New to Chap 13

[vegasjohn]

Hello all:

We are in the process of filing. and am shocked at what our attorney came back with...100% of our debt, including the difference on the short sale of our home is being paid back, leaving us with $4.00 per month left over...Is that normal?

[lillymarlene]

Hi vegasjohn, Welcome. Other people with more experience may tell you more, but I think that in a 13 you are supposed to commit all your DMI toward the repayment of your debt over 3-5 years. For example after calculating my income less all my allowable expenses, I had net income of about $206. So $6 is all I'm supposed to be left with after my trustee payment, so I guess your $4 is normal.

Your expenses of course on your schedule J should be the maximum allowed, so you can try and save a little out, from your food budget for instance.

[LadyInTheRed]

Welcome to bkforum, vegasjohn.

There is no normal when it come to Chap 13 plan payments. There are too many factors for us to know if your payment is reasonable. As lilimarlene says, you must commit all of your disposible income to your plan. When averaged over 60 months, your plan payment minus your necessary and reasonable living expenses should be zero.

[ccmisery]

Post means test they sap the rest up, the only recourse is raises or a big salary increase, from what I know they wull not change your payback leaving you with more cash.

I think the 100% depends on whether or not all your creditors attend the meeting.

[katztoo]

Yes it is normal. They want ALL of your disposable income. We saved money be saving on food and gas(my husband started car pooling). They also give you an monthly allotment for home and car maintenance which you don't need every month. You need to see what you were paying out to creditors before and what you pay out after. Your monthly outgo should be less or the chapter 13 is useless. We paid out about 700 less a month (cars were included in 13) than we were paying before 13.

[ccmisery]

If you owe 60K total in credit cards, 100% payback for a 5 year plan is roughly $1k/month, minus the fees. For a 3 year it would be $1700/month rounded up.

It's obvious to file when you look at the interest rates even at 10 to 25%, since it's an uphill battle with the monthly interest. It was a good thing when the new credit card laws made the credit card companies breakdown the payment amount and years it would take to pay it off.

Attorney told me during a consulaton that I am in the 100% payback category, all my debt is credit cards. I do not know if it will drop down to 50% or less when I actually file?

[kornellred]

A competent bankruptcy attorney will, in most cases, propose a plan that will give the debtor a fighting chance at completion. If the trustee has issues with the payment amount, there will be objections to confirmation. This happens quite regularly. Chapter 13 bankruptcy demands a whole new way of looking at things. The sacrifices that must be made are worth it in the end.

[vegasjohn]

Thanks to all of you who responded- its nice to have folks on this end that can help and share their experience. I keep going over this plan and maybe its just me, but it scares the hell out of me not having any "cushion" for unplanned issues. Have any of you experienced a situation where you had a financial incident come up that exceeded your budget? What did you have to do?

[dyrstr8s]

When you create your repayment plan, you need to account for expenses like auto and home repairs, auto insurance, doctor and dentist visits, auto registrations, etc. Expenses that you don't necessarily pay every month, but you will have. They will reduce your bk payment. You will not spend this money every month, you will save it to cover when the transmission or the water heater go out, someone gets sick, etc. At least you will, if you're smart!

[ccmisery]

When you create your repayment plan, you need to account for expenses like auto and home repairs, auto insurance, doctor and dentist visits, auto registrations, etc. Expenses that you don't necessarily pay every month, but you will have. They will reduce your bk payment. You will not spend this money every month, you will save it to cover when the transmission or the water heater go out, someone gets sick, etc. At least you will, if you're smart!

Isn't' that what the means test verifies? Then you have your attorney work on getting you the best deal that also makes the trustee happy. If Bankruptcy meant you would have to take every dime you made and pay it back and have nothing left over to pay gas to get to work and/or a car loan along with putting food on the table, then it wouldn't be a good alternative.

I think a 3 year plan is tough for a lot of people who have very high debt and not a great income, 5 year makes it more doable but it means 2 years longer of making a sacrifice, I am not even sure what route I am going yet, I had a loss in income, salary went in reverse and I am now making less than I did 5 years ago.

[LadyInTheRed]

I think the 100% depends on whether or not all your creditors attend the meeting.

No. Who shows up at your creditor's meeting has nothing to do with your percentage payment to unsecured creditors. If so, a lot more creditors would show up. It is rare for a creditor to show up because there is rarely anything they can do to change the plan that the trustee isn't already doing.

I think a 3 year plan is tough for a lot of people who have very high debt and not a great income, 5 year makes it more doable but it means 2 years longer of making a sacrifice, I am not even sure what route I am going yet, I had a loss in income, salary went in reverse and I am now making less than I did 5 years ago.

Somebody who qualifies for a 3 year plan should sumbit to a longer plan only if they have non exempt assets, mortgage arrears, other secured loan payments or other amounts that must be paid during the plan that they can't pay over 3 years. The amount of unsecured debt would not force somebody with under the median income into a plan that is longer than 3 years.

If you can't handle the plan payment, either you should be in a Chap 7, are unwilling to make necessary changes to your spending habits, are trying to keep assets you can't afford or have a lousy attorney and should get another legal opinion.

This thread is a good example of somebody who needed to change attorneys and did: http://www.bkforum.com/showthread.ph...ded-in-a-panic!!! One attorney told her she would have to pay $1662 per month for 5 years. She went to another attorney who just filed a 3 year plan at $460 per month. She does probably have some things that she needs to change in her budget and her plan has not yet been confirmed. But, based on the information she provided, the first attorney was not willing to fight for a reasonable plan.

When your attorney tells you what your plan payment is, make sure you understand how they arrived at the amount. If the only explanation is that you have to pay x% to unsecured creditors or they are not including necessary and reasonable expenses in your budget, find another attorney.

[lillymarlene]

Somebody who qualifies for a 3 year plan should sumbit to a longer plan only if they have non exempt assets, mortgage arrears, other secured loan payments or other amounts that must be paid during the plan that they can't pay over 3 years. The amount of unsecured debt would not force somebody with under the median income into a plan that is longer than 3 years.

I qualified for a 3 year plan, and according to my attorney my payments were to be at $200 per month. Then the next day after I signed the papers, I noticed one of my business credit cards had been left off. My papers were quickly redone, and my payments were to be almost $300 per month. At that time, I didn't know about this forum, so I asked for an additional year (I was not forced) and was able to keep my payments back at $200 per month. I now know the % doesn't matter, but I guess my attorney seems to think it "looks better" to the trustee if the the unsecureds get something.

[vegasjohn]

I'm still doing the numbers, but so far I have a net income of 6759/month. My attorney has my current monthly payment at 2381, so about 35% of my total take home amount. After bills if I'm lucky, they have me on the form with $4.00 left per month... I would still be interested to hear from anyone who ran into a situation while in Ch 13 that encountered an unforeseen expense and how you dealt with it regarding your trustee and attorney...

[TheBajan]

To answer your question, you have to account for the unexpected in your plan. By that I mean that both your attorney and the trustee realize that you have to be able to build an emergency fund. In our case, our atty put a $100 a month right in our plan to save for... (whatever). He also increased our clothing, utilities, and a few other categories to the allowed standards that were way more than we actually spend. So in reality, we took what was allocated to those areas and used it to build a savings. You need to talk to your atty again. Four dollars a month will not get you through a 13. Make sure you are budgeting for the things that come up only occasionally (auto main, vet bills, lawn care, dental, etc) and make sure that your taking your full allowances where you can. Also, if you haven't already, look at the things in your life you can give up. Like cable, extra phones, gym or club memberships, etc. We did that right after we filed to free up those funds for savings.

Having an emergency fund in a ch 13 is essential to surviving it. Create a plan that will allow for that. If you can't do that, you won't make it. Life happens. That's a certainty. You MUST ACCOUNT for it even though do don't know what IT is.

[momofthree]

I'm still doing the numbers, but so far I have a net income of 6759/month. My attorney has my current monthly payment at 2381, so about 35% of my total take home amount. After bills if I'm lucky, they have me on the form with $4.00 left per month... I would still be interested to hear from anyone who ran into a situation while in Ch 13 that encountered an unforeseen expense and how you dealt with it regarding your trustee and attorney...

How much do you have on your budget for clothing, food, medical expenses, car maintenance, home maintenance, etc? Aside from food, these are not expenses that you will need to spend each month, however they are accounted for in your budget. So, what you do, is put that unspent money into savings. Then, when the expense does arise (new water heater, tires, ER visit, etc), the money is sitting in your savings account for you. So, while you don't get to budget a line item of "emergency fund," there should be plenty of line items that you can deposit into savings each month. It is imperative that you stick to your budget, and save that money each month or your plan will fail. Good luck and keep us posted. I don't know your family size or specific expenses, but
$4378/mo for living expenses seems reasonable.