Questions and Soliciting Thoughts

[bdcoxii]

Hello everyone, I am new to this forum.

In June of this year, I filed Chapter 7 Bankruptcy. Before Thanksgiving, my case was dismissed due to the Presumption of Abuse motion the US Trustee filed. However, the Judge provided me with the option to convert to Chapter 13 instead.

To summarize my case, the issue is related to my student loans. From 1985 to 2000, I've taken out these loans for both my Undergraduate and Graduate degrees. Currently, my monthly student loan payment is $1100. Although student loans are not dischargeable debt, like credit cards, they are considered non priority debt. In other words, student loans are debt that must be repaid like taxes but they are no more important that credit card debt. So, the US Trustee's argument was based upon this.

With this in mind, the student loan amount of $1100 per month, was included in my petition as part of my monthly expenses. Somehow, the US Trustee was able to take my student loan amount, extract $908 per month from it, and determine that to be my monthly disposable income for 60 months in the future. From the $908, it was determined that I should be able to pay my student loan (according to my attorney, about $700+ will go to the student loans), the creditors, the US Trustee Fee, and my Attorney Fee in a Chapter 13 payment plan. This is the reason for my Chapter 7 filing was dismissed.

Below, I will provide you a summary of my debt before I present you with questions:

Student Loans: $198,000 (principle and accrued interest)
Creditors: $30,000+ (credit cards, etc.)
Creditor: $28,000 (one creditor, Statue of Limitation is 6/2014)
Auto Loan: $14,000 (refinanced, undervalued, and I need a new one).

I have no mortgage nor dependents.

Also,

With the economic crash during 2008/2009, I was living in North Carolina (I should have just stayed there, ... as usual, hindsight is always 20/20), I had lost my job. I came back to Michigan, my home, to start back over in January 2011. I've been employed ever since earning $80k/year.

I have the following questions for which I am soliciting thoughts/advice on. I plan to meet with my attorney this week to let him know which direction I would like to go.

Question 1:
With my Chapter 7 case having been dismissed and the Judge allowing me the option for converting to Chapter 13, should I convert to Chapter 13 or should I consider negotiating with the Creditors? My decision for filing Chapter 7 is that I had a wage garnishment earlier in the year along with two of seven other creditors coming after me for debt. I am thinking that having file Chapter 7, which was dismissed, the creditors may assume that Chapter 13 is next. Chances are if I file Chapter 13, a few of the creditor may not get anything. Again, this is my assumption and thought. I am soliciting the thoughts/advice of others.

Question 2:
If I do choose to negotiate with creditors, and everything is idea and successful according to my thoughts (I know the likelihood of anything being idea is '0'), Chapter 7 dismissal will show up on my credit report. Currently, even after filing Chapter 7, my credit scores as of today are 602, 613, and 611. My question is how long should I expect to receive adverse reactions to Chapter 7 dismissal although I may have settled my debts and my credit score continues to improve?

Question 3:
If I choose to convert to Chapter 13 and I get into a higher paying job, how will this affect the Chapter 13 payment plan that would be currently in effect? In addition to this, if I choose to take on a part time position, what effect will this have on a Chapter 13 payment plan as well.

Please accept my apology for being long winded. I am just addressing my concerns either way. I am thinking there is a chance that someone or many have been in similar predicaments that I've addressed.

[BKAttyMI]

Why did an attorney file a Chapter 7 for you on a yearly income of 80k? What is your household size? The questions you're asking have a lot of very specific details that are needed.

Before going back to this attorney, I would suggest meeting with a few others to get their take on your case.

[LadyInTheRed]

The chances of reaching a satisfactory agreement with all of your creditors is small. It sounds like some already have judgements. So, your chances are even smaller. They have no insentive to negotiate when they've already gone to the expense of suing you and winning.

Your Chap 7 will be on your credit report for 10 years. The damage has already been done. Your credit report should be your last priority right now.

Question 3 depends on procedures in your district and your trustee. If your income increases, you may need to modify your plan. Or you might have increased expenses to balance the increased income. It also may be that the trustee won't care about a post-confirmation increase in income and nothing would change. Ask your attorney about procedures in your district. It's best not to make a decision based on what might happen. Decide whether to convert to a 13 based on your current situation.

[TheBajan]

Hello and welcome to the forum. I'm also from Michigan and in a chapter 13. I am also curious about why your atty suggested you file a chapt 7 with the income that you have and no dependents.

To answer your questions;

1. I would not count on being able to work something out with your creditors. They already know your situation and your income. They already know they can garnish your wages.

2. LadyInTheRed is correct. The damage is already done and your credit rating should be the last of your concerns right now.

3. Again, I have to agree with LITR. Almost immediately after we filed, I took a part-time job that increased our income. It does depend on your district and your trustee. We were told that if our income rose more than 10% we have have our payments bumped up. We are required to turn in a copy of our income tax papers annually. I can only speak for my own experience in this but our trustee did not increase our payment even though our income did go up. Please do not make your decisions based on what MIGHT happen. If your income goes up.... GREAT! AWESOME! So what if they increase the payment a little? You are still better off than you were with less income.

One more suggestion... please take the time to check around with other attorneys. You are looking at a five year relationship and each one will approach your case a little differently. You want to be sure you can work well with him/her and that they are competent with chapt 13. Many attorneys are only comfortable with chapter 7's and it may be why he pushed you in that direction.

Best wishes. Please stick around. There's a lot of great advice here.