Here's a head scractcher!

[Kingxray]

Hi all:

We are currently about to begin our 3rd yr. in BK13 because of a law suit by my dad (long story won't bore you with it). Now dad wants "to be a family again". He says he doesn't need the money.

What I would like to do is have him agree not to pursue us if we dismiss our case and then make a deal with the other creditors for them to receive the same amount they have been getting for the next 3 years. It doesn't do us any good have my dad's claim dropped and stay in the 13 because the trustee will then make us pay the other creditors at 100%. My dad's claim is the biggest and if he dropped out the additional money would go to the other creditors. Our payments are huge and are killing us right now, not sure we'll make it 3 more years.

Has anyone one heard of a situation like this? What kind of legal dance has to be done? Any thoughts?

Thanks much.

[LadyInTheRed]

If you don't want to be in the 13, stop making your plan payments and it will be dismissed.

But, if the BK is dimissed, you will owe late payment penalties and interest on all of your debt. Your creditors probably won't even talk to you about settlement while you are in BK. Once you are dismissed, negative reporting will start again and your credit reports will be worse than if you complete your plan.

Why not just stick with the BK? If your dad no longer wants to collect what you owe him, he can continue to get payments from the trustee and give you gifts. Just keep in mind that if he makes gifts to any one person that exceed $13K a year, he has to file a gift tax return. But, no gift tax will be due if he doesn't give more than $5,000,000 in 2012. That will drop to $1 Million if Congress doesn't pass new legislation. The $13K limit may also be reduced. I'm not certain and don't have my quick reference guide nearby.

Talk to your attorney to make sure receiving gifts from your dad would be okay.

Why are you having problems with your plan payments? Has something changed about your financial situation? If so, have you considered a plan modification?

[frogger]

Our payments are huge and are killing us right now, not sure we'll make it 3 more years.

Has your income been reduced? A chapter 13 should be something that you can live in. If your situation has changed, get with your attorney and do a modification of the plan.

Don't dismiss the case.............

[keepsmiling]

I am so sorry for whatever lousy situation brought you to where you are now, and happy for you that dad wants a reconciliation.
If your dad wants to be a family again, maybe he can just help you out by buying your groceries. Or daycare. Or whatever.
If your income /expense sitch has changed, then as the lil green guy says, you need to revisit your plan. BUT....
I suspect the payments feel worse now that you have considered not making them anymore

[TheBajan]

Please don't dismiss your case. It's very risky and you will have no resort if things go south again. I agree with KS and Lady, just have your dad use the portion he received from the trustee as a gift back to you or to buy your gas, groceries, etc while you continue your bk. Emotionally, the payments probably are a heavier weight now that you are thinking about not making them but bear in mind that your creditors can tell you anything they want and are under no obligation to keep their word once you dismiss. You really could end up worse off than you are.

On a much brighter note, I'm very glad there is healing and reconciliation in the relationship with your father. Please keep us updated with your decision. I'd love to know how things turn out for you.

Wishing you the best,
The Bajan

[angel7821]

OP if you are in a 5 year plan I know it probably feels like this is never going to end. Please don't throw in the towel on your 13. It will be over before you know it even though it may not seem like it right now. Get with your attorney and look into a plan modification so things can get better for you. That really is the best thing to do instead of dismissing. You are going to have creditors contacting you again and that is a nightmare.

[Kingxray]

Thanks for your responses. You all make valid points. What is ironic, we were never late with our creditors. Never one phone call. If it wasn't for my dad harrassing us with wage garnishment etc. we would have never filed for BK.

My dad and I share a bank account. I know weird that he never took me off-ha. He can continue to deposit the checks into that account and I could just transfer it back to our account. That way we are safe in case things go south with him again and the remaining creditors get an amount we can live with. Will that work?

I should clarify, the payments are not killing us yet but may in the near future. Before we were confirmed, our lawyer drew up a reasonable step-up plan but the trustee shot everything down. I couldn't even claim my car as a deduction (hubby has company car). She would only allow a public transportation deduction. She's a real piece of work! After paying a reasonable amount for a year our payments went up by $1000. We are probably good for next year but who knows what the future holds.

Thanks again for your responses.

[karm43]

I am so glad you and your dad made amends Life is too short! I think we all go through wanting to drop it, my thought more interest. more liens.and more on my credit report. Anyway they have alot of great ideas gift, groceries sounds like you may be able to make that work. Even though you were never late the creditors will probaly look at it different, then they start selling your debt, before you know it, very overwheming. I myself was gonna catch up but the late fees were just too much. Still waiting to be confirmed, praying my plan works out. Its HARD!

[Kingxray]

If you don't want to be in the 13, stop making your plan payments and it will be dismissed.

But, if the BK is dimissed, you will owe late payment penalties and interest on all of your debt. Your creditors probably won't even talk to you about settlement while you are in BK. Once you are dismissed, negative reporting will start again and your credit reports will be worse than if you complete your plan.

Why not just stick with the BK? If your dad no longer wants to collect what you owe him, he can continue to get payments from the trustee and give you gifts. Just keep in mind that if he makes gifts to any one person that exceed $13K a year, he has to file a gift tax return. But, no gift tax will be due if he doesn't give more than $5,000,000 in 2012. That will drop to $1 Million if Congress doesn't pass new legislation. The $13K limit may also be reduced. I'm not certain and don't have my quick reference guide nearby.

Talk to your attorney to make sure receiving gifts from your dad would be okay.

Why are you having problems with your plan payments? Has something changed about your financial situation? If so, have you considered a plan modification?

Hi Lady, long time no talk. My dad and I share a checking account. Can he deposit a lump sum or monthly amounts that I can just withdrawl or transfer without breaking any IRS or bankruptcy rules? He won't claim it on his taxes and neither will I. I have a call into our attorney but it will be a few days before I can talk to him. Also if he must legally claim it a gift, are my husband and myself considered one person or two according to IRS? We file a joint return. Thanks as always for your knowledgable help.

[LadyInTheRed]

Hi Lady, long time no talk. My dad and I share a checking account. Can he deposit a lump sum or monthly amounts that I can just withdrawl or transfer without breaking any IRS or bankruptcy rules? He won't claim it on his taxes and neither will I. I have a call into our attorney but it will be a few days before I can talk to him. Also if he must legally claim it a gift, are my husband and myself considered one person or two according to IRS? We file a joint return. Thanks as always for your knowledgable help.

Hello. I think you should wait to hear from your attorney about whether it will be an issue in your BK.

As far as the IRS is concerned, your father can give you money in any manner he wants as long as he reports gifts over the annual limit. You and your husband are two people for purposes of the $13K per person limit, regardless of how you file your income tax returns. Gifts to your husband should be made to your husband, not through you. If your father is married, his wife can also make gifts to you and your husband.

[Kingxray]

Hello. I think you should wait to hear from your attorney about whether it will be an issue in your BK.

As far as the IRS is concerned, your father can give you money in any manner he wants as long as he reports gifts over the annual limit. You and your husband are two people for purposes of the $13K per person limit, regardless of how you file your income tax returns. Gifts to your husband should be made to your husband, not through you. If your father is married, his wife can also make gifts to you and your husband.

Thanks much, very helpful as usual. I'm actually more worried about the BK issues than IRS, so I'll wait to speak to our attorney.

[Kingxray]

Update on head scratcher (not scractcher-hee)

Talked to our lawyer and it is no problem for dad to give a gift. Since we have already filed and are confirmed (2 yrs. ago), we don't have to report it to trustee as income as it is a gift. Now I just have to see if dad goes for it. If he doesn't, so what, I'm no worse off than I was! Thanks to all of you for setting me straight and telling me to stick with our BK. It was truly the best decision.