Another new member with questions

[jeep75]

I just found this forum a week or so ago. Essentially my wife decided we can't go on like we have been and I started searching for a solution and have been reading a lot about Chapter 13.

Our gross income is over median for our state by $400, our state is 100,400k.

We both work full time jobs.

Our house is valued around 269k and that is about what we owe.

We have 85k in unsecured debt

I have a car loan for $298 a month

My Wife's car is paid off but it is time to be replaced.

We have a 2002 travel trailer that we also own, camping is cheap and we'd like to keep it, it's hard to find blue book values on these, but if I wanted to sell it quick I could probably get $4000-$5000 for it.

We really have no other assets, furniture, a couple of tvs, a computer, not a whole lot of value in jewelry either. How do you go about deciding how to list this stuff out and value it?

We have 4 year old twins. We pay my mother $150 cash a week to watch them while we work. In the summer they will have to start going to a new place at $230 a week.

We currently pay $1600 a month the credit cards. We've never had a late payment on anything and still have pretty good credit. Although creditors are starting to try to raise interest to ridiculous rates so we have to transfer, or they lower the balance to right above what we owe.

My son started speech therapy. Health insurance doesn't cover it, we found a place that does it for $95 a visit which is half the place we were originally referred to by our pediatrician, the visits are once a week for 30 visits.

I started a small business two years ago, it brings in $100-300/mo on a good month, one or two customers call. I'm not sure it will be worth continuing. 2010 taxes show $500 profit for the year.

I believe even with the speech therapy we will be able to show $200/mo disposable income. I think after speech therapy the $95 a week will go to the creditors. If we decide to file, should we just wait to file until after the 30 visits are done?

So in the summer child care will be $230 a week which is not bad for two children, then in the fall they start kindergarten but they may need to do a wrap around program at school where they stay later until we can get home from work which is about the same price.

We have set up two consultations with different lawyers late this week and early next week.

We have some questions about some of the items I've read here. We are wondering what happens if you above median income and it is decided you don't qualify for ch 13? I don't believe this can be the case with us, but do they just say "see ya and good luck"?.

My Wife's car is paid off but it is time to be replaced with something that will last the 5 years while we go through this. Is it better to just go ahead and get a newer one now or wait for a lawyer to say it is OK, from everything I've read you are allowed $471 for one car and $322 for the second and it is never questioned.

Like many others I've read about here, it is a tough decision to make that first step and stop paying the credit cards, when do you do that, when a lawyer says to? What do you do with the money, I've read pay the lawyer, some use it for a down payment on a car, what else? I don't think one can just keep it in the bank?

Thanks for helping another new member.

[dneil]

If I could go back and do things over, I would have never missed a payment prior to bankruptcy. Unfortunately, I didn't pay for a year.... I ended up with 2 judgments on public record.

[shark66]

If you're currently paying $1600 in CC bills, there is no way in my opinion that you'd be turned down for a Ch.13...because that amount of money, even after trimming everything that you possibly can, will most likely leave enough DMI.

Being over the state's median is really not that much of a big deal for Ch.13. It just pushes you in a five-year plan pretty much automatically. Having said that, if all your debts were to be paid off before that period of time, the plan would end sooner.

I wouldn't worry too much about exemptions. Whatever you own (furniture, jewelry, electronics) should be valued at "garage sale" prices and in most cases no one will blink an eye. Speaking from personal experience here, but YMMV.

If I were in you position, I'd get a new car for your spouse ASAP and then stop paying all the CCs. That would leave you at least three to four months to file before anyone decides to take you to court.

My $0.02 only...

Good luck.

[lrprn]

Our gross income is over median for our state by $400, our state is 100,400k.

$400 is nothing. If you go over your expenses carefully making sure you've forgotten nothing at all, I'm betting you can find $400 extra dollars if you want to file Ch 7 rather than Ch 13.

I have a car loan for $298 a month

What matters is not how much your monthly car payment is. What matters is how much the car is currently worth in today's market vs. how much you still owe on it.

My Wife's car is paid off but it is time to be replaced.

Be sure to talk to your lawyer about this. Chances are your best bet is to go get a new (at least to you) car before you file. Otherwise your state's auto exemption will have to cover both your car's and your wife's car's current market value minus what's owed on yours. Most states can't cover that much completely, so you could end up owing money to your trustee to cover the difference. Buying a car for your wife helps with that situation greatly, plus it gives you reliable transportation in case filing a 13 is your best option.

We have a 2002 travel trailer that we also own, camping is cheap and we'd like to keep it, it's hard to find blue book values on these, but if I wanted to sell it quick I could probably get $4000-$5000 for it.

Can your state exemptions cover this amount? Ask your lawyer what to expect if you can't protect the travel trailer with your exemptions. The worth is enough that if you can't protect it, your trustee may go after it to sell to increase the payback for your creditors.

We really have no other assets, furniture, a couple of tvs, a computer, not a whole lot of value in jewelry either. How do you go about deciding how to list this stuff out and value it? Again, your lawyer is the best guide for this. In most cases (not all), it's garage sale/eBay prices for all of it. Jewelry can be another matter. Some trustees may require that you have the jewelry professionally appraised, some won't care. That's why the bk lawyers in your area who are familiar with the trustee customs in your local court will give you the most reliable advice about this.

We have 4 year old twins. We pay my mother $150 cash a week to watch them while we work. In the summer they will have to start going to a new place at $230 a week.

Discuss this during your lawyer interviews. Depending on your current financial situation, you may be able to wait to file until summer so you can include the higher child care costs.

My son started speech therapy. Health insurance doesn't cover it, we found a place that does it for $95 a visit which is half the place we were originally referred to by our pediatrician, the visits are once a week for 30 visits.

This can be included if you file before the visits end. If I"m reading you correctly, you will pay $95 a week for 30 weeks. That's a goodly chunk of change, so once the visits stop, your trustee is likely to want to review your income vs. expenses again to see if the $385/month can be sent to your creditors instead.

I started a small business two years ago, it brings in $100-300/mo on a good month, one or two customers call. I'm not sure it will be worth continuing. 2010 taxes show $500 profit for the year.

Peanuts to a trustee and not worth going after. However, expect your trustee to be looking at your annual tax returns to see if the company has more profit as your plan continues.

So in the summer child care will be $230 a week which is not bad for two children, then in the fall they start kindergarten but they may need to do a wrap around program at school where they stay later until we can get home from work which is about the same price.

Speak about this during your lawyer visits. Family needs change during a Ch 13. Whether your plan has to modified to accommodate the changes depends on the amount of the financial change up and/or down.

We are wondering what happens if you above median income and it is decided you don't qualify for ch 13?

Given that it sounds like you have sufficient income to support a Ch 13 plan, the only way you won't qualify for a 13 is if you owe more than the maximum amount of debt allowed which is more than $336,900 in unsecured debts or $1,010,650 in secured debts. From what you've said, this won't be a problem for you.

Is it better to just go ahead and get a newer one now or wait for a lawyer to say it is OK...

It's better to wait to get sound legal advice that this is the best option in your case first.

...from everything I've read you are allowed $471 for one car and $322 for the second and it is never questioned.

That may be true with one trustee, but it is not consistent across the country. The only way to know what the Ch 13 trustee in *your* local court allows is to get sound advice from an experienced bk lawyer who frequently files 13 and knows the local trustee's habits and customs. Add this to your list of lawyer questions to ask during the scheduled interviews.

...stop paying the credit cards, when do you do that, when a lawyer says to?

Stop paying the cards when the attorney you retain tells you to stop paying them. Keep in mind that paying on unsecured cards when you are 100% certain you are going to file is a waste of cash. However, if you aren't going to file for a long time (like 6 or more months) or aren't sure you are going to file, it's best to discuss your options first with your lawyer before stopping payments.

What do you do with the money, I've read pay the lawyer, some use it for a down payment on a car, what else? I don't think one can just keep it in the bank?

It starts by knowing how much cash the bk exemptions in your state can protect. In some states it can be thousands of dollars. In other states, there are no protections for cash.

The key is to know what's the case in your state and plan ahead accordingly. You can spend money before filing on the things you've likely been putting off - medical and dental care, fixes to the house, new glasses, new clothes, stock up the freezer....anything that a legitimate living expense and reasonable in amount. This is not the time to buy a new Mercedes and/or furs and/or expensive jewelry and/or lavish vacations. But it is ok to purchase things that are necessary living expenses. Your lawyer will know what the safe purchases are in your local court.

Hope this helps ease your fears a bit. Hang in there. Deciding to file and preparing to do so are the hardest times emotionally. YOu are asking all the right questions - now you just need to get the answers that fit your specific local court and your unique financial situation. Good luck!

[jeep75]

Thanks for the great post. We met with a Lawyer today, he answered most of our questions with answers that we've read here and I was expecting. He said to go get the car.

He caught me by surprise though as he seems to really want to do Ch 7 rather than 13. He seems to think we would be able to keep everything, which I guess isn't a whole lot when you think of it asset wise, and get rid of the unsecured debt. I was really surprised about this.

He asked if we paid any one credit more than $600 in the past 6 months and we just paid one of the credit cards off for $2500 before even talking about bankruptcy at all. A month or so ago we also transferred a balance from one card to another, he didn't say so, but to me it looks like we will need to (or should) wait 6 months to file. He just said we should have used that for a down payment on the car.

I guess I didn't understand the median income before, I thought because we made over 100,400 gross that was it, chapter 13. All of my reading/research has been on Chapter 13.

We told him we were concerned about not paying the credit card bills since we've never been late, but he said we're going to have to stop using them/paying them sometime. We are still concerned about this. Rather than pay zero if we send the creditors $10 or $20 a month will it have the same end result on our credit reports?

Assuming we wait until July now to file (everything is paid for January) what is general consensus as to best option over the next 6 months to avoid any law suits regarding the credit card bills, will sending $10 or $20 stop the law suits? We are thinking of stopping starting February.

I've seen it posted a lot on this forum and didn't realize it until we were talking today, there are a lot of maintenance and health things you push off and push off when you are sending so much money to creditors every month.

[shark66]

Some basic math here...

No credit card company that I've heard of will even consider taking you to court until you've defaulted for at least three months, and even that timeline is fairly rare. That's your three out of six right there...

Even if they were to take you to court, that's at least another month.

You could always finagle and petition the court to give you more time, there's another month...

In other words, don't pay any of your unsecured debt, not $20 a month, not $2 a month, not $0.02 a month...

Will they call, pester you with letters and such? Of course they will. But that's all a part of the game. Put your phone on "do not disturb" and enjoy life.

Get all of your ducks in a row, and be fully prepared to file on a short notice if needed, and you're good to go.

My $0.02 only...

Good luck.

[PhantomPain]

We made the decision right after thanksgiving 2010 that we needed to get bailed out. Found a great attorney who made us feel at ease. She couldn't "advise" to buy a new car but simply suggested it would be in our best interests. So, feeling absolutely 'dirty' about doing so, we went ahead and bought a 2011 Civic (reliability & dependability). Figured I'd also get an extended warranty and GAP insurance for piece of mind. My monthly cc payment was $2300 so instead of paying that out we put 10% down on the Civic and got 1.9% financing. I no longer feel dirty about it as my old car although runs fine with 125K miles on it - I just couldn't see it going another 5yrs without problems. Wife has a 2009 so I feel we are in good shape vehicle wise.

The best piece advise I have seen on here so far besides considering a new vehicle is how to deal with the calls. Discover, Chase and GE Money call incessantly. I choose not answer as they are either robo-calls or some loser on the under end. Since we have no land line and only cell phones, I save the Credit Card caller's phone number in my contacts and assign a "No Ring" tone for them. I have contacts labeled CC1-Chase, CC2-Discover & CC3-GE Money in my cell. It is absolutely amazing how often they call. I do this addition to blocking calls from my Verizon website account.

My attorney advised me to pay only one card - that is to John Deere as I plan to keep my Lawn Tractor which i bought early last summer. I need it has I have a little over a 1/2 acre and I have a bum leg and pushing a mower would be tough after awhile.

At this point I am over the "guilty" feelings I had. I was never late, had good credit but the debt piled up fast after some health issues affected my wife who lost her professional career probably for ever. I tried to negotiate lower rates on a couple cards that had high balances on them that I hadn't used in a couple of years but they don't budge so screw them and their loan shark tactics.

I'm crazy good at documenting where every penny of our income goes. The attorney stated she hasn't seen anyone so prepared and organized in quite sometime. I've documented every expense and nothing appears to be out of line according to her. Our DMI now will be quite low and it appears our payback may be around $400 a month. Sure beats the hell out of $2300 a month with absolutely NO end in sight.

Good Luck to you!! Once things progress I'll unload on here somewhere and maybe someone will learn something. I read this forum every other day and learn something just about every time.

Good luck to you.

[minan]

We bought a new car in June, however we had started in April/May to shop due to leases coming to an end. A 2nd IRS levy forced us to file which we did in July. One of the objections from the Trustee regards the purchase of the car, however we explained to our atty that we were at the end of lease on a car and would have to get a new one anyways. The atty doesn't see any issue with this, however in July when we were atty shopping, many of them stated we look into a new car to replace the lease. Of course, this wasn't advice but a suggestion.

We went through such emotional turmoil, but it has gotten easier. However every time something related to the bk occurs, we are right back on the emotional roller coaster. Just when we think we're getting back to normal (as normal as possible under a bk), a phone call, letter from the Trustee, takes us back to the depression, anger, sadness, etc..We are not yet confirmed so the emotional ride is worse. We just pray that we get confirmed and can get on with life.

We have accepted that we made a mistake when we were self-employed which got us in the tax debt, however the "guilt" doesn't go away immediately. The bigger issue is trying to deal with "how could we have gotten ourselves in this mess", etc...we got in over our heads in the self-employment and didn't realize everything that entailed, i.e. taxes, payroll, insurance, etc....that's what we have a harder time dealing with.

My advice: interview several attys, pick the one you like, do research online, read this forum and use this for support and questions. So many times, one of us was at the end of their rope and we don't think we'll make it. We turn to this site. It reminds us that people make mistakes, but that doesn't make us bad.

[jeep75]

I was playing around with the means test again last night and I was coming up with around $266 DMI. I'm sure the Attorney has his ways to do the test. One of the things I read on this forum is to change your W4 exemptions prior to filing to 0 so that more money is taken out of your check. I see how this comes into play in the means test at the total tax line. I ran this and a couple other things I read on this forum like increasing 401k contributions by the attorney via email (don't think he's much of an emailer). He didn't answer the 401k part but did say "don't fool with the withholdings".

The only reason I can think he would say that is because of the 6 month look back, he hasn't seen all the numbers but doesn't seem to think we'll need to wait six months. I think we will for a couple of reasons, first, in early Jan we paid off a credit card for $2500 and did a balance transfer of $5k between cards before even knowing this could be an option. Second, when my wife bought her new car she also put down $3000 cash without running it by me to lower the monthly payment. There should be no equity in my truck (I owe what it is worth), in hers it looks like there might be around 6k depending on how they do the value but this should fall under the auto exemption.

Edit: I see where PhantomPain also put some money down on a car also that would have went to the cc's so maybe that is OK.

[momofthree]

Looking at correct withholding amounts is one of the first things that trustees do. Believe me, you are not the first person to come up with this "genius" idea. This is why many trustees seize tax refunds each year. It's much better for you to be honest, and come up with expenses that eat up that money each month than try to pull the wool over your trustee's eyes. Chances are, you won't be allowed to keep your refunds anyway.