New to this...have some 13 Questions.

[kellmax]

My wife and I are considering Chapter 13. We both do well, income of 120K per year, but are overextended in CC debt, and house in under water. 1st with Chase 191K, 2nd with Green Tree, 24k. House is worth 160K maybe now...stinks! We also have two vehicles with payments, at higher interest loans.

So a few questions, I hear we can have the 2nd mortgage stripped, what happens with the cars? Can we get a reduced rate on the notes? also I have read some horror stories, about trusties not letting people buy Christmas Gifts??? so how is the spending monitored? Does the payment to the trustee have to come out of a paycheck?

Just a few questions...


any help is appreciated

[kornellred]

Chapter 13 is no picnic, but it is not the horror show that some people think it is. You will get a lot of good advice from the folks on this forum, but you will need to verify it with a bankruptcy attorney in Illinois. The fact is that some BK districts are tougher than others, not to mention the Chapter 13 trustees being all over the place with their own demands.

Ongoing spending is not monitored during the length of a Chapter 13 plan. In some (but not all) cases, trustees keep track of debtor's incomes by requiring the submission of income tax returns, so that significant increases in income can be noted. This could trigger a motion to modify the confirmed Chapter 13 plan, usually to secure more disposable income for creditors.

Lien-stripping is most always to the advantage of the debtor, and never to the advantage of the 2nd mortgage holder. The creditor will get something out of the deal, but at the end of the Chapter 13, they cannot take any action to recover the deficiency. Auto loans are treated according to a number of factors, so no general advice can be offered.

You should have plenty of questions for a BK attorney after the forum picks up on your posting.

[8forme]

We are 4 months into our 13 and have more "extra" money now than in amny many years. Our monthly payment does come out of the paycheck biweekly. Our 13 payment is cheaper than paying our 2 autos and the 2nd mtg was. Our autos were included in the plan and the interest rate went down to 5.25%. But, we have had them over 4 years, neither was recently bought.

We had our 2nd mortgage stripped, judge signed it at confirmation. Our 2nd was also with Green Tree and they did not fight it at all. We were underwater about 20-30K on the first. I think that is why they did not contest at all. It was not even close to haveing equity. Our spending is not monitered, we had a very nice Christmas that we paid cash for!! It feels so good not to be worried about all our debt payments and we actually have a very good budget in place that allows for stuff we had to skimp on for years. We even have a good start on an emergency fund.

We found a good attorney that specializes in 13's and knows what the Trustees and judges here will allow. We set up a good budget that was not too tight for us and had no issues getting confirmed. Now to hope it all keeps going smoothly. But I only regret not filing sooner. The peace we have now is priceless.

[kellmax]

8forme, where are you from?

[8forme]

In the South.

[dmc-2008]

I was considering BK 13 a few years ago, but I never did it. Now I am worse off then ever! I have not one extra penny in case of an emergency! I hope nobody gets sick or breaks!

I am seriously considering a Chap 13 now, but I too am afraid of what it will be like for 5 years!!!! My attorney that I spoke with a few years ago, said I can keep the condo, have the 2nd and 3rd stripped and end up better off in the end. But FIVE years?

How doe it work? You send a payment to a trustee for the debt repayment that is set up? Do they monitor your spending on a monthly basis? Can you get your kids anything as a treat once in awhile or are you strapped worse then you are now?

Do you have any cards for an emergency and for getting plane tickets? My elderly mom lives in another state?

Are trustees awful people?
Thanks so much!

[AZNoName]

Chapter 13 isn't really so bad. Think of it this way, it provides a PLAN to get out of your debt. I'm in the hole about 500K between bad business debt and personal debt. My payments are 990/mo over five years, but in the end, i'll pay back 11 cents on the dollar for all of the unsecured debt I owe, and then it's done! Doesn't sound so bad, right? There's a light at the end of the tunnel!

I was forced into BK because of a lawsuit. My personal finances were actually OK, but between my car pmt and credit card minimums, i was paying 800/mo. I could easily pay more than the minimums, so a payment of 990 might sound bad, but it's doable for me!

We're surrendering our home too, so I've been saving my butt off since filing by not paying a mortgage payment. This savings is going to get me through the next five years of emergencies since credit cards aren't an option. I'm hoping the bank moves slow to foreclose, and our goal is to save up about 10K before we need to move.

Anyways, I know my story is unique and not everyone is able to save like this... but the point is, that chapter 13 provides a solution to getting out of your debt. They don't monitor your spending... as long as you send your payment on time and don't acquire more debt, they pretty much leave you alone. I still buy my kids toys, We go out to eat occasionally, and I have a plan to save money through an FSA plan at my work (daycare Flex spending account), and cash it all in at the end of the year to use for Christmas. Chapter 13 forces you to plan ahead for those things! Spending it as fast as it comes in is no longer an option.

Hope this helps!

[Tonfee]

I am in the same predicament as the OP. We make about $150,000 per year, with 2 car payments($1350) and about $80,000 in CC debt. House severely underwater water with 2 mortgages. We are barely making minimum payments. behind on 3 cards with BOA due to being unemployed for a couple of months. Does anyone know if you can just decide to file chapter 13 because you feel it is better than making minimum payments. Do you have to be behind? Or incapable of making minimum payments? I have not spoken with an attorney, but would like to file simply because i have no strategy for getting out of debt. i think we make enough money to make all payments, i am just frustrated b/c i think with minimum payments i will still owe out a lot after 5 years and still will not be able to save for emergency or 401k. can they reject you for making too much money? like i said, i can pay, i just can not make a significant dent. Also i really would like to strip the 2nd mortgage. I can't see a reason to spend 10 more years paying on it and the house is underwater. my credit score is already in the tank. i have nothing to lose there.

[dmc-2008]

I wish I had answers, I too am looking for some.

So are you saying they close every single CC you have, including debit with Visa attached, or Department Stores? Gone?

[jange]

Every bk case is different, but yes you can expect to lose all of your cc and you are not allowed to take on any new debt without the trustees approval. Yes you should be able to retain your debit card with visa or mc attached since it is really a debit card and not a credit card, but it also depends on the bank and if you have any other debt with that bank. Read up on this forum as there is a lot of good information here and get several free consults with several attorneys.

I am starting year 3 of 5 years. I hear from the trustee once a year with the annual statement he sends out. He doesn't care what I buy as long as I make my monthly payments on time and don't take on any new debt. The key is having a good budget and saving money every month. I pay cash or use my debit card for all my purchases, things are a lot less stressful and I know in year 3 years I will be debt free.

[dmc-2008]

That is wonderful!
I want to invite you to my brand new blog:

http://joyofdebt.wordpress.com/

I just created it today!
It will be a journey of my struggle and solution to my personal debt crisis.
I have not decided which route to take, but it would be wonderful if you can come and join me!
See you there,
DebtGirl

[AZNoName]

I am in the same predicament as the OP. We make about $150,000 per year, with 2 car payments($1350) and about $80,000 in CC debt. House severely underwater water with 2 mortgages. We are barely making minimum payments. behind on 3 cards with BOA due to being unemployed for a couple of months. Does anyone know if you can just decide to file chapter 13 because you feel it is better than making minimum payments. Do you have to be behind? Or incapable of making minimum payments? I have not spoken with an attorney, but would like to file simply because i have no strategy for getting out of debt. i think we make enough money to make all payments, i am just frustrated b/c i think with minimum payments i will still owe out a lot after 5 years and still will not be able to save for emergency or 401k. can they reject you for making too much money? like i said, i can pay, i just can not make a significant dent. Also i really would like to strip the 2nd mortgage. I can't see a reason to spend 10 more years paying on it and the house is underwater. my credit score is already in the tank. i have nothing to lose there.

Tonfee,

Ch13 provides some excellent tools to help you get rid of debt. Lein stripping is one of them. Especially if you love your house and want to keep it. Without the 2nd mortgage, how underwater are you? I owed 135 on my first and 66K on my 2nd. My house is worth 80K. Still way below the first mortgage. thats why I surrendered it...

I think of it this way, in 5 years going at the rate you are, where will you be? If you calculate how far you can pay down your debt on your own, it might open your eyes to the possibility that a Chapter 13 is a good solution. You dont have to be behind or incapable of making payments, but if your minimum payments make it extremely difficult to pay anything else, than Ch13 should provide some breathing room. I hear trustees can get finicky about saving for a 401K, when that money could be paid towards your creditors, but your age or employer contribution may help with that (each trustee is different).

[deepinit]

We are now 9 months into our Chap 13 plan. We kept our home (owed $210k worth 190k) and did a lien strip for the 2nd which was $48k through Greentree. We pay for a car inside the plan and own 2 other vehicles outright - older models with high miles. I pay the Trustee directly each month via money order instead of payroll deduct. I work in a small company and it would have affected my job if my employer knew about the BK. So far for us it has been good. No more phone calls and we actually have a small savings weve been able to scrape together ( $2800 and counting) and i'm not thrilled about 5 years but I wouldnt have gotten myself out of debt in 50 years at the rate we were going.
This is the most difficult embarrassing thing in the world for us to go through. We have several reasons why we accumulated 90k in CC debt including our own irresponsiblity.
We have rented cars and been on flights since filing and we just use our Debit card. It is nice to be able to save money now though. For the first time ever we are living on a budget and truly within our means.
We have a long road to go but I am looking forward to finishing this thing out and having a nice savings built up ( I hope ) and being debt free in a litle over 4 years!

[dmc-2008]

Deepinit
Looks like we have similar situations. I owe about 240,000 and worth 220,000 not counting 2nd at 55,000 and 3rd at 8000. Lots of school loan and unsecured debt as well. Those r rough numbers! Go to joyofdebt.wordpress for story and follow and let's support each other. I have not filed yet but think it will be only way to go. I only have 10 or so working years in me do there is that added stress! Wow this sucks!!!! Hope to get to know uitenhage there and learn this.

[kakdbass]

We were behind 3 months are our mortgage (no second), had a car payment with high interest (which in now reduced to 5 %), back taxes, student loans, payday loans, just about everything you can imagine. We were sinking more and more each month. Chap 13 was the best thing we have ever done. Even though we are in a 100 percent payoff, we now have money in savings, planning a vacation this summer, have money for upgrades on our home, etc. Things we haven't been able to do and probably wouldn't have been able to do had we not filed. Having the debt collectors not calling constantly is an amazing feeling. We pay for things with cash and are able to use our debit card for reservations and things like that. We send a cashier's check or money order for our payment each month. Just make sure that when you're doing your paperwork that you do not underestimate your expenses! Our attorney actually said the majority of our numbers seemed to low, added expenses I would've never thought of, and the trustee never blinked an eye. Best of luck to you and your family. : )