Filling Chap 13

[iamwhoiam]

My best friend is in some trouble and I need some advice from you guys on what he can do.

Currently he makes 142,000 a year his mortgage is 3,862.86 a month plus an equity payment of 377.82 He has 90,000 in credit card debt. currently he has borrowed from his 401k and what's left to pay everything every month once that runs out he can't pay everything and keep current I know he can not file a chap 7 but he will file a chap 13. without paying the credit cards and paying the house and living expenses he has about 900 left over in free cash

what do you guys think it would look like as far as ball park payment and just any advice you can give before we hit the lawyer and he stops paying everything. Yes the house stays we are not getting rid of it and there is no car to worry about.

[spidge]

First thing is stop using the 401k as it is protected. He will look back and wish that money was still there as he closes in on retirement.

Is the house worth less than the balance on the first loan? If so he will likely be able to strip that in the 13 and be done with it along with the CC debt. Of course this will be a five year payment plan that he needs to be ready for. There are some allowable steps he can take like taking advantage of the car allowance. I made this mistake in that I feared the payment on a newer car and now have a 12 year old car that I am sinking money into often.

Every 13 is different so he would have to see a few attorneys at minimum to see where he stands.

[iamwhoiam]

He doesn't have a car he just does public transportation. The main loan on the house he has paid down to the point where its even with how much the house is worth there isn't any equity in the house as of yet.

[LadyInTheRed]

He doesn't have a car he just does public transportation. The main loan on the house he has paid down to the point where its even with how much the house is worth there isn't any equity in the house as of yet.

If the value of the home is equal to or less than the balance of the first mortgage, them the 2nd can be stripped. Sounds like your friend is close, so an attorney might recommend he get an appraisal, or at least a realtor's opinion of value.

If your friend truly has $900 in disposable income, that will be his payment. If he has any non exempt assets, that payment would have to be enough to pay unsecured creditors at least what they would receive if the non-exempt assets were liquidated in a Chap 7. An experienced Chap 13 attorney may come up with a number that is lower or higher than $900.

If he has any desire to have a car, before filing Chap 13 would be a good time to buy one. The car payment would either lower his plan payment or be paid from it. But, he shouldn't make any moves before consulting with a couple of attorneys.

[toojerm]

That much income, my guess is a 100% payment, which means 1500/month just on credit cards and around 7% on top each month for the trustee. If it looks like a 100%, then don't bother with the lawyer, he should do the work himself as it can't be worse than 100%. Then the house outside, it will suck. I am 2 paychecks away from finishing off $107,895 over 58 months making far less than your bud. Maybe just wait and settle debt for less, using the $10k or so the lawyer and trustee will take anyway. Sorry, high income individuals get screwed in CH13. We pay more for the lawyer, more for the trustee, and pay it back longer, which I've never understood why everyone shouldn't do five years. Someone who pays 0% to unsecured for 3 years is elgible for an FHA loan two years sooner than someone who paid over 100k back over 5 years. Yup, I'm bitter, and no, it won't go by fast, it will be slow, and painful, and your friend will be bitter too.

[iamwhoiam]

Thing is as it is right now he can't pay any of his debt as soon as his tax return runs out and also his 401k loan runs out he will start falling behind, so i don't understand how a 13 won't help, thing is he can't afford a 1500 payment with the cost of the house and the bills that come with that house its a duplex so its a lot to heat and keep cool as well as the assessment fees. I guess its time to talk to the lawyer and see what happens.

[iamwhoiam]

Ok here is a better idea, he makes 6,000 a month 4,782 in monthly obligations pertaining to the house with the equity loan included. Then the minimum payments on all the cards is 1,782 and he still comes up 500 short and is using his 401k to keep them paid. Wouldn't this get him a 7? or a really really low payment on a 13? I mean he's done for there is no disposable income as the amounts don't include food or any living expenses.

[spidge]

So he has a good income yet cannot stop paying his debt and still pay the mortgage and utilities? It seems something is not being shared here. Why should he not file a 13?

11,800 income
4,241 mortgage
7,559 left over to pay utilities and live?

I must be missing something.

[spidge]

Ok here is a better idea, he makes 6,000 a month 4,782 in monthly obligations pertaining to the house with the equity loan included. Then the minimum payments on all the cards is 1,782 and he still comes up 500 short and is using his 401k to keep them paid. Wouldn't this get him a 7? or a really really low payment on a 13? I mean he's done for there is no disposable income as the amounts don't include food or any living expenses.

Oh, he makes 72,000 per year? Find out what the median income in your area is. That was my mark and squeaked under it.

[iamwhoiam]

Oh, he makes 72,000 per year? Find out what the median income in your area is. That was my mark and squeaked under it.

6,000 after taxes.

[spidge]

6,000 after taxes.

Likely above median, but you need to make sure. That is a large house payment for that income. Is the house value below the balance of the first? Has he attempted to modify the first? I'll send you a link to a place with some good mortgage advice. Again, don't touch that 401k. It may seem like a good easy solution now, but will blow up on him later. I hope he did not take a hardship withdrawal as the taxes will be quite surprising.

[Pjmax]

I'm confused, in your first post he made $142,000. Are you saying he pays $70,000 in taxes?

[iamwhoiam]

What is owed is 429,000 and the house is worth 520,000 per the last appraisal. The reason the mortgage is that high is because the taxes alone are 15,000 a year. He did not take a hardship he did a loan so he is paying it back. He is going to talk to a lawyer i am his roomie and we are just trying to figure out what the options are for him. I'm moving out so he will not have my money to add to his income which is reflected in the numbers i have provided. Would they force him to give his house up? if not what would they do, it is above the median as i did check for IL we live in chicago which is why the taxes are high.

[iamwhoiam]

I'm confused, in your first post he made $142,000. Are you saying he pays $70,000 in taxes?

its after taxes, 401k loan repayment health insurance and such.

[iamwhoiam]

I'm trying to give as much information as we are going through his debts and income right now.