Any Successful Chapter 13's?

[jetsfan2010]

It seems people pay so much for a chap 13 that they are unable to live.

I think this is the reason many fail. Many times if you are in a 100 percent payback plan, you would be better off negotiating settlements for percentage of whats owed with each creditor.

[LadyInTheRed]

It seems people pay so much for a chap 13 that they are unable to live.

I replaced $1,000 in monthly payments with a $500 plan payment that includes the payment on the new car I bought 6 weeks before filing.

Follow LPRN's three keys for a successful 13 and you should be able to live just fine as long as you don't try to keep assets you can't afford and don't have any significant reduction in your income.

[justbroke]

I think this is the reason many fail. Many times if you are in a 100 percent payback plan, you would be better off negotiating settlements for percentage of whats owed with each creditor.

Actually, negotiated settlements may not be actually better.

• A 100% payback plan will stop accrual of all interest.
• A 100% payback plan does not require large lump sump payments (as many settlements do).
• You are not 100% guaranteed that the settled debt won't be "sold" to another junk debt buyer (JDB).
• You will likely pay taxes on forgiven debt (1099-C)
• You are not 100% guaranteed that all creditors will settle or for what amount they will settle.
• You could deplete your 401(k) trying this route, as many have, and still be in debt and need to file bankruptcy.
• It is highly likely that not all your creditors will even file a claim in a Chapter 13 100% plan.
• A Chapter 13 will teach you how to budget; debt settlement won't.
• Your credit report is affected just as much, if not worse, from the entry "settled for less than full amount" being reported for the next 7 years.

That's just a few thoughts. Now, there are some cases where this makes sense, to settle, but I wouldn't do so at the risk of depleting a 401(k) or being stuck with a bunch of 1099-Cs! If the debt is miniscule, $10K, then it may not be an issue. However, if you have $200K of unsecured debt (as I did), settling for 20% would yield $160K in gains and a nice tax bill of $80K.

Just something to think about.

[IamOld]

Justbroke...you mentioned not all Ch 13 claimants may file...is that likely???

[justbroke]

Justbroke...you mentioned not all Ch 13 claimants may file...is that likely???

Very likely. I had two creditors that didn't file a claim. They were Bank of America and Chase and the two totaled over $26K! Most of the times, the debt is sold to junk debt buyers (JDB) pre-confirmation and you'll see named like B-Real, B-Line, Roundup Funding, e-Cast Settlement, etc. They are relentless and tend to file because they bought a "portfolio" specifically to drain it for every penny that it's worth! The debt that isn't transferred/sold, is usually not claimed from my experience.

[IamOld]

Interesting! INdeed, HSBC Credit Cards dumped it to their JDB, but Chase filed...thus far, Citi and Citi/Home Depot have not...AND!!!! and HSBC UNsecured line of credit that had filed suit before bk....

Have not seen Sallie Mae yet either - but I continue to wonder if they even will, as the sum is ungodly, and it'll survive BK anyway...

[lrprn]

Keep in mind that even if creditors don't file claims before the deadline, unless your plan is set up from the beginning as a 100% payback, the only thing that will happen is that your creditors that do file claims will get a larger % over the life of your plan. Your Ch 13 payment still remains the same and you still pay the same number of months.

Like JB, two of our biggest cc creditors didn't file claims either - one for $12K and the other for $10K. However, several of our smallest creditors that we owed less than $300 to did file claims. There's no reliable pattern to figure out ahead of time which creditors and collectors will file claims and which won't.

Don't waste your precious time and energy seeing who files and who doesn't. Unless your plan is set for 100% payback at filing, it really doesn't matter to you in the long run who files claims and who doesn't. It's a much more fruitful use of time to make sure your budget is realistic, everyone in the family is on board with the budget, you have a good way to track and document living expenses across the family on a regular basis, and the budget allows saving some dollars for your emergency fund as quickly as possible.

[jetsfan2010]

Justbroke - thanks for the input. In your situation(200k unsec debt) I can certainly understand why it made sense. In some cases though, debt settlement is an option. A former co-worker of mine just did this in lieu of a ch 13, and he used a tax refund received to settle 40 cents on the dollar of his 20k debts

[IamOld]

Agreed LRPN!!!! It's just that if Sallie Mae doesn't put in a claim, then we'd essentially be in a 100% repay AND then possibly our payments would possibly even end the plan early :-)

BUT if Sallie Mae puts in a claim, forget it :-) - in for 60 months.

Keep in mind that even if creditors don't file claims before the deadline, unless your plan is set up from the beginning as a 100% payback, the only thing that will happen is that your creditors that do file claims will get a larger % over the life of your plan. Your Ch 13 payment still remains the same and you still pay the same number of months.

Like JB, two of our biggest cc creditors didn't file claims either - one for $12K and the other for $10K. However, several of our smallest creditors that we owed less than $300 to did file claims. There's no reliable pattern to figure out ahead of time which creditors and collectors will file claims and which won't.

Don't waste your precious time and energy seeing who files and who doesn't. Unless your plan is set for 100% payback at filing, it really doesn't matter to you in the long run who files claims and who doesn't. It's a much more fruitful use of time to make sure your budget is realistic, everyone in the family is on board with the budget, you have a good way to track and document living expenses across the family on a regular basis, and the budget allows saving some dollars for your emergency fund as quickly as possible.

[justbroke]

Justbroke - thanks for the input. In your situation(200k unsec debt) I can certainly understand why it made sense. In some cases though, debt settlement is an option. A former co-worker of mine just did this in lieu of a ch 13, and he used a tax refund received to settle 40 cents on the dollar of his 20k debts

The problem is USUALLY not the settlement amount. The problem is the tax on the forgiven debt!!! Your friend now has $12K more income ($20K - $8K (0.40 on the dollar) = $12K). He will pay at least $3K in taxes, so he actually settled for 55% or .55 on the dollar if he stays in a 25% tax bracket.

This is precisely why settlement should be reviewed very carefully with the full knowledge of the tax impact on the decision.

[jetsfan2010]

The problem is USUALLY not the settlement amount. The problem is the tax on the forgiven debt!!! Your friend now has $12K more income ($20K - $8K (0.40 on the dollar) = $12K). He will pay at least $3K in taxes, so he actually settled for 55% or .55 on the dollar if he stays in a 25% tax bracket.

This is precisely why settlement should be reviewed very carefully with the full knowledge of the tax impact on the decision.

Thanks for the info. Not sure if the creditors stated to him about the 1099 issue or not.

[LadyInTheRed]

Thanks for the info. Not sure if the creditors stated to him about the 1099 issue or not.

It's not the creditor's job to warn the debtor about a 1099. I hope your former co-worker doesn't get surprised by his tax bill.

[justbroke]

Thanks for the info. Not sure if the creditors stated to him about the 1099 issue or not.

The creditors are required by law to issue a 1099-C (Forgiveness of Debt). Otherwise, the creditor will sell the deficiency to another Junk Debt Buyer (JDB) and around and around we go! This is why debt settlement needs to be done very carefully and hopefully with representation.

[James H]

Just made my 48th Payment in a 60 month plan and have no intentions of having this thing fail.... I'm almost there!!!

For me the first stages were a nightmare, kept me up at night. going to court was pure hell, I kinda felt like a criminal standing in front of the judge. But even that was better than getting huge credit card bills every month that I knew I could never pay.

The day I left court with a set payment everything got better. I make my payment every month and It's just like any other bill. The trustee has never had to contact me and I've never had to contact them (thank god) I've also learned to budget a lot better and have a good chunk saved up. When I'm finally done with this next summer I'm just going to keep making the same payment but to my savings account instead of the trustee.

I think there are a lot more stories like mine that you realize it's just that on a bankruptcy forum people are going to come here that have problems and are looking for help/comfort.

People that are doing well in the chapter 13 just kinda stay away

[angel7821]

Just made my 48th Payment in a 60 month plan and have no intentions of having this thing fail.... I'm almost there!!!

For me the first stages were a nightmare, kept me up at night. going to court was pure hell, I kinda felt like a criminal standing in front of the judge. But even that was better than getting huge credit card bills every month that I knew I could never pay.

The day I left court with a set payment everything got better. I make my payment every month and It's just like any other bill. The trustee has never had to contact me and I've never had to contact them (thank god) I've also learned to budget a lot better and have a good chunk saved up. When I'm finally done with this next summer I'm just going to keep making the same payment but to my savings account instead of the trustee.

I think there are a lot more stories like mine that you realize it's just that on a bankruptcy forum people are going to come here that have problems and are looking for help/comfort.

People that are doing well in the chapter 13 just kinda stay away

Very nice post James. Glad to hear it is going well for you. I am about to mail payment 17 out of 36 so I am almost half way thru with my 13 as well. I am not having issues with my plan either. My car is being paid outside the plan and will be done this month. That will give me an extra 400.00 per month to live on. At my 341 trustee said he would not want the extra money when the car was paid off. The only thing he requires is my tax return every year. I am going to be saving the 400.00 per month in a savings account. It will be nice to watch it grow. I wish I could pay off my 13 early but since it is 36 months that is not an option. I will be glad when it is finally over.