Chapter 13 to 7 questions...

[CtheLight]

Hi All,
Right now our Chapter 13 debt is solely taxes. 65K with 4K plan payments. Only 15? Payments to go. Since getting lower paying jobs, our income can’t afford the 4K anymore.
We don’t own a house. Right now, our assets are 3 cars and a boat all paid through the Chapter 13.
Only the boat and truck are worth any real money. Maybe 30K in total.

One of the options a poster here gave me was to convert to Chapter 7, but I had some questions first…

1. Would the trustee/judge force us to sell the boat and truck? We don’t care about the two cars… They both have 200K in miles on them.
2. The taxes still owed through the Chapter 13 would still be owed after a Chapter 7 was discharged… We would then have to negotiate with IRS/FTB on a monthly payment… Would they add on interest and penalties for the past 3.5 years we were protected under the Chapter 13?
3. When we filed Chapter 13, our 100K tax debt became 80K that would be paid through the plan. If we filed Chapter 7, would that 20K in taxes still be owed?
4. Is there an online means test where I can find out if we even qualify for Chapter 7? I’m in California, Santa Clara County.

Thank you all for your patience. I know I’m not using the correct terminology, but up until a couple months ago, the Chapter 13 was going smooth and I didn’t have to pay attention to anything except making the payments. Now I’m panicked and confused!

[LadyInTheRed]

1. You would not be forced to sell them. But, the trustee might sell them if you cannot exempt them. I don't know whether the values for exemption purposes would be as of your original filing date or the conversion date, but I suspect it would be the conversion date. Since the loans were paid off during your plan, I assume the value you would have to exempt is higher now. But, California has pretty generous exemptions, including a wildcard exemption that is over $20K if you use system 2 and do not have a home to exempt.

2. I believe interest and penalties are unsecured non-priority debt that would be discharged in a Chap 7. But, I don't know for sure. See Justbroke's post in your previous thread. Maybe Justbroke will be along to provide clarification.

3. Wasn't that $20K unsecured non-priority debt that was going to be discharged in your Chap 13? If so, it would also be dischargable in a Chap 7.

4. Here's an online means test: http://www.legalconsumer.com/bankruptcy/means-test/

Whatever you determine based on answers you receive here and the results of the online means test, please make an appointment to sit down with your attorney and discuss your options.

[CtheLight]

Thank you Lady! It gives us an out if needed. Hopefully we can figure something else out!
Any other comments are welcome!

[CtheLight]

Looking at the means test, it asks if the primary debt is consumer debt. I would assume Taxes are not consumer debt... What does "exempt from means test" mean?

Non-consumer Debtors.
If your debts are not primarily consumer debt.
THEN you are exempt from the means test.

[dmc-2008]

Looking at the means test, it asks if the primary debt is consumer debt. I would assume Taxes are not consumer debt... What does "exempt from means test" mean?

Non-consumer Debtors.
If your debts are not primarily consumer debt.
THEN you are exempt from the means test.

How about just a modification when you know what your new dmi will be?

[CtheLight]

We are already at the minimum to repay the tax debt.
Unless Chapter 13s are ever extended a month or three, I'm not sure how we'll be able to make it to the end.
I'll be talking with our lawyer today hopefully.
Thanks!

[LadyInTheRed]

Looking at the means test, it asks if the primary debt is consumer debt. I would assume Taxes are not consumer debt... What does "exempt from means test" mean?

Non-consumer Debtors.
If your debts are not primarily consumer debt.
THEN you are exempt from the means test.

If your debt is at least 50% non-consumer, you do not have to complete the means test to get a Chap 7 discharge. I don't know if tax debt is consumer debt or not. If it isn't, that will be good news for you.

[LadyInTheRed]

We are already at the minimum to repay the tax debt.
Unless Chapter 13s are ever extended a month or three, I'm not sure how we'll be able to make it to the end.

Another option I mentioned in the other thread is that if you can't get a Chap 7 discharge and can't work out a payment plan with the IRS, you could let the current cases get dismissed and then file another Chap 13 to give you longer to pay off the non-dischargeable tax debt.

[CtheLight]

I thought you couldn't file two BKs within 7 years or something like that...?
The means test would have to include the 4K monthly payment for the Chapter 13, correct? If so, we very much pass the means test!
Thanks!

[LadyInTheRed]

I thought you couldn't file two BKs within 7 years or something like that...?

You can file more than one bankruptcy case, but are limited in how often you can get a discharge. If your Chap 7 or Chap 13 is dismissed without discharge, you can file another Chap 7 or Chap 13 the next day and get a discharge, as long as the first case wasn't dismissed as an abuse or for fraud and no creditor filed for relief from stay. If you can't file the next day, you may be able to file 180 days later. If you do get a Chap 7 (or Chap 13 for that matter), you can file a Chap 13 the next day, but you just won't get a discharge. If all of your debts were discharged in the first filing, then you don't need a Chap 13 discharge. You just need the protection of the bankruptcy court to make payments of your priority tax debt manageable. That is why you would only file a second Chap 13 if you could not work out an adequate payment arrangement with the IRS.

The means test would have to include the 4K monthly payment for the Chapter 13, correct? If so, we very much pass the means test!
Thanks!

No, the means test does not include the plan payment. The means test is pretty specific on what deductions are included. Just follow the form and don't include anything that the form does not ask for.

[CtheLight]

Thanks for the info!
After talking with hubby, he wants to stay in this 13 as long as we possibly can. 15 more payments and we'll be finished, it's just a matter of doing some strategic budgeting and maybe a second job for a bit...

[LadyInTheRed]

If you can swing it, staying in the Chap 13 really does seem like the best option after coming so far! Good luck! Stay in touch, even if you just need to vent and get a few words of encouragement. You will always find sympathetic ears here!

[CtheLight]

Thanks. I admit I'm having a hard time. I'm stressed and depressed and just want to be done with this.
I've learned my lesson and will not be so cavalier about money again. I can't believe how much money we threw away over the years... Never again!
Would rather save for retirement!

[frogger]

I've learned my lesson and will not be so cavalier about money again. I can't believe how much money we threw away over the years... Never again!
Would rather save for retirement!

Join the club. It's amazing how much money most of us have wasted. BK was in incredible learning experience on how to live within my means.