Question about a 13

[ttcbk]

Hello, I'm sure I'm not the first person to ask this question, but I'm wondering about the following. (FYI:I'm in Maryland)

I make approximately $107k a year, we have about $44k in cc debt ($1200 a month payment). The mtg is $2500 and 2 car payments are $700 total. My net income is roughly $6000 a month and after bills are paid and before food, clothes, etc we have $500 left. I'm contemplating a 13 but I'm curious about the following.

1) When you file a 13 are you put on a budget so that everything you spend is under a microscope? i.e., vacations, etc?

2) our cc payments total $1200 a month. All I'm looking to do is lower the payment of these so that we can afford things like the dentist, etc. We are not late on any payments at all right now. I've called all CC companies and have lowered my payments and have been put in payoff plans on all, but it's still tough getting by month to month.

3) We have 2 cars we want to keep and a disney vacation club timeshare that we use each year as our vacation. Will I have to give these up? Will I be able to allocate $$ to still go on vacation each year (~$2000)?

Thanks

J

[momofthree]

1. Yes, you are put on a budget. However, once your plan is confirmed (usually 6-12 months after filing) & if you don't have major income changes, the trustee will not be overseeing your monthly expenditures or evaluating your bank statements, so if you can save money out of your planned budget by being extra frugal, then you can save up to take a vacation. You will not be allowed to have a "vacation" expense on your schedules though.

2. Not sure what your question is. ;)

3. Keeping the cars shouldn't be an issue. How old are they? If they are more than 3-4 years old, then I'd recommend trading them in for newer vehicles that will get you through your 5-year bk without needing major repairs. Is the Disney timeshare paid off? If so, then you should be able to keep it, but they might not allow your "maintenance fees" as part of your budget, so you'd have to pad other areas of your budget to cover them. If the timeshare is not paid off yet, then you probably won't be allowed to keep it unless you're paying back 100% of your debt. As I mentioned above, you will not be allowed a "vacation expense" on your budget. $2000 vacations will probably not happen during your bk.

4. I notice that your gross income and net income are significantly different. You have listed gross of $8916 ($107k annually) & net of $6000. Are those numbers correct? $2900 is a huge withholding. Do you normally receive a tax refund? If so, they will make you change your withholding so that you get more money each month in your paycheck that you can pay into your plan. Are you contributing a lot into a retirement plan? This may or may not be allowed depending on your individual case and trustee.

It's a good idea to interview several attorneys before deciding to file. Good luck and keep us posted.

[Flamingo]

May I toss something in here for the OP along with the good advice above...During a Chapter 13 there is a major lifestyle change that needs to take place in order to successfully complete your Chapter 13. Many have a hard time doing that (i.e., giving up expensive vacations, having to shop discount, bulk, etc. and no more weekend mall sprees). You probably will be able to vacation each year but you will somehow have to find a way to save and do it. We were lucky as we had friends who have a beach house and invited us down each summer for a week or so absolutely free - we supplied part or most of the food for that time in exchange. Or we vacationed in our back yard as most do. The main thing is to change your mindset and lifestyle to get through the Chapter 13 because once you do so and things get better and you learn to control your money with some serious budgeting, you can have that all back again. If you cannot change your mindset and lifestyle during your 13, you risk dismissal if you cannot make your plan payments or pay your other bills by spending money on items like vacations or other non-necessary items.

Best of luck to you.

[ttcbk]

Thanks guys. So here's a bit more detail. The above salary is correct, but I get paid every 2 weeks so twice a year I get an extra paycheck. I usually get back a refund from taxes, but this year because I upped my number of exemptions to get more money in my check a couple times, I may end up having to pay. I was planning on paying that with my extra check in the April/May timeframe.

The cars are brand new and don't want to get rid of them. Again, all payments are on time. I don't have a 401K. I've borrowed against it and I'm paying back the 2 loans at $12 a month for it.

Does the court decide the 3 or 5 year timeframe, or is that something my lawyer and I determine? If I get 2 extra paychecks a year can I use them for what I want or does any extra cash go directly to the trustee?

My wife is pregnant and due in March. Not sure if that matters. Also I was planning on doing the 13 myself and not including her. I think I am the only one on the credit cards and debt except for one card that she has for $1400.

My lawyer seems to think that since I only pay $150 a month for our DVC that we won't have to give that up because it is a reasonable cost for a yearly vacation. It's not paid off. We owe about $8800.00 on it and don't think we could get what we owe.

If I start this process and find out that they will take the DVC away, can I cancel the process, or do I have to continue once I get the ball rolling? What about the 2 extra paychecks? Do they get factored into the payment or is that "free" money when I get them? I am really, really hesitant to move forward because we are at the point where we've gotten most of our cards in a payoff plan with lower interest rates. We just don't have any breathing room for an emergency, dentist, etc.

Thanks.

[Pandora]

your plan term is based on if you're over median or under; in your case you will be in a 60 month plan as you are over median. Your plan should be based off of 26 payperiods and not 24, since you get those extra checks. So, it would calculate out including those extra pay checks (i.e., simply take your Gross yearly / 26, then take deductions to get net ), which means your monthly amount may be higher than it actually is, depending on how your attorney calculates it.

While I understand your wanting to keep your Disney time share, it really doesnt come down to what we "want" - it comes down to what the trustee feels you can live without, sad as that is. Trustee works for the creditors, and that $2K a year for a vacation can go to pay a creditor. You're contemplating filing BK for a reason - that reason should be based on several things, 1 being debt to income ratios, 2. if you're robbing peter to pay paul (using credit cards to fund items) - then you're technically broke. Why would a timeshare be your decision breaker at this point?

[momofthree]

Like Pandora stated, your monthly income (and plan payment) will be based off of your 26 pay periods, so it will be up to you to save that extra check each 6 months and use 1/6th of it each month so that you can afford your plan payment without struggling.

It will probably be in your best interest to wait until your baby is born so that you can use the higher monthly expense amounts for having another household member (plus additional daycare expenses, etc.)

As far as the timeshare, it doesn't matter that you're upside down on it. Timeshares are practically worthless in a trustee's eyes, they don't want to seize it to sell it. You would simply surrender it back to the timeshare resort. The way the trustee will see it is that $150 (and I'm guessing an average of around $50/mo in maintenance fees), which comes to $12000 over 5 years, is something that the trustee will want to pay to your unsecured creditors. Of course, your attorney thinks it will be okay, and he is more familiar with your local trustees than we are, so you may be able to slide it through without any problems, especially if you end up in a high percentage payback plan. But at least you will be prepared if an objection arises.

As far as if you can dismiss your case if the trustee demands you surrender the timeshare, yes, you can dismiss your case at any time for any reason. A ch.13 is voluntary. Keep in mind though, that once you file it will remain on your credit whether you complete the plan or not. However, if you're in a position where the timeshare is the main deciding factor, then you're probably not a good candidate for bk.

[jcj112562]

What you might want to do is look at how much (exactly) you have in unsecured debt. Take the mortgage, add the cars (and the time share if you pay for that, although I am not quite sure if that is treated as secured), and any other secured debt you have. That is the minimum possible payment in a BK13. Since you will essentially be forced into a 5 year plan based on income, divide the total unsecured debt by 60, and add that number to the total secured debt. That will tell you what the minimum Plan payment would be, if you were forced into a 100% payback Plan. I recently completed a 5 year Plan, although anyone with a calculator could figure out it would last about 29 months, based on the total debt and total payments. I did not have to put each and every cent of DMI into the plan payment, simply because it was all going to be paid back within the Plan. This might not work for you, but I did this as a pro se filer, and did not have any issues with the Plan, or anything else from the Trustee. Your mileage may vary...

John

[ttcbk]

Ok, so what it looks like is if I do a 13 I wouldn't be able to choose to just do the credit cards? I don't want the cars or mtg in the payment plan, only the cards. would I not just take the $44k I owe and divide that by 60 to get my 5 year payment (assuming I pay 100% back).

Also, jcj I don't understand 100%. Can you explain what you are talking about further please?

Thanks!

[lrprn]

Ok, so what it looks like is if I do a 13 I wouldn't be able to choose to just do the credit cards?I don't want the cars or mtg in the payment plan, only the cards.

When you file bankruptcy - Ch 7 or Ch 13 - *ALL* debts have to be listed. You don't get to pick and choose.

After your free initial consultations with at least 3-4 bk lawyers in your area, let's say you decide that Ch 13 is the best option. Then you work with the lawyer you choose to retain to decide whether having your trustee pay your asset payments for you ("inside the plan" and a few local trustees require this) or you continue to make your asset payments directly to the asset lenders yourself ("outside the plan"). One will be the best option for you in your unique financial situation.

would I not just take the $44k I owe and divide that by 60 to get my 5 year payment (assuming I pay 100% back).

If it were only that simple.....sigh. A monthly Ch 13 payment is calculated using a complex set of interacting financial figures on the required Means Test and Schedules. For example, someone could have the same income you have and the same unsecured debt levels and yet have a completely different Ch 13 payment.

If you haven't looked over the Means Test and Schedules to file Ch 13 or Ch 7, you can find them here - http://www.uscourts.gov/FormsAndFees...ptcyForms.aspx . Scroll down to B22A for Ch 7 and B22C for Ch 13. The Schedules are B6A-J.

Also, jcj I don't understand 100%. Can you explain what you are talking about further please?

There's several stickies in the Ch 13 forum and multiple threads and posts that explain 100% payback in a Ch 13 very well. Please take a look at the Ch 13 stickies and also do a forum search for "100% payback". After reading through what you find you still have questions about 100% payback to unsecureds in Ch 13, feel free to post your questions then.

[sheilaE]

What you might want to do is look at how much (exactly) you have in unsecured debt. Take the mortgage, add the cars (and the time share if you pay for that, although I am not quite sure if that is treated as secured), and any other secured debt you have. That is the minimum possible payment in a BK13. Since you will essentially be forced into a 5 year plan based on income, divide the total unsecured debt by 60, and add that number to the total secured debt. That will tell you what the minimum Plan payment would be, if you were forced into a 100% payback Plan. I recently completed a 5 year Plan, although anyone with a calculator could figure out it would last about 29 months, based on the total debt and total payments. I did not have to put each and every cent of DMI into the plan payment, simply because it was all going to be paid back within the Plan. This might not work for you, but I did this as a pro se filer, and did not have any issues with the Plan, or anything else from the Trustee. Your mileage may vary...

John

I'm a little Confused. For us, our house is worth around $235,000.00, and we have 3 older vehicles-1 that we are making payments on. We have around $80,000.00 credit card debt, but our DMI is very low-around $200.00, so how would all this play out? We're keeping the house and cars and we are a family of 5.

[ttcbk]

So right now I pay approximately $1200 towards my credit cards and have about $550 left over after all bills are paid. This is before food, clothing, etc.

Is it possible that my payment towards the cards would be more than the $1200 I'm paying now?

[bk2009]

How many people are in your family? You should look at your state exemptions for the amounts that will be allowed for food, clothing, utilities, etc. Generally, I'd think that you should have more than that $550 left over for all of those things.

[LadyInTheRed]

How many people are in your family? You should look at your state exemptions for the amounts that will be allowed for food, clothing, utilities, etc. Generally, I'd think that you should have more than that $550 left over for all of those things.

State exemptions are not expenses, they are how much property you can own without creating a minimum that has to be paid to unsecured creditors during your Chap 13. In a Chapter 7, the exemptions are how much property you can keep. Everything else can be liquidated by the trustee for distribution to creditors.

For amounts allowed for housing, utilities, transportation expenses and out of pocket medical, you use local standards. For food, clothing, household expenses, etc., you use National Standards. National and Local standards can be found at: http://www.justice.gov/ust/eo/bapcpa...anstesting.htm.

[ttcbk]

In March we are having a baby and it will be 4 total people.