Questions on just why my Chapter 13 payment quote was unbelievably high

[Shelly3630]

Ok, I got a quote on a Chapter 13 case for 600-700 a month payment for 5 years for around 30 grand in cc debt. We can't pay that. Since we are married and together I think that they may have based this payment on both of our incomes. Even though my
husband WILL NOT BE FILING. So I have two questions.....


1. If we were to get a legal separation and I literally move back into my parents
house with them for a few months, will they figure the payment on my income
alone. Believe me, if I had to get a legal seperation and move out I will. I want
to do this legally.

2. Or, is it the fact that we have 200,000 in equity on a home that has us resulted in
having that high of a payment, and it would'nt matter as to whether we were legal
together or legally separated?

3. Oh, and one more. If I were to take my name of off this house, which I can do, no
problem, then wait two years and would I be able to file for Chapter 7 since I would
have no real assests in my name.

[newbie2]

Yes, they do base a Chapter 13 plan on all disposable income, and that income is based upon whomever contributes to the household (even if a spouse doesn't file.)

What you are proposing to do (legally separate to beat the system) is not something any of us would recommend. (Or, at least I don't think any of us would.) You have to swear that everything in your petition is true. Only you can answer as to whether you have the nerves to go through with that.

Yes, the fact that you have an enormous amount of equity does come in to play. I don't know how much you can exempt, but the portion you can't exempt has to be covered in the plan up to 100% of your unsecured debt. Think of it this way: You do have the money to pay your unsecured creditors, but you would have to sell your home to get the equity out to do so. The Chapter 13 is set up to have you make payments (the 600-700 a month for 5 years) so that you don't have to sell your home/property to pay your unsecured creditors.

Don't take your name off the property. The trustees can go back further than 2 years if they get a whiff of fraud.

[Shelly3630]

Why would it be fraud if my name is not on the property. I would'nt have owned it for at the very least 2 years. I had one lawyer come up with a 700 number payment with both of our incomes, then another come up pretty darn close with just my income. So it was kinda hard for me to really tell whether or not they would base the payment on both incomes. I don't see the real problem if we were to get a legal separation or heck a divorce and I move out for a while. Thats legal. How could they even think about basing the payment on his income if we were legally seperated or divorced. I would have paperwork and documents to prove it. I mean, I'm sure people get divorced and seperated over this very thing every day.

[Shelly3630]

We are thinking about trying to settle though. Both lawyers that I have talked to really seem to like that idea better. I can get 15 grand in a loan from my dad to settle these cases pretty easily. (I will be paying him back 100% by the way.)

[forgotten]

Why would it be fraud if my name is not on the property. I would'nt have owned it for at the very least 2 years. I had one lawyer come up with a 700 number payment with both of our incomes, then another come up pretty darn close with just my income. So it was kinda hard for me to really tell whether or not they would base the payment on both incomes. I don't see the real problem if we were to get a legal separation or heck a divorce and I move out for a while. Thats legal. How could they even think about basing the payment on his income if we were legally seperated or divorced. I would have paperwork and documents to prove it. I mean, I'm sure people get divorced and seperated over this very thing every day.

You are attempting to hinder, delay, or defraud your creditors by everything you are proposing. Is it really worth commiting bankruptcy fraud and possible jail time, no matter how much you think you can get away with it? I don't know your states exemptions off hand, but unless you can exempt $200k in equity, which is close to no where except florida, your are going to have to pay back 100% to your unsecured creditors which is why your payment comes out to the same.

If the trustee sees you had a home with $200k in equity 2 years ago you can bet they are going to go digging. Who gets divorced and gives one spouse a $200k home and takes nothing?

[catleg]

It might be a fraud upon your creditors if you transfer the house out of your name at this point, but if you do so, and make it 2 years and file BK I don't think the BK court would have anything to say about it. There's a reason these time periods are put into the statutes. The worst case is the creditors file an AP and get the debt declared non dischargeable. There is no bankruptcy fraud in your intent.

More likely the creditors , if the get wind of your property transfer , sue you within the 2 year waiting period and either get a lien on the property or start a fraudulent conveyance action.

But yes, if you have enough property to payoff the debt, and there is no exemption to protect it, the best a ch13 will do for you is turn it into a no interest 3 to 5 year payment plan. Better to settle it the way you discussed if possible.

[momofthree]

When we filed our petition, we had to answer a question about any property transfers within the last 10 years. They can look back further than 2 years. Not to mention, you're talking about basically getting divorced, signing over your home 100% to your hubby, and then living with your parents for 2 years! A separation probably won't cut it, especially since you're talking about signing over your house completely to your dh, and like a pp mentioned, that seems suspicious in itself. Not many people are willing to leave a marriage with nothing. Unless you want to get divorced anyway, I don't recommend this course of action. If you do want to get divorced, then sell the property, pay off your debt, and you'll have a nice chunk of change left in your pocket to start over.

And, yes, as a pp mentioned, your payment will be the same no matter who you go see. You'll be in a 100% plan, so they'll just take your debt, divide by 60, add in attny and trustee fees, and there's your payment.

[ValleYum]

Remember, too, to check on the tax implications that settling with the cc companies may have for you. It would stink to have a huge tax bill if/when your former creditors send you a 1099 at the end of the year. It is doubtful you could declare yourself insolvent to the IRS with your the equity in your home.

Best wishes.

[catleg]

Remember you'd only owe tax on forgiven principal not the piled-on penalties and interest. That's the good news :-)

[df04527]

IMO - this type of pre-planning is fraud. You are trying to beat the system. I, personally, could not do it as I prefer to sleep at night.

[forgotten]

When we filed our petition, we had to answer a question about any property transfers within the last 10 years.

Exactly. The property transfer can be reversed for up to 10 years after the transfer. If they really wanted to wait 10.5 years before they filed then it would probably be okay.

[catleg]

The question would of course be did the transfer take place at a fair value.

[newbie2]

We are thinking about trying to settle though. Both lawyers that I have talked to really seem to like that idea better. I can get 15 grand in a loan from my dad to settle these cases pretty easily. (I will be paying him back 100% by the way.)

There is a reason they both agree that settlement may be better for you -- did you bring up removing your name from your home and separating from your husband to them? I bet they see a nightmare ahead with what you propose to do, and are trying to to keep you from doing what you suggest.

[Shelly3630]

We both want to settle. That I think is the very best way to go. I just hope we can do it. My husband wants to use a company to go through. I want a reliable one. We go to a Consumer Credit Counseling service next week, that is very legit. I am sure they will be able to advise us on this. I mean if we were to offer them 50 cents on the dollar cash immediately to settle the debt, I just wonder if they would like that.

[Shelly3630]

The question would of course be did the transfer take place at a fair value.

What do you mean, I would'nt be transferring it to anyone, just taking my name of off it. Reading these post I can see where this may really not work. But we do want to settle, so maybe that will work.