Thinking about filing - Question about payments

[CynWhi]

Long story, but we are facing bankruptcy for a second time. The first time was in the late 90’s, and was due to irresponsible behavior, no budget, and excessive spending on frivolous items and vacations instead of paying our mortgage. We did a Chapter 13 to save the house. Now here I sit today waiting on a call back from a bankruptcy attorney to schedule a consultation, but this time it is for totally different reasons. My husband took a risk on self employment that failed miserably and although he now has a job (not self employed) we have never really caught up from that period of self employment. We took to the old ways of “borrowing from Peter to pay Paul” (thinking husband would be getting overtime, it would be easy to pay back, etc etc) and now find ourselves way over our heads in debt. We live frugally – haven’t taken vacations, do budget grocery shopping, rarely eat out, etc. but we simply cannot keep up with the monthly bills. I am tired of constantly juggling creditors and the final straw was having to borrow money from our 20 year old daughter. I cannot do it anymore. I have tried to find a part time job to help out (both husband and I work full time but he has an erratic schedule that would make it much easier for me to get a part time job) but so far have had no luck. We have sold everything I can think of to sell. With no way to increase income, I am seeing bankruptcy as our only option at this point. I don't think we will qualify for a 7.

Now on to my question – are your Chapter 13 payments reasonable enough that you can “live” – and by that, I mean – I would love to buy clothes every now and again. I would love to take our girls on an inexpensive vacation, something we haven’t done in years. I would love to have “date night” once a month and go out to dinner with my husband. Again – nothing frivolous and all completely budgeted for. I just remember that the last time we were under a Chapter 13, our payments were more than our mortgage payments and we had very little to live on (which ultimately led to us to losing our house). We definitely didn’t have any money to set aside for an emergency fund or savings – I think at one point we were netting about $200 - $300 week after the Ch 13 payment was taken (not a lot, when the mortgage was $1000 month). I think we had a really bad attorney and I didn’t know enough about it at the time to question him or the payment – so I want to go into this one well prepared.

[plateump]

I feel for you Cyn. Make sure you put EVERYTHING on the income form! That includes clothing allowance, insurance, home repairs, utilities, cell phone, cable, etc. Even entertainment expenses should go on there. The trustee will not be looking to take it all away from you and your attorney should be working with you and be able to gauge what the trustee is looking for. If he or she does not have experience with that trustee, I'd find one who does. The attorney is your guide, your navigator.

We had enough to get by the first year and still went out for dinner once or twice a month, visited our kids who live out of town, took some small 'get-away' vacations from time to time. The thing was we had enough left over to live life and put some away for emergencies. It was tough the first couple of years, but I have to say that I think that was all perception, not reality. Being kept on a leash is not normal and it grates at you for a while. But you get over it and see the goal... and it gets easier.

Again.. do your homework, get that pencil and calculator and your bills out there in front of you and claim what you can. The worst they can say is 'no'. I'm just telling you what worked for me.

[keepmine]

First of all, why do you think you want qualify for a 7?
Leaving median income aside for the moment, if the majority of your debt is business related, you are exempt from means testing.

[spidge]

It sounds like you have been living on a tight budget for some time, but you may find some of the allowances are a bit generous. We were so tight the CH13 was a release in many aspects especially groceries. Look up the federal guidelines to help you find what you do that may or may not be out of the ordinary. Who knows, you may qualify for a ch7. Fingers crossed.

http://www.legalconsumer.com/bankruptcy/means-test/

Take some time and look around the site, but be sure to use your zip code at the top. You can check median income for your area, expenses, etc...

[BNKRPTinNC]

We filed in the Middle District of NC. We were fortunate that we had an excellent atty. that set up a plan that was quite livable. Also, the trustee was most cooperative and hands-off. The first year was the hardest but starting with nothing one could only go up. Feel free to pm me if you are looking for recommendations for counsel around the Raleigh area.

[CynWhi]

Thanks for the info, everyone. I think it just helps to vent somewhere and get some advice from people who have been there, done that.

plateump - that's exactly what we are hoping to do - just have enough to live life and establish an emergency fund. I figure it can't get any worse - we aren't living life right now. We are living in constant stress and just trying to figure out how to make it to the next pay day. Heck, I can't even afford to go to the thrift stores anymore which I used to love to do!

keepmine - It's not business debt, it's personal but due to not having any income from the business then when my husband did find a job it is making far less than he was before he did the self employment thing.

spidge - thanks for the info and the link! You are right - if I were spending $1465/mo on groceries/clothing/household/personal items, I would feel pretty extravagant, haha! I did take the means test on the link and just estimated some things without pulling pay stubs (income may have been a little high for DH as his income is not regular) and based on that we are close to being able to file a 7. With actual #'s, it may work...keeping my fingers crossed!

NC - we are in Charlotte and I need to find out how to find a good attorney. The one I left a message for this morning didn't call back - that's not a good sign if she can't respond to someone asking about a consultation.

[LadyInTheRed]

Not getting a same day call back from an attorney is not unusual. I wouldn't use that fact alone to rule her out.

I suspect that the reason your last Chap 13 was so difficult is that you were trying to save the home and paying the mortgage arrears made the payment unmanageable. A Chap 13 is supposed to be tight, but it should be livable. If you are struggling to make large unsecured debt payments and don't have significant arrears on secured debt, a Chap 13 should be an improvement. I replaced about $1100 in credit and sencond mortagage payments for a $500 plan payment, most of which is going to pay off the car a bought a month before filing. Having a good attorney and being an active partcipant in our case (i.e., review and understanding your petition and asking about anything you are uncomfortable with) are key in having a livable plan.

Definitely meet with as many attorneys as you need to find one that is a good fit. And bring complete information on your expenses and last 6 months income so they can determine whether you can qualify for a 7. If anyone says that your make to much money for a Chap 7 without running the means test, walk out of their office.