Chater 13 with unsecured debt

[artgood]

Simple question...

It seems that most people on the forum filing chapter 13 have secured debt. Is that normally the case? How often does someone with no secured debt file chapter 13?

I'm still wrestling with this. Really worried about doing a 13 instead of a 7. It helps my conscience to pay something back... but the fear of being in a ridiculously hard plan is keeping me up at night.

[justbroke]

Filing Chapter 13 with no secured debt, is common! Remember, you can't qualify to receive a Chapter 7 if your disposable income indicates that you can actually fund a Chapter 13. The debtors who are likely to do this, are those who rent (a home/apartment) but have racked up tens of thousands of dollars in credit card, defaulted loans, medical bills, or even taxes.

A Chapter 13 allows you relief by keeping the creditors from harassing or otherwise contacting you during the plan years. It also abates interest in most cases as well! A debtor in these cases may end up paying their unsecured creditors 10%, 20%, or even 80%... but they won't pay the interest -- in most cases -- over the plan years, and that's significant!

[artgood]

Yep, that's us. We rent a house, and we racked up a lot of credit card/personal loan debt. We've also had a foreclosure. We'll just have to suck it up and make it work. There are so many unknowns. Hopefully, my attorney is worth the money we are paying her.

[alorth]

artgood...I have the same concern about a 13.

Knowing that roughly 60% fail going in, how will we be able to live on the Plan?

Are the trustees going to be reasonable? It puts my stomach in knots wondering about this.

Yet I know we almost have no choice, since we can only make SOME minimums, I'm late on 5 in my name, and we still use cc's to get by monthly for gas, groceries, etc.

[rjd78]

I had mostly unsecured debt when I filed (about $18,000). I did have a car, with about $10,000 left to pay off (so about $28k total). My attorney explained it as such...

First, you have to pay back as much of the secured debt as possible. After that, depending on your DMI, the unsecured creditors are paid. In my situation (and I think in most), the unsecured creditors get very, very little.

When I first filed, my monthly payments were $230 per month. That included 100% payback on my car loan, and the rest going to unsecured creditors (less than about $30 of that). However, my car broke down about a year ago and I couldn't afford to fix it (needed about $4000 worth of work). So, we petitioned the court to surrender the vehicle, my father leased a car (we decided that leasing, while in the CH13, was the best option as I only have about 2.5 years left. It was cheaper than buying, and anything major that goes wrong with the car is covered), and I make the payments on it and drive it. My attorney recommended my payments be reduced to $50 per month so that I could afford the car payment (I didn't necessarily need to get approval since my father was the one leasing the car).

So now, $50 a month goes to my unsecured creditors and that's it. I don't have any other secured debt after I surrendered my car.

[rjd78]

Are the trustees going to be reasonable? It puts my stomach in knots wondering about this.

This question isn't easy to answer. I've read on here of trustees that are incredibly unreasonable, and some that are very reasonable. In my experience, my trustee is very, very reasonable. My attorney explained to me that he's not out there to put the screws to people. However, I've also heard of trustees that are out there to get everything they can.

Talk to an attorney. Find out from them how long they've dealt with the trustee in your district. Find out certain things like, does the trustee have a history of taking more money if you get a raise? Does he take your tax refund? Answers to these questions will give you a good indication as to what that particular trustee will be like for the next 3-5 years. Some trustees make it very difficult to live within your means, and some allow you to get back on your feet and (gasp!) even allow you to do much, much better while in a 13.

[LadyInTheRed]

Knowing that roughly 60% fail going in, how will we be able to live on the Plan?

Don't let that number scare you. My understanding is that it's not accurate to say 60% of 13s fail. It may be that only about 40% of plans are discharged, but that doesn't mean they failed. Many people file 13 to get creditors off their back long enough to catch up and never intend to get to discharge. Others have a change in circumstances and convert to a 7.

[justbroke]

Exactly what LadyInRed wrote. My Chapter 13 plan might be considered a "failure" (lack of Chapter 13 discharge), but it was converted to a Chapter 7 and I received a discharge in that Chapter 7. However, let's not underestimate that the failure rate in Chapter 13s is very very high. The 60% comes in because a good number of cases never even make it to confirmation.

(Note: I hate statistics because 60% of all statistics are made up anyhow.)

[Pandora]

(note: I hate statistics because 60% of all statistics are made up anyhow.)

LOL!

[NowImDownInIt]

You are on here. I think that's half the battle with a Ch. 13. You are getting educated and you are getting support.

[jange]

Simple question...

It seems that most people on the forum filing chapter 13 have secured debt. Is that normally the case? How often does someone with no secured debt file chapter 13?

I'm still wrestling with this. Really worried about doing a 13 instead of a 7. It helps my conscience to pay something back... but the fear of being in a ridiculously hard plan is keeping me up at night.

I think it is pretty common. My plan is 100% unsecured, with about 60% payback, my mortgage is current and paid outside the trustee payment. My plan is livable, I manage to save some extra money every month for our emergency fund. We are able to still do things, we go out to dinner, but nothing fancy, I have already had several large expenses that I was able to pay for with cash. I actually have more money at the end of the month now then I did before filing. make sure all your expenses are listed accurately and included when you completed your schedules.

[indebt00]

We had substantial unsecured debt in our bk...and that was the main reason we had to file ch 13. unable to stay afloat anymore. I would have liked a choice between ch 13 and ch 7...would do 7 in a second. Your done, free, its over. 13 is a long road.....but we had no choice. over the median income by far, just no way we would do 7.

it really was the best thing for us. Its hard living on a budget I won't lie...but its a better way of life. We are learning to live within our means.

[987654]

Agree with other posters There are reasons to go with Ch 7, and reasons to go with Ch 13. IMHO, If you *can* do a Chapter 7, then I would say go for it. There is nothing saying that you can't pay off your creditors in the future, and I assure you they will be happy to accept money from you LOL! It's very honorable to want to pay them, and you can, the big difference (again if you're eligible for Ch 7) is that you can pay what you can each month, and if you have an unexpected expense in say, June, then you don't *have* to pay them.