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**newbie2** · 06-06-2011, 04:06 AM

Welcome to the boards sean. You have alot of questions, some I can help with (responses will be in blue after your questions):

Originally posted by seanp951 View Post

I'm new to this forum. I have a few general questions,hop someone here can point me in the right direction..

i went to a local attorney who advised I didn't qualify for a ch 13 b/c I made too muchm oney.
I earn about $140k/year.

That statement doesn't make sense. The attorney probably said you don't qualify for a Chapter 7 because you make too much money (and have disposable income that can be paid to your unsecured creditors)

Ou house is valued at about $250k,but we owe 380. a 300 first and an 80k second.

is bankruptcy my only option? i looked into forbearing ordeferringm y student loans but sallie mae says i earn too much and don't qualify... No, bankruptcy isn't your only option. If you feel that you can pay off the unsecured debt within 5 years by being disciplined with your money then you can avoid bankruptcy. If you look at things realistically and know you can't pay them off within 5 years, then you may want to seriously consider bankruptcy.

i talked to one lawyer ho said if I did a c 13 i could strip my second. i' still be underwater afterteh strip..but not by much... if I stayed long term i'd be a whole lot closer to having some equity vs being underwater for decades... This is one of the good parts of the Chapter 13 plan - stripping the 2nd mortgage / lien.

a couple of qwuestions.. if I do ch 13.. how much can I expecty my monthly payment to be? Everyones payment plan is different. Disposable income is the big factor, along with any secured debt that has to be brought current in the plan, and any assets you can't exempt.

ina ch 13, do they basically take ever spare cent you have and I"m living on next tonothing for 5 years.. isf that is teh case, i might as well just do it tomyself..suferfor 5 years and try to pay if off the hard way... or is it easier to maintain somewhat of a comforetable lifestyle on a ch 13 and stil make payments.. will there be any money for a dinner out, a trip somwhere.. or will I be living o a shoestring budget for 5 years? i don't expect to be out buying jewelry, new cars, etc.. but is it doable? No, they don't take every spare cent, but you are expected to contribute "all disposable income" to your unsecured creditors through the plan payments. And yes, it is doable. Spend some time here reading from others who have been there / done that and you'll get a good idea of what life is like during the years of the plan.

is it possible to buy a house after BK? if so, how long and when? Yes, it is possible. FHA requirements right now are 2 years post discharge.

if a car were to die while I was in BK.. or some other unepcted emergency..am I basically SOL for credit? You can't incur new debt without the trustees permission while in a Chapter 13 plan. You should be able to save some money during your plan for emergencies, but you'll want to make sure your vehicles will last throughout the plan. If you are not sure about that, replace the car/s before you file.

what do you do for CC while in the plan? so many places demand a CC to do anything.. rent a car, etc.. can you just get a prepad debit card and use that? Some people get a secured credit card, most people use their debit cards. It can be done, just takes a bit more legwork and investigating. We've gone 5+ years now without a credit card and have rented cars, made airline reservations, slept in hotels, etc.

how do I know BK is the right thing to do? I feel like I"m out of options..but don't know how to really figure out if I could honestly pay this all off mself the hard way and maybe i'm thinking BK is an easy way out??? You won't know if it is the right choice for you and your family until you've consulted with a few attorneys and really looked at the raw hard numbers. As I stated above, look at whether you can pay off the unsecured debt on your own. Remember, interest stops during a Chapter 13 plan. It won't stop if you are trying to pay things off on your own. (That's something else to consider)

if I do BK - what do I do to strtagically do it the best? Interview more than one attorney and ask questions. Lots of questions.

stop paying my first or secodn for a few months? can I keep that money as a safety net? Don't stop paying anything until you have talked to an attorney and only if you have made the decision to file and/or to the disposition of your home.

stop paying credit cards or cars for some short period of time? i figured if I stopped paying eeryone for a few months..i'd stockpile a nice emergency fund.. or can you not do that? I don't want to g out any buy crap like a big screen and then file...but if I could somehow stop paying and pcket that cash.and have that for emergencies.i will or can you not do that. Again, don't stop paying anything until you are sure you are going to file. Once you have made a decision, if you do decide to file, then paying on your credit cards is a total waste of money. Look to your states exemptions about how much cash you can have on hand without it being subject to a "pay back" during your Chapter 13 plan. Example: If you have $5000 that is NOT exempt, you would have to pay your unsecured creditors $5000 at the minimum during your plan or give the non-exempt portion to your trustee to distribute.

thanks

Good luck to you, and don't be afraid to ask more questions. Chapter 13's are different, and can be quite confusing if you don't ask questions.

**momofthree** · 06-06-2011, 06:20 AM

Newbie did a great job of answering most of your questions. Here is a link to the IRS standards that you are allowed to claim for living expenses: http://www.justice.gov/ust/eo/bapcpa...anstesting.htm

~A family of 5 is allowed $1639/mo for all food/clothing/household supplies/personal care/misc.
~You are allowed $300/mo standard medical/dental out-of-pocket expense--if you can prove a larger expense it will be allowed.
~You are allowed 2 car payments of up to $496 each. If you worry about your cars not making it thru the full 5 years, then replacing them now with a payment as close to the standard as possible is a good option.
~You can strip your 2nd mortgage and it will become unsecured debt and paid at the same rate as all your other unsecured creditors.
~Make sure you have low deductibles on your medical, auto, & homeowners insurances. Increase your life insurance. If you don't have disability insurance--get it! These are all allowable expenses and will simply lower the amount that your unsecured creditors receive, as well as helping to protect you in case an accident of any type should befall you.
~CA has a "wildcard" exemption of around $23k (too lazy to look up the exact figure) that you can use to exempt cash on hand. I strongly recommend saving as much cash as you can before filing so that you start out with a comfortable emergency fund. Most people do this by not paying their credit card bills for several months up to filing.

Good luck and keep us posted.

**frogger** · 06-06-2011, 06:48 AM

Originally posted by seanp951 View Post

i went to a local attorney who advised I didn't qualify for a ch 13 b/c I made too much money.

Find another attorney.

**seanp951** · 06-06-2011, 09:25 PM

thanks everyone... lots of great advice!

the disability insurance was a good one. If I was disabled and couldn't work...that would be a big problem..didn' tknow I could deduct that.. i'll check into it.

another factor to consider... my employer is talking about forcing another 8-10% in pay cuts on everuyone... which will drop my income...maybe it would allow me to qualify for a ch 7? the ch13 is attractive b/c it allows me to strip the second..but it takes so long!

if I did a 13..is the bankruptcy on my record from the date of the discharge or from the date I file... meaning.. if I get a 5 year plan...and when I finish it.. THEN does the clcok start..and it's on my record another 7 years... or would it be a couple m ore years and it would be gone???

in my situation... is a 7 or 13 better? is there ever a situation where a 13 is better .. or in general is a 7 always the better choiced b/c it's so fast?

once I decide to file.. how long can I not pay CC before I need to file? can I go six months? more less?

what about my mortages? should I stop paying those? or keep paying them too?

thanks for the info.

i'll look at my budget. i honestly think paying off all my CC debt in 5 years..just by "cutting costs" woudl be really hard... every month I"m going negative... i recently sold a car.. it was a third car.. to cut my expenses.. i netteda bout 10k from that car... i've been using that money to make up the difference between what I spend and earn.. it's almost gone.. that was six months ago..... so even with that "fund" i'm going negative....

i'm at that point where the debts have gotten to the point that the monthlfy minmums, plus my mortgage, cars, and basic necessities.. exceed what I earn. i don't eat out tha tmuch.. haven't bought clothes in a long time... don't go on trips.... i really think that BK may be my only option... I don't want to do it.. i feel bad.. for a person who makes "a lot" of money.. i know there are plenty of peole who m ake piles more thanme..but I always felt that at my age, 38, making almost $150k/year was pretty good..... and yet.. it's not enough... i don't have an extravagant house... my cars are "nice" but they are not M/B or BMW... they are "nice" japanese cars... nboth cost around $30k... so by no means do I have some Q56 $65k luxury car.....

i'll talk to a few more BK lawyers and see what they say... it will suck to have to think "i filed BK".... but maybe it's the best way to get out of this mess.

if I finished my plan.. in 5 years my cars would be paid off... my CC woudl bed gone, and my second would be gone. I'd have several thousand dollars of debt every month GONE... wow woudl that feel GREAT...

**seanp951** · 06-06-2011, 09:27 PM

could I really get another car before I file?

One car has 50k miles, one has 65k. both are in good condition... i don't think either would crap out on me... but if I coudl sell the higher mileage one and buy something newer with lower miles..then id' know for sure i've got one car that is newer and has a longer warranty and will make it through the BK... no idea if I would qualify for a loan.. i'd never buy a "new" car..jsut maybe a "newer" CPO car...

does a BK trustee frown on this and say WTF are you doing buying another car before you file BK? or are they ok with it as long as the payment is about the same??

**LadyInTheRed** · 06-07-2011, 01:05 AM

Originally posted by seanp951 View Post

thanks everyone... lots of great advice!

the disability insurance was a good one. If I was disabled and couldn't work...that would be a big problem..didn' tknow I could deduct that.. i'll check into it.

another factor to consider... my employer is talking about forcing another 8-10% in pay cuts on everuyone... which will drop my income...maybe it would allow me to qualify for a ch 7? My guess is that you will still not qualify for a 7. The only way to know for sure is to run the means test. the ch13 is attractive b/c it allows me to strip the second..but it takes so long!I might have qualified for a 7, but it was a close call. I quickly decided against it because I could strip my $88k 2nd in the 13. For me it is definitely worth it.

if I did a 13..is the bankruptcy on my record from the date of the discharge or from the date I file... meaning.. if I get a 5 year plan...and when I finish it.. THEN does the clcok start..and it's on my record another 7 years... or would it be a couple m ore years and it would be gone??? The clock starts on the date of filing.

in my situation... is a 7 or 13 better? is there ever a situation where a 13 is better .. or in general is a 7 always the better choiced b/c it's so fast? It all depends on how you look at it. If you have a choice, you need to decide weather stripping the 2nd is worth being in a 13 for 5 years.

once I decide to file.. how long can I not pay CC before I need to file? can I go six months? more less? Nobody can say for sure. But, from reading of people's experiences here, it seems that 6 months is the earliest CCs start to sue. You are likely to have even more time than that.

what about my mortages? should I stop paying those? or keep paying them too?If you decide to file a 13, you should stop paying the 2nd. If you file a 7 and want to keep your house, you need to at least stay current on the 1st. If both mortgages are with the same lender, stay current on both. If different lenders, you might want to stop paying on the 2nd and try to negotiate a settlement. But there is risk in doing that. If you don't settle the 2nd after stopping payments, the bank will foreclose once there is enough equity to make it worth while.

thanks for the info.

i'll look at my budget. i honestly think paying off all my CC debt in 5 years..just by "cutting costs" woudl be really hard... every month I"m going negative... i recently sold a car.. it was a third car.. to cut my expenses.. i netteda bout 10k from that car... i've been using that money to make up the difference between what I spend and earn.. it's almost gone.. that was six months ago..... so even with that "fund" i'm going negative....

i'm at that point where the debts have gotten to the point that the monthlfy minmums, plus my mortgage, cars, and basic necessities.. exceed what I earn. i don't eat out tha tmuch.. haven't bought clothes in a long time... don't go on trips.... i really think that BK may be my only option...If you truly can't cover basic necessities (including clothing) and your debt payments and have money to save, it may be your only option I don't want to do it.. i feel bad.. for a person who makes "a lot" of money.. i know there are plenty of peole who m ake piles more thanme..but I always felt that at my age, 38, making almost $150k/year was pretty good..... and yet.. it's not enough... LOL. I make half what you do and have said the same thing. As income rises, your spending rises. It's easy to get into trouble before your realize what has happened. What's difficult is to accept the position you are in and make the right business decisions to improve it. Don't feel bad. Just learn from your experience.i don't have an extravagant house... my cars are "nice" but they are not M/B or BMW... they are "nice" japanese cars... nboth cost around $30k... so by no means do I have some Q56 $65k luxury car.....

i'll talk to a few more BK lawyers and see what they say... it will suck to have to think "i filed BK".... but maybe it's the best way to get out of this mess.It won't suck as much as spending the rest of your life working to pay off debt one minimum payment at a time.

if I finished my plan.. in 5 years my cars would be paid off... my CC woudl bed gone, and my second would be gone. I'd have several thousand dollars of debt every month GONE... wow woudl that feel GREAT... I sure am looking forward to that feeling! But, I already feel better. I have to budget carefully, but I have more money to spend than I did before filing and am building a savings. A Chap 13 does not have to be a jail sentence. Make sure you find a good attorney who will work to get you a liveable plan.

For information on California exemptions, see my blog. You will probably want to use system 2 since you have no equity in your home.

**momofthree** · 06-07-2011, 06:21 AM

Even if your income dropped by 20%, you probably still wouldn't qualify for a ch.7 unless you have some super high documented medical expenses. The main reason: you have a low house payment. It's people who overspent on their mortgages that are able to qualify for ch.7. It sounds backwards that you are "punished" for being responsible, but it is what it is. All it takes is around $182.00 of DMI at the end of each month to fund a ch.13. And you can't count student loan payments (they go into forbearance during the bk even if you're out of deferment time) So if you have more than $182 after paying your mortgage, cars, medical, & basic living expenses, then you don't qualify for a ch.7.

When the laws changed back in 2005, the ability to "cram down" the value of a vehicle was changed to only apply to those vehicles purchased over 910 days before the filing date (approx 2.5 years). So, when you buy a new vehicle, you must pay back the full amount you owe, so it is not considered fraudulent or "frowned at" to purchase a new vehicle prior to filing. With that said, the payment must be less than the IRS standard of $496/mo or the trustee can object to the expense. So keep it below that figure and you're golden. Buying 1 or 2 new(er) vehicles before filing ch.13 is just good bankruptcy planning. Many attorneys actually recommend it.

You have at least 6 months of skipping payments before the creditors will start to sue, even then, you have even longer before a judgment and garnishment would go thru. There are people on here who've gone up to 2 years without paying or filing in order to properly plan out their bk without being sued. If you're going to strip the 2nd mortgage, then stop paying it as well.

**seanp951** · 06-19-2011, 05:42 PM

Thanks for all the input.

Here are a few more questions I've come up with...

if I do buy a new car before chapter 13, is it ok if it is slightly over the monthly limit? My wife's car has about 70k miles and our payment is around 550/month. I could replace it with something similar but newer for about the same monthly, but d pay longer. Our current car is paid of in about 3.5 years....if I got a newer one I'd pay for 5-6 years but have a similar monthly...then I'd have one car that would be newer and nit have maintenance issues during my plan. Does the trustee care whattkind of vehicle it is or do they only look the payment?

If. Were to pay off a car during the 13 plan and free up that money...does the trustee take it and apply it toward the creditor payments, or do I just get to pocket it? One car is paid off in 3.5 years, another in 2.5 years. If I pay off the cars mid plan, and free up about $1000 I'd love to kep it, but f you tell me the trustee would take it to pay to my creditors, I wonder if idbebetter off to buy two newer cars and ake out 60 month loans...then idle paying on MY car the life of the plan and mini ize what gets paid to the trustee.....although it seems counterintuitive to think that buying new cars right before filing BK makes any sense!

If I found a way to buy a newer house that has a much larger monthly...and then I qualified for BK...would that work? My current house has a payment low enough that I could rent it out and not lose money... But idont know if I qualify for another loan given how much debt I have...I,might though, because much of the debt is on my wife's name not mine.

Is there a cap on how much cash I can have when I file BK? If o were to not pay credit cards and my second for 6. Months, I'd save up about 12000-15000!! If I went longer...do the math. One year of no payments would be a pile of money... Are there any investments I could shelter it in while I'm mot paying that would make it ot subject to the plan?

If I buy anything before filing BK...not big stuff like cars and houses, but smaller items, like a laptop or stuff like that....suppose I pay cash for it...with some of the money I'm not paying creditors....does a trustee know or ask about that stuff and do they care? I I am going to be on budget for 5 years I may want to update my computer before I start.I don't want to buy it with a credit card...but if I'm not
Aging a credit card and just take cash out of the bank...then there isn't really some kind of debit card or credit or bank transaction showing I bought it....

I would imagine a trustee might frown if the debit card history shows massive spending right when you are stiffing the credit cards? Or it that what they expect you to do and it's ok?

Thanks. I don't want to cheat, but if I do this, and tank my credit...I want to maximize the benefits I get out of it and do it strategically.
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