I need wisdom, guidance, and advice

[cperkins66]

Hello all,

This is my 1st post within this forum. I'm sure many of you will have comments and I'm open to any and all suggestions. I hope that you don’t find me to long winded, but I feel the more you know, the more you’re able to assist.

In December 2010, I found myself behind in my mortgage, my car loans, and all of my credit cards. This was the result of converting from a contractor to a full time employee. This resulted in the loss of approximately $60K a year of income.
Not knowing what to do, I started looking into bankruptcy as I knew that I didn’t want to lose my home and cars. I connected with an attorney and we filed in December. The instructions that I received were to pay my mortgage and car payments each month moving forward. My monthly BK payment would pay everything else that was in arrears. Basically, as my attorney explained, in 48 months, I would actually payoff my creditors with the exception of my mortgage. In late July 2011, I had to change my w-4 tax withholding to an outrageous number to avoid federal and state taxes being taken out of my check. I needed the extra income and planned on putting things back to normal as we moved into 2012. Well, that didn’t happen and I went through the entire 2012 year not paying federal and state taxes.

In April 2012 I received a letter from my HOA stating that if I did not complete my landscaping the HOA was going to sue me in court (I had been in the house since June 2009. I can’t blame them.). I had no choice as I could not afford a lawsuit. Yet, we were not talking about just a couple of thousands of dollars for the landscaping. I had estimates that put my basic landscaping at somewhere between $18K to $25K to complete. I was switching jobs and knew that I would get a ton of cash for my vacation cash out. But the only way I was able to complete the rest would be to stop paying everything (minus utilities). I wrote my trustee and he told me to not make trustee payments from May 2012 to November 2012. I followed my plan and did not pay my mortgage, nor my car payments and I was able to complete my entire landscaping. Furthermore, I was able to eventually catch up my mortgage and my auto loans; and I don’t mean that these items are current based on my BK payment, I mean that these items are current based on the fact that they are totally up to date.

Here’s where I have some issues. I did not start making my BK trustee payment again. So, I am multiple months behind, 6 months to be exact. I left my w-4 tax withholding as it had been though 2011 for the entire year of 2012 and as a result, I owe $20K in federal and $1K in state taxes for 2012 (I have corrected that in order to avoid this issue again). If I could get rid of my BK payment (it’s approximately 1,500 a month) I could make ends meet and make payments on a repayment plan with the Feds and State. The items that my trustee payment were covering are the following: American Express, Home Depot, Best Buy, and Visa. Of course payments were going to my mortgage and auto loans as well, but like I told you, those are completely current.
Can I file Chapter 7? Will that get rid of the Chapter 13 BK payment? Would that get rid of the remaining creditors? Will Home Depot still come after my refrigerator, range, and washer and dryer even though they’re 4 years old? What are my options? This is where I can use wisdom, guidance, and advice.

Thanks.

[justbroke]

Can I file Chapter 7? Will that get rid of the Chapter 13 BK payment? Would that get rid of the remaining creditors? Will Home Depot still come after my refrigerator, range, and washer and dryer even though they’re 4 years old? What are my options? This is where I can use wisdom, guidance, and advice.

If you are in Chapter 13, you should really be discussing options with your Bankruptcy Attorney. They can help decide whether converting to Chapter 7, or dismissing and re-filing is better.

First, to file or convert to Chapter 7, you must actually qualify for Chapter 7. This means, that you can't have too much disposable monthly income. If you're trying to save your home, Chapter 7 is just not going to work.

If you dismiss and re-file Chapter 13, you will probably need to wait several months (6 months) before refiling. This could be court ordered or necessary in case some creditors are seeking to move against property (like your mortgage lender). You could then include the new tax debt. The new tax debt is going to eat up over $500/month alone of your income over 5 years (60 months) -- as a back of the napkin estimate.

It is unlikely that Home Depot is coming for those items. In my Chapter 13, they filed an "unsecured" claim. You should check your claims to see what type of claim they filed.

I am surprised that the Trustee has not moved to dismiss your case. The dismissal could be a blessing if it is not with prejudice. You should really talk to your attorney. Your case, as you know, is a mess.

My opinion is that you could probably salvage some things, but definitely not your current Chapter 13 case.

[LadyInTheRed]

JB, if I am reading correctly, I believe all pre-petition and post petition mortgage and auto loan arrears have been paid, either by the trustee or by cperkins66 while he wasn't makiing plan payments. Is that true, cperkins66? If that is the case, it seems that converting to a 7 or filing a 7 after the 13 is dismissed would work if he/she qualifies for a 7. If he/she can't qualify for a 7, I wonder if the current 13 can be salvaged by a modification of the plan seeing as how the secured payments the trustee would have been making since last May have been made. But, I'd confirm with the mortgage company that they agree that the mortgage is no longer in default before doing anything.

This is a real mess. cperkins66, you really need to talk to your attorney before the trustee moves to have your case dismissed so that you have as many options available to you as possible. Have you talked to your attorney at all in the last year? You only mention talking to the trustee.

[memuzz]

I had the same situation happen in my case. We filed our chapter 13 in 2006. My attorney said to increase the number of withholding allowances as to allow more net income and not to receive a tax refund. Bad advise cost us badly in 2007. We found out that we owed nearly $7000 in taxes. I contacted the IRS immediately and the agent handling our case advised us to include the debt in our plan. The first attorney added the debt. A few months later, we were having problems paying our bills since our weekly payments were over 33% of my husband's take home pay. I had been working when we filed our case. We lost my income when I injured my back. I tried contacting my lawyer trying to get a modification to lower our payments to the court. We could not get in contact with him despite numerous certified letters, several phone calls every day for nearly 3 weeks. I finally got disgusted and contacted the local lawyer referral service. They referred me to another attorney. I contacted her and she agreed to take our case. I fired the first attorney.

Immediately, she petitioned the court for a modification to lower our payments. The trustee filed a motion to stop the modification but the judge allowed the new plan.
It took us over 5 years and 6 months to pay off our case. Many times with many tears but we paid it off.
My advise is to talk with your attorney first about your case. My new attorney helped us out of a difficult case. I was very proactive in my case going to PACER and also the National Data Center to find out any details of the case. Your attorney knows all of the laws and steps to help you out of this mess. I would have never been discharged without the help of a good attorney. I hope that your case is resolved soon. Good luck.

[despritfreya]

The problem is the taxes. Can the post petition taxes be added to the Plan - yes under 1305 but, doing so at this time will probably make the Plan payment (modified Plan with a waiver of payments and then an increased payment to cover missed payments and taxes) way too high.

If the house and car are current and the equity in them is within allowed exemptions AND OP qualifies he/she can convert and then get on an installment agreement with the taxing agencies.

If working it out with the taxes is not in the cards he/she could let case #1 go and file case #2 to force the repayment (no interest) on the taxing agency. He/she would only have to wait 6 months if he/she sought a voluntary dismissal AND a Motion for Relief had been filed since “willful failure to obey a court order” is not going to be an issue. If a Motion for Relief had been filed he/she just waits for the dismissal based upon a Motion to Dismiss filed by the Trustee.

There are many options and as suggested above, sitting down with your attorney is the best approach at this time.

Des.

[cperkins66]

Thanks all for the great advice. I will reach out to my attorney. I'll keep you posted as to where I go from there.

[justbroke]

I don't know if it's just me, but I read that you haven't paid the Trustee since May 2012. To me, that means no mortgage payment during that time and you were to resume payments in November 2012. Hopefully, you were paying your mortgage that whole time, but I can't tell.

In any event, your attorney will help you go through the options mentioned. In fact, your attorney may think of something else since they know your case more intimately!