Well, This is Odd!

[Tater]

My husband and I are still interviewing lawyers in the beginning of our bankruptcy process. We met with one Monday who stated we would qualify for Chapter 7 even though we are over median. I got a call from his office on Friday stating he is not sure if we will qualify for a Chapter 7 now after he further reviewed things. I didn't fret and began reading the Chapter 13 forum off and on this week.

We have another consult with a different attorney tomorrow morning. I have my list of questions and paperwork completed. I've heard horror stories about going through a 13 because of the failure rate. I have also read the positive posts of the members here who have completed or are completing Chapter 13 plans now.

There is one thing I am confused about. What is a cram down or a crash down? We have an older car and we owe much more than it is worth. If we do end up going through a Chapter 13, is this something that we can have taken to the fair market value? We currently owe about $6,000 on it and it's twelve years old. The blue book value seems to range between $1,000-$1,500. I'm just wondering if a 13 would be more beneficial for us.

[LadyInTheRed]

I don't know much about cram downs. But, I believe that if the loan qualifies, the part of the loan equal to the value of the car on your filing date would be treated in your plan as secured debt and the balance of the loan would be treated as unsecured debt. Ask about this at your next consult.

Have you considered getting a newer car? If you are going to be in a 60 month Chap 13, you want to be sure to have a car that will get you through it. Another thing to discuss with an attorney.

It isn't odd at all that the attorney first thought you'd qualify for a 7 and then, after looking more carefully at your situation and crunching some numbers, realized you might not. If he said he isn't sure you'd qualify, did he recommend that you try and then convert to a 13 if you have to?

I'm glad you aren't fretting at the idea of a 13. A chap 7 is preferable if you can qualify, but a 13 isn't the end of the world. Think of it as a 5 year budgeting lesson. Just be sure you hire an attorney who will work to get you a reasonable plan. Your on the right track interviewing several attorneys.

[Tater]

Thanks Lady for the input! Yes, we have another car that is less than five years old. We use this one the most, well I do. My husband uses a company vehicle for work. I asked a different lawyer about giving the older car up if we did have to file Chapter 13. She said we would have to pay the difference once the lender sells it. That is why I was asking about a cram down. I see there are certain specifics to qualify for it. I have to admit I worried about Chapter 13 when one lawyer stated that was what we qualified for but have since realized it will be better than we have been living the past few years. We've already lived on a strict budget for the past year and I've read several good suggestions on the forum on how people live through a 13.

I think attitude has a lot to do with it. I realize we would never get out of our debt without help of the bankruptcy court. Plus, the payment plan would be basically interest free. The one lawyer did tell me if I don't find employment by the time my unemployment benefits run out then we may able to qualify for a Chapter 7. We've become pretty thrifty over the last year and have learned what our needs are vs. our wants. I have some good questions tomorrow for the lawyer we are interviewing. I wasn't able to speak to the attorney on Friday. It was his admin. assistant who called us and he was in court at the time. I will call tomorrow after our next consult if need be.

[LadyInTheRed]

She said we would have to pay the difference once the lender sells it.

That doesn't sound right. Are you sure she didn't mean that the difference would be treated as unsecured debt? Definitely ask other attorneys about this.

...it will be better than we have been living the past few years.

That is often the case in a Chap 13. I have more to spend than I did before filing Chap 13.

I think attitude has a lot to do with it.

I agree. That and education. Somebody who reads about other people's hard time in a Chap 13 and decides they would also have a hard time without learning about how their own Chap 13 would look is acting out of fear which is never helpful.

I wasn't able to speak to the attorney on Friday. It was his admin. assistant who called us and he was in court at the time. I will call tomorrow after our next consult if need be.

I suggest you call him even if you like the other attorney better. A lot of attorneys won't look that closely at your case until you retain them. I see the fact that this one did as a good sign. You might as well hear what he recommends and why, even if you know you won't retain him.

[Tater]

Hi Lady,

You made a good point about calling the attorney we met with last week. I didn't look at it that way and will contact him after our appointment today. I liked what you said about not basing one's own Chapter 13 on fear. I have to admit I have been fearful during this process but I think it has been more of the fear of not knowing what is going to happen. My husband keeps reminding me when are doing what's best for us so there is no reason to be afraid anymore. He is right and we are both sleeping better at night. No matter which chapter we end up filing, there is a light at the end of the tunnel!

As far as the older car situation, yes the other lawyer meant we would pay it through a Chapter 13 as unsecured debt, the amount left over. I didn't explain myself very well. Education is also a key factor in being prepared and this forum has been a great help to us! Thanks for your input!

[andy158]

I copied this from a previous post on this forum:

In a chapter 13 you can cram down a secured loan to the value of the collateral.

There are time restictions on how long you had to have owned the property. For example, an auto loan must be 910 days old. As well, you can not cram down a mortgage on your residence.

For example, if you owe $30,000 on your vehicle and it is only worth $20,000 you can "cram down" the loan and pay the $20,000 through your plan as a secured debt and the other $10,000 would be treated as unsecured debt.

Ex. Our car payment was $375/mo with 3 years remaining on the loan going in to our bk13. It was crammed down to $100/mo through the life of the plan. You will still get a clear title after discharge.

[Tater]

Andy,

Thanks for the explanation! It makes a lot more sense to me now! We met with an awesome attorney today and I think we are going to retain her. I did call the lawyer back from last week but had to leave a voice mail. I want to speak with him before we make a final decision! The lawyer today was impressed that we were so prepared and knew a little. I told her thanks to this forum and wonderful members! She was surprised that there was an accurate means test online. I gave her the web address and she is going to have her paralegal check it out. The paralegal was off today.

We received a lot of wonderful and useful information today. It had my mind spinning for awhile but I guess that is to be expected during this process. If we do retain her, she wants to do a complete income analysis to see when and if we can qualify for a Chapter 7. Her paralegal does this and it does cost money but it does go toward the retainer fee. We did learn there is one nice trustee in our district and one "that doesn't seem happy at all". We supplied her with most of the documents she needed but we have a lot more information to go through that she gave us today. She gave us some good suggestions so we'll see how things play out over the next few days. We have two good lawyers to choose from!

[AngelinaCat]

Hi Tater. I am glad to hear your good news. Please keep us posted.