and could not work anymore because of the shoulder injury. Our plan would have been feasible if I worked. We were barely living and that extra $1000 would have been bearable for us over the next few years. We hired a new lawyer she filed a modification to our plan and it was approved. We'll have to pay a few months longer but at least we can afford food. I believe that this entire plan needs overhauled. Bonuses are usually gifts from your employers not income. One year could be great the next a drought. This is why it isn't feasible in a bankruptcy. Only your monthly regular income should be listed on your plan. The payback amount should be passed on all your expenses. My attorney tried to list everything she could think of including such items as car repairs, food, medical. Go everything you can think of as an expense. Insurance costs, medical costs, food costs, basic entertainment costs, transportation costs, personal care costs just everything you can think of and list it on the expense sheet. We even included tithing and pet care items because we have guinea pigs that are very picky about their food. So we included their $15 a week food bill on our case. You have to think of everything you are paying out for every month. Then take it to your attorney and prove that you can't afford that much out of your income for a bankruptcy case. You have to be proactive in your case. Don't just take the advice of your attorney as law. You need to follow your gut and if your gut is warning you. Then don't sign anything, get a second opinion or a new lawyer and do what's right for you. Good luck