Disposable Income

[xodus2222]

Hello,

Here is my situation. My company closed down and I was unemployed for almost two years. Finally, I found a good job and have started paying back on some of my debts. However, I am truly way behind. I was considering filing a Chapter 13 due to the fact that I do want to repay my debt and was told it would put my student loan payments on hold, which I have over 100,000K in student loans.

My first question has to do with disposable income. I went online and printed off various forms for a Chapter 13 and I saw all the amounts you are allowed. So does that mean after you take out all the allowables, you have to give up the rest? That would pretty much be a whole paycheck for me, which again would keep me in a bad financial place. I also had to buy a new car a few months ago and was told I should wait at least 90 days after the purchase in order to file a chapter 13 and wondered if that was accurate.

On one hand if I filed a chapter 7 then I would still be confronted with the student loans which would kill me and on the other hand if I file a chapter 13 would most of my income be taken away, which again would put me in a bad place. Any thoughts or help with my questions?

Thanks

[lillymarlene]

Hello xodus2222, Welcome to the forum. On a chapter 13, I do believe you have to pay most of your DMI towards paying back your creditors. However, you may be able to bump up some of your expenditures to the highest allowed levels for your area, and then be able to save a little bit out for emergencies.

[lrprn]

My company closed down and I was unemployed for almost two years. Finally, I found a good job and have started paying back on some of my debts.

Congratulations on finally getting a new job! That's wonderful!

On one hand if I filed a chapter 7 then I would still be confronted with the student loans which would kill me

$100K of student loans - that's a huge amount to owe. Are you aware that during Ch 13, although the student loans do go into deferment, the lenders are still allowed to charge interest for the entire Ch 13 that lasts 3-5 years? Unless you are able to make payments to your SL lender(s) that at least cover the interest every month, you'll come out of Ch 13 owing significantly more on your student loans than you do now.

Is paying back the student loans forcing you into bankruptcy? Or is it just unsecured loans like credit cards? Do you owe secured loans too?

...and on the other hand if I file a chapter 13 would most of my income be taken away, which again would put me in a bad place.

Until a competent bk lawyer completes the required Means Test and Schedules with your specific financial figures, you don't know what your Ch 13 payment is likely to be. A lot will depend on the local practices and customs in your local court and by its trustees (both Ch 7 and 13). Only an experienced local bk lawyer is going to know what to expect and how much of your disposable income is truly going to be going to a Ch 13 plan.

Many Ch 13ers who have good bk lawyers who fight for them don't end up giving up every penny of their true disposable income in their monthly payment. It all depends on how much of an artist your bk lawyer is when completing the Means Test, how willing your lawyer is to go to bat for you against the trustee, and what your trustee considers "normal" income and expenses. A good bk lawyer putting together the best repayment plan possible for you is at least 50% of the success or failure of your Ch 13 plan.

It's time to set up at least 3-4 free initial consultations with experienced bk lawyers in your area who file both Ch 7s and Ch 13s frequently. During the interviews you can start to figure out what will work out best for you and if bk is a viable option or not to resolve your current financial problems. You can also start to see who will represent your interests best if you do decide to file.

Come back and let us know what you find out, ok? Good luck!

[8forme]

Many Ch 13ers who have good bk lawyers who fight for them don't end up giving up every penny of their true disposable income in their monthly payment. It all depends on how much of an artist your bk lawyer is when completing the Means Test, how willing your lawyer is to go to bat for you against the trustee, and what your trustee considers "normal" income and expenses. A good bk lawyer putting together the best repayment plan possible for you is at least 50% of the success or failure of your Ch 13 plan.

So true. We are in the beginnings of a Ch13, filed 2 months ago. Our attorneys are very familiar with the Trustee here and know what will raise flags and what won't. They helped us set up our budget so that we can put away a good bit into savings each month. We don't skimp on food, nor get the cheapy processed food. We don't feel deprived or cramped at all on our budget. In fact, we have had absolutely NOTHING in savings for over 8 years now. We have managed to put aside a good start to our emergency fund now and still have money left at the end of the payperiod. Before, we were in the red at the end of the payperiod.

Research your lawyers, don't necessarily go with the cheapest. Go with one you feel comfortable, one that will truely help you. Our attorneys are available by email or phone anytime if we need them, and I have called them numerous times with prompt call backs and answers.