New and just started the process

[tinpusher]

Hi everyone. I'm brand new to this site and am enjoying all the good reading.

I just started the process, paid the initial deposit to my lawyer today. A little bit about my situation:
Live in Virginia
Combined household income is about 100k gross
About 110k in debt, no mortgage.
Our problem is the minimum payments are just too much to handle. Once we pay the minimums and our household bills/utilities we have no money left.

I'm nervous to see what our payment will be. I'm hoping we aren't basically in the same situation money wise as we are now.

Any insight or advice would be greatly appreciated. Thanks

[LadyInTheRed]

Welcome to BKforum!

You sound a lot like me when I started. My income is not as high as yours, but at $83k for a household of two, it is enough to live reasonably comfortably, if only it weren't for those credit card bills! When I filed Chap 13, $1400 in minimum monthly debt payments were replaced with a $500 plan payment. For the first 4 years, most of that $500 went to pay off the car I bought a month before filing (after consulting with my attorney).

The Chap 13 still required a lot of adjustment in my habits. While not having all those credit card bills to pay was a huge relief, I didn't suddenly have an extra $900 a month to spend. In the year before I filed, I charged an average of $1000 a month to credit cards. I would use my cards for gifts and vacations, for expenses that come up once a year like vehicle registration and for whatever I decided I wanted or needed that I didn't have cash for. I had to start living within my means. Which meant cutting living expenses every month so that I can save to pay for things I used to use credit cards for. No money to pay for a vacation? No vacation. I would really love a new sound system, but I don't need one and can't afford one. So, the old one will do. The Christmas budget is much lower than it used to be and I always have more than enough cash saved when the vehicle registration notice arrives. The 20-year habit of pulling out a credit card whenever I wanted to spend money had to die.

A Chapter 13 is not supposed to be easy. You are supposed to commit all of your disposable income to paying down your debt. You are allowed reasonable living expenses, but those may not be as high as what you have been spending. Aside from living within a budget, the key to success is finding a good attorney who will review your financial situation and prepare a plan that is reasonable. I suggest you consult with at least three attorneys. Bring a spreadsheet that lists all of your current debts, your income and payroll deductions for the last 6 months and all of your monthly living expenses. Don't forget to include those once a year expenses, divided by 12. Before my 3 consultations, I emailed a spreadsheet to the attorneys. All of them had an estimated payment ready for me when I arrived. Don't count on all attorneys doing that, but sending info in advance might help.

Right now, your creditors are in control and they decide how much of your debt you must pay. When you file Chap 13, you will tell your creditors what you can afford to pay.

[klandsb]

tinpusher welcome. I can only talk from my own experience. It would have taken me 50yrs+ to ever pay off my credit debts that I incurred. Approx 23,000 give or take. It kinda just snow balled after my divorce, interest rates skyrocketed and I just felt so overwhelmed . Made a really bad mistake and signed up with one of those Debt Relief Companies which was the last straw. When a sheriff showed up with a pending judgment I filed Chapter 13. I had never been late on my mortgage,helco or auto loan. Credit cards were another story. Has it been easy , NO, but its a helleva lot better than where I was. IMHO it does matter who you pick for a lawyer and who your trustee is. Not sure I picked the right lawyer (has since sold business to another lawyer I have never met) . After reading some horror stories on trustees mine seems reasonable . Its definitely a life style change but when you reach the point I was at you have no choice. I feel fortunate to have survived the 5yrs without any roadblocks. Once I filed it was a relief. No more creditors breathing down your back. I have a fresh start and plan to make the best of it . 5yrs is a lot better than 50+ it would have taken me to get out of the bottomless hole I was falling into...

[tinpusher]

Thanks for the advice y'all. I wish I had thought of seeing a few different attorneys. I hope I'm not screwing myself here. The one I have seems to be good. He's got tons of good reviews and he's been very patient with my questions. When talking about my budget today he said that we needed to do that together (me and him). He doesn't want me to miss the little things like vehicle maintenance, registration, changing utilities, and various others.
This is a super nervous time for us. As of tomorrow our cars and biggest loan officially become delinquent for the first time. The lawyer reccomended that I stop paying because it wouldn't affect my chap 13. He said to save that money and use it on a rainy day. Good advice?

[klandsb]

Very good advice... When you are 100% sure your filing why throw money ,you could save for a rainy day ,onto those accounts that will be included in your plan . It was a very stressful time for me right b4 I filed & the 341. Once I knew what my payments were I was in it for the long haul and felt more at ease. My payback started at 40% and is now real close to 50%. I only had 1 credit card that didn't file a claim for $ 1000.00. Some had been bought & sold by a few junk debt buyers so ones I thought didn't file had actually filed under a different creditor but all in all, like I said, I only had 1 that didn't file.

[dmc-2008]

Welcome and good luck!

[159515951]

The previous posters provided great information. The only comment I have is that you're really going to have to figure out how you ended up $110k in credit card debt with no mortgage and a $100k income. Unless there was a major medical event or job loss that resulted in that much debt, you're going to have to make some serious lifestyle changes during your Chapter 13. As long as you're ok with some belt tightening, you're going to be WAY better off in 3-5 years when this is all over.

[tinpusher]

Thanks again for input everyone.

I know it seems crazy that our income is so high and yet our debt is that high. As they say "here's the rest of the story".

In 2011 my wife and I had a combined income of 170k gross. In December 2011 she was laid off. Our income went down to 70k. In march of 2012 the military (yes I'm military) moved is from virginia to the middle of Texas. Military income is partially based on where you live. My pay dropped about 10k. In December 2012 they forced us to move again, Jacksonville florida this time. Pay went back up about 5k. May of 2014 yet again, we were told to pack our bags and come back to virginia. So my pay is back to 70k (gross, 21 of that is "cost of housing" that I don't actually see). Now my wife is in a new profession (nursing) and makes about 30k.

From December of 2011 to July 2014 she didn't work. Her old profession (top secret computer networks for government) was lucritive but very specific.

[switch625]

Welcome to the world of Chapter 13, tinpusher. you will find some great info here and some very knowledgeable people.

I'm one of those who visited only one attorney, but that was after a lot of other research via web and bankruptcy court info, narrowing down to about two to four candidates, with certain other criteria. I was also pretty stressed out at the time with the collection calls and falling further behind on the mortgage, so I wanted to get the process going and done with and I was happy with the first atty I met. The biggest enemy to debtors in this process is the stress created by handling unmanageable debt and collections actions. It can compel more than a few to make some bad decisions (to keep the debtors away and/or to avoid foreclosure or filing for BK) and my BK was the good decision that was preceded by several bad decisions on my debt management.

If I had to offer any advice at the stage you are at, I would say this: If your attorney is OK with it, ask him/her to be your point of contact right now, even if you aren't paid up completely on the attorney fee and you haven't filed the petition. If you get collection calls (you will be told to stop paying your unsecured creditors immediately), telling your unsecured creditors that you are going to file and providing your atty's name and contact info will get some or even a majority of them to stop calling you. That's what happened in my case. If your attorney will do that, you may remove a lot of stress and aggravation in short order.

Also, be sure to list and account for all of your past six months and current monthly expenses and don't be afraid to err on the side of overinclusion, but to the extent that it can supported by your credit card and banking statements. In other words, don't lowball any of the less quantifiable monthly expenses such as groceries in the hopes of meeting the Trustee's "smell test" to get past the 341 meeting and get your petition to an easier confirmation. If you are spending $1K a month in groceries, list it. Let your attorney conduct that "smell test" for you and tell you what won't pass muster with the Trustee. As LITR indicated, those annual expenses and even the small ones..factor them in monthly (and in your case, especially that VA annual registration/"car tax", which I understand is a three-figure sum!). I made the mistake of believing at your stage that since I was over the mean on the Means Test, my DMI (and 13 payment) would be based on the Means Test and my expenses were the IRS Standard. It turned out that I could use actual expenses on Schedule J for the DMI but it was a wash since it was very close to the IRS standard exemptions anyway. However, I feel I could have lowered my DMI by about $100 or so on the Schedule J if I took the time to give a better accounting of some expenses such as groceries and housing upkeep and maintenance.

You will find that you will need every dollar of allowable expenses once file your petition. If you have an monthly expense that is high and find as you go forward that you are not spending as much in that category, you and your attorney have created some "wiggle room" to save up money for some unexpected expenses down the line. One example is transportation expenses. I filed a year ago when gas was selling in my area at $3.70 a gallon and based my monthly transportation expense on that amount. Now it's over a dollar a gallon less, so more $$ for me and my family, until prices go up again.

[Drazil65]

Hi and welcome, I agree with all of the above advice and suggestions and would add that you have some serious lifestyle changes ahead of you. Even at a "low payday in the " $70s for 2 people in the military where you have many things "taken" care of for you (ie: health ins etc) it is obvious you need a crash course in budgeting. No more credit cards when things get "tough" and for that matter work out a budget that does not include using credit cards at all. My guess is you bought/have expensive vehicles as well, learn to drive much cheaper and used vehicles and live within (or better yet) below your means. There is really no reason 2 people with the salaries you mentioned (in the military especially) cannot live on that one salary and bank the other, budget!

This journey will take a lot of commitment and self control from both of you but it only works if that is the goal. No hall passes or free walks with bankruptcy, its hard work and a long road but the end result is worth it. You have a chance to do it right this time and move on from there. Good Luck!

[FullBoost]

You definetly will need some lifestyle changes as suggested above. The chapter 13 will force you to do so.

I am at the end of my 5 year journey thru a chapter 13 and just made my last payment about a week ago. I was in a very similar situation with regard to income. However my situation (the reason I had to file) was divorce. I was placed into a 100% plan with $900/month payments. It really was more than I thought it should be, but thats what they came up with. I was lucky enough to be able to work a few overtime shifts a month to help offset it.

I got lucky along the way. I had a 2nd mortgage with Bank of America, with a payment of $1,100/month. I could afford the 1st mortgage ok, but when the 2nd was added on there was no way. Well I was looking at giving my house back to the bank since I was upside down when I recieved a letter from BofA indicating they were forgiving the entire $120,000 2nd mortgage under an agreement with the Justice Dept and the federal government. Suddenly I was able to keep my home I had built! That was an incredible blessing!

Hang in there, its not a fun journey but you're not alone as millions of us have had to go thru it.

[tinpusher]

I understand what everyone is saying and I agree. Our belt tightening has already happened, more than a year ago. We know what we did wrong and have already started fixing it. This is another one of those tools we plan to use now that we are wiser.

On another note, the last 2 posts kinda irritated me. I know it's advice from people who have been in my shoes so I'm trying really hard not to get defensive.

Drazil65 Please don't make assumptions about my life, if you have a question ask and I'll tell you honestly. I do not drive 2 expensive vehicles. I have a 2007 chevy silverado that I purchased used in 09 and a 2010 chevy equinox that we bought in 2012. Both are base models without extras.
Yes the military has some perks but everything is not "taken care of for me" as you put it. Health insurance is a benefit, everything else I pay for. Just last week I had to buy a jacket that cost $363 because my old one was ruined during a move. I filed a claim and 9 months later have not been payed for it. This is a requirement for my job.

Today's military isn't the same as our grandparents had. Nothing is issued anymore. We purchase it.

70k is not a "low pay" for me. I stated in my post that our pay went from 170k to 70. I challenge any of you to reduce your salary by 59% and see how you are doing. 70k is a decent living, however it is not commensurate with my experience and profession. I am am air traffic controller and with 15 years of service in the civilian sector is be in the 140k range spending on location

That last part was kinda a rant and I apologize in advance

[switch625]

I too had over $100K in unsecured debt. When my plan was confirmed, I ended up only owning over half of my original unsecured amount, since some of my creditors (who held a lot of my debt) didn't file Proofs of Claim to be paid under the plan. Maybe that will happen to you. Also be prepared to see some of your unsecured debt that you've so diligent on paying the minimum amounts that are tough for you to make to be sold by some of your creditors to debt buying companies for pennies on the dollar, after these creditors charge off the debt and take it off their books once you file. Paying debt buyers out of your 13 is definitely one of bankruptcy's punch-to-the-throat moments.

One other thing to discuss with your attorney is income tax refunds. You may want to ask your attorney how they will be treated by the Trustee. In some districts, the Trustees take the entire refund. In other districts, the Confirmation Order will state that the Trustee will only take those refunds above a certain amount, say $1000 or $1500. In other districts (like mine) the Confirmation Order is not specific on how they are to be handled and you could be pretty much on a "don't ask/don't tell" or "wink, wink" basis with what you do with that tax refund check or payment. That tax refund is used by those on ch 13 plans to build savings for emergency or unanticipated large expenses that come in during the course of the plan and is an annual welcome pot of money for those than can get it.

[Drazil65]

No need to get defensive, you stated that your biggest bill was for vehicles and things were already tight, so on a $70 a year, you pointed me in that direction? Just imagine not only your salary cut by 59% and also having to pay $600 plus for health insurance for family coverage on top of that, been there done that. We worked 2 full time jobs and 2 part time jobs just to try to make up the lost salary. I believe you also get somewhat of a housing stipend as well, you will be just fine? I think if you look at your situation when you say your salary dropped to $70k and you have some extras coming your way and its only 2 people, I think you can see how we might think "gee if he thinks this is tight, just wait"? There are many families out there that live on that total annually (or less) and do just fine so you can make it through this.

Look no matter how you got there, you are there and you are headed down the right path to right yourself back up. Its a long road as you are aware and things are about to get tighter that's all. I truly wish you the best on this journey, it is a great feeling when you get to the end, something to look forward to....its all good!

[LadyInTheRed]

tinpusher, there is no reason to feel defensive. Nobody is making any judgments. Incorrect guesses or assumptions maybe, but everything you've read here is from a desire to be helpful, not a desire to shame. What we all know from our experience and the experience of other BKforum members is that the higher your income was before the decrease, the more difficult it is to make the necessary adjustments. I think everybody is just trying to make sure you know from the start that things will be difficult. I think people who ever been there themselves tend to be very adamant about warning others.

Paying debt buyers out of your 13 is definitely one of bankruptcy's punch-to-the-throat moments. .

Why? Your debt was an asset of the original creditor. That creditor didn't want the asset, so they sold it to somebody else, just like they would do with any other asset they don't want anymore. Why do you care who the trustee pays?