New here...need help please

[Macdad123]

Hi,

I have be doing as much research as possible and I am so glad I came across this site. I will give you my story and see if anyone has advice

I recently received a letter from the bank that my HELCO which was an interest only is about to mature and they are demanding full payment which is $65,000
I currently have about 95,000 in unsecured credit debt. I have about 45,000 in equity in my house, and I am unable to refinance my HELOC due to obvious reasons. I have been struggling for quite some time my debt problem and I just can't get ahead. My wife and I between us make about $110,000 a year. I spoke with an attorney briefly yesterday about a chapter 13 and he said he can help me save my house, and that we can keep our two vehicles, etc...I guess what I am trying to figure out is how much money I will have to live on each month. We have a 13 year old daughter that just got braces, she is involved in theater etc and I am afraid I wont be able to pay for any of these things for her. We also have my elderly mom in the house and a child in college that lives at home. Our household expense is quite large. I currently pay 3,000 a month to my unsecured debt. here are some of my questions

1.I assume I will have to pay 100%, does that mean they will take all of my income that is left or if I have income above what would pay my debt in 60 months can I keep the rest?

2. I am a teacher and sometimes we get small bonuses for our school grade or our performance, do I have to turn that money over to the trustee?

3. IF I pay off a car during the plan (which I will) do I have to add that extra money into my plan and give it to the trustee?

4. Do you have to worry about the expenses that you pay from your debit card, or cash? for instance if I want to sign my daughter up for a workshop or continue her music lessons am I allowed? Are family members allowed to pay for things like this? A gift so to speak?

5.If I get a raise usually about 4% every 3 years do I have to surrender that? If I am already at 100% I don't understand how they could alter my plan to make me pay more?

Thanks for anybody that wants to respond...I am sure I will have a lot more questions

[klandsb]

Macdad123.... No one can tell you if u will or will not be in a 100% pay back plan until you do all the schedules required to figure out how much disposable income you have left. I would consult with at least 3 attorneys B4 you make your final decision if a Chapter 13 is the right decision for you. $3000 a month too unsecured is a huge chunk of change. B4 I filed I was making the minimum payments every month on my unsecured & getting no where fast. Then they upped my interest rates & I just couldn't keep up anymore.. I have never once regretted filing. Yes, I made some bad decisions and was granted way too much credit for my income at the time. I ended up with a 49% payback plan which is probably what I actually owed them minus all the interest . Sad part is the junk debt buyers are the ones that got most of the money I paid in & not the actual creditors but not my problem.
I was very fortunate that I got to keep any tax refund every year & my job does offer overtime so I also had that to pay some unexpected car repairs & such that popped up. But it is a life changing event. You have to learn to live on cash only & sometimes when the money runs out you just do what you have to do to get by. At times its not easy but if you really want to make it work you will.
Every trustee , state is different so only an attorney can tell you what is and what is not allowed & how the trustee runs their program.
Bankruptcy is not a way of life it is however an option when you have hit a certain point in you financial situation. A sheriff showing up at my door with papers to file a lien on my house was the last straw for me.. I am so glad he showed up that day because it forced me into something that I had been scared to do but was my best option .

[keepsmiling]

Hi there, welcome to the forum! Glad you found us, it will be a huge stress relief. Lots of good folks with good advice here.

1)There is absolutely no reason to assume you will be in a 100% plan.
In fact you could wind up paying the Heloc and very little unsecured. It all depends on your individual circumstances. There is no one size fits all in bk.

2)maybe, it depends. just don't spend that money in your head yet.
3) most likely, unless you are in fact in a 100% plan.
4)sure, your mom/dad/aunt/godparent whatever can treat your daughter to her lessons. Just have them pay directly.
5)again, it depends. Very often trustees don't ask for anything under 10%.

You want to start scheduling a few consults with some bk attorneys and start getting a feel for where you might land. Don't commit to anything until you fully understand what each one proposes and which is in your best interests. Come here to discuss and possibly even tweak. You may be surprised at some of the answers. For instance, you may be told to get another new car. Really. Maybe. We don't know enough about your circumstances yet.

What piqued my interest is that our HELOC ceases to be interest only this year as well. Now I am worried that they will want the entire thing at once too! Is this really the only alternative they gave you? Any idea why?

[dmc-2008]

You should go see a atty with a list of expenses. Yes you can sign your kids up, you just have to budget for it. Some trustees do don't requir refund, but you just should try to come close to no refund, I messed up this year!!!

Bk is not supposed to punish you and your fam, there should be some room.

Don't get too scared before you talk to a couple of attys.

If you can't dig yourself out in five years it's a good idea to file. It's just gonna get worse. My kid was 13 when I filed and I worried too. She is gonna want a car next year, that should prove to be very challenging for us.

Good luck

[Macdad123]

Thank you all so much that have already responded....I know I have a lot to learn. The HELOC doesn't mature until July 15th, should I just lay low for now and gather information and wait for them to come after me before I start to file? Does anyone know how long it would take them to try to take my house after 7/15 when they don't get their payment?

[sophieanne]

Hi Macdad,
If I was you...i would look at getting those lawyer consultations now. You might be surprised how much it will help you (like getting rid of those $3000/month credit card payments). A lot of us hate that we got to this stage, however when we learned what filing could do to help us, wish we had done it years ago. A consultation is not a commitment so check out what
the attorneys have to say. Good luck!

[BKAttyMI]

$3000 per month on a $110k annual income? How on earth are you making ends meet? Stop paying on this junk and go see an attorney immediately, preferably two.

[Pandora]

First, welcome to the forum.

As the others had stated, you won't know for sure if you'll be in a 100% plan until you fill out schedules. Since you are above median however, you will be in a 5 year plan.

Some things you need to know that may come into play:
1. Teacher: how do you get paid; biweekly (26 pay periods) twice a month (24 pay periods)? Do you get paid all12 months the same amount or are you only paid for 9? This is a MUST KNOW for whatever attorney you choose as it will play a major role in how you can pay you CH 13 plan and budgeting. If you only get paid 9 out of 12 it's still up to you to come up with payments every month to the Trustee regardless if $ is the same or not.

2. College expenses can be tricky...I've seen some Trustees allow them on here an others say no go. Student loan payments are an entirely different ballgame so if you're paying those, READ the forum regarding how they work for a Ch. 13

3. Music, theater, gym memberships,summer camp etc: all considered nonessential things in a Trustees eyes and money that can pay creditors. While you are allowed an Entertainment allowance, it isn't much (we were allowed $60 monthly for a family of 3). If you have wiggle room in other areas that you dont spend in, you pull from those areas to pay for other things. Trustees thought: Bottom line is you're filing BK for a reason -too much debt , overspending, whatever the reason....you need to make sacrifices

Braces are also not considered a necessity BTW....our son needed them and we had to wait until our car was paid off to use that $ to make the monthly payment (interest free no loan) directly to the ortho. Since to you said your daughter already has them, it will be allowed if financed currently, otherwise it may be included as a Medical Expense. Make sure you check with lawyer how it will go as you're allowed only X. Amount monthly if an over the median filer. There have been some exceptions but as with everything, YMMV. Also check with ortho if you're currently financed through them (or have any other medical owed) as many private Dr's will not allow you to be seen if you file BK and owe them $. They'll get the same amount of $ all the other unsecured creditors get and you can't pick and choose.

4. HELOC: is it truly a line of credit or is it secured by an additional lien with another lender, like a 2nd mortgage? If the latter, you may be able to strip it if the house is valued lower than what the 1st is.

5. Last and most important... The biggest question and first you should be asking, is can you afford the house you live in even after you get rid of the unsecured creditors? If you can't manage everything, including the HELOC (possibility exisits it may remain...) After completing a 5 year plan, then you're house poor and ch. 13 won't help you. Walking away from that houseand getting a smaller more sustainable house will.

I'm sure others will chime in with things I've missed but these are just a few thoughts.

[BriOS]

Goodluck.

[LadyInTheRed]

Welcome to BKforum. I want to give you a quick, and somewhat simplified, summary of how a Chap 13 works.

Assuming you do not pay any child/spousal support, do not have any delinquent taxes, are caught up on your first mortgage and car payments on the day you file and do not have any non-exempt assets, your plan payment will be equal to your DMI which is your income minus your reasonable necessary expenses. Your DMI over the 60 months will have to be enough to pay off the HELOC, attorney fees included in the plan and trustee fees.

What are reasoanble and necessary expenses can be somewhat subjective. One trustee may object to an expense that another would not object to. The best way to know what will be allowed is to talk to a local attorney familiar with the local trustees. If your DMI is high enough to pay off your HELOC plus 100% of your unsecured debt, then your expenses are not likely to be too closely scrutinized unless the trustee takes the position that you should pay all of your DMI to the plan even if that means finishing the plan earlier than 60 months.

Once your plan is confirmed, you can spend your money any way you want, regardless of what was in the budget in your petition. Yes, the trustee can ask that your plan payment increase if your DMI increases, but if you are in a 100% plan, that is not likely.

Don't assume you will be in a 100% plan, but do assume you are going to have to do some belt tightening. Consult with a couple of experienced attorneys. There is no point in waiting until July. Even if you wait until then to file, an attorney can help you plan for a successful Chap 13.

[dmc-2008]

Also u have to stop using credit for like 6 months before you file I think!

[LadyInTheRed]

Also u have to stop using credit for like 6 months before you file I think!

While that is a good idea, and is exactly what Des' said in another post that he recommends to his clients, it is not required. The risk of using credit before filing is that a creditor could petition to have the resulting debt declared not dischargeable. Debt for luxury purchases over a certain amount ($600, I think but don't remember for sure) within 90 days or cash advances over (I think) $700 within 70 days of filing are presumed to be non-dischargeable if the creditor objects to their discharge. If the creditor objects to discharge for any other debts, then they have to prove that the debtor incurred the debt without the intent to pay. That's usually pretty hard to prove and most creditors will not bother unless the amount involved is very large. But, it is still very good practice to put as much time as possible between incurring debt and filing BK if there is no hurry to file as is probably the case with Macdad123.

The Bankruptcy Code Section on non dischargeable debts is at https://www.law.cornell.edu/uscode/text/11/523

Macdad123, I wanted to add a couple of points to my initial response because I suddenly had to rush to finish.

Once your balloon payment becomes due, it will probably take at least several months and maybe years for the bank to foreclose. The minimum timeline is based on state law and the maximum timeline is up to the bank. If your bank moves as quickly as allowed by state law, you will have enough notice to file BK and halt the process.

I suspect that because your daughter already has the braces, there is a better chance that the continued expense would be considered a necessity. I can't imagine the trustee (or the judge if it went that far) would expect her to just keep the braces and not have the professional care required to maintain them.

Whether bonuses have to be paid to the trustee depend on the terms of the confirmed plan. During a Chap 13, when in doubt about a bonus or raise, call your attorney.

Your unsecured debt plus your HELOC total $160,000. Add $5,000 for attorney fees (probably a high estimate) and 5% for trustee fees, divide by 60 and you get just under $2,900 per month that you would pay in a 60 month 100% plan. Since you are paying $3,000 a month on your unsecured debt, a Chap 13 will likely provide you with some relief.

5. If I am already at 100% I don't understand how they could alter my plan to make me pay more?

The trustee could take the position that you must pay all DMI to your plan. Once you pay 100% of claims, the plan is complete. The reason a trustee would insist on this is that if your DMI decreases during your plan and your plan is later modified to lower the payment so less than 100% is paid or you convert to a Chap 7, then the creditors lose out on the higher payments they would have received earlier in the plan.

[Macdad123]

LadyinTheRed...Thank you so much for your informative post, and thank you for coming to back add to it Those are the numbers that I am coming up with as well. My main question is....after all of my obligations I have about $1000.00 left over each month. If I file and I am paying 100% do I have to give up that extra money? That is the part that scares me the most. I was getting ready to seek help with credit counseling just to try to lower my interest ( I pay over 2000 in just interest now) but then the letter from the HELOC lender came and my world seemed to flip upside down.

[LadyInTheRed]

If I file and I am paying 100% do I have to give up that extra money? That is the part that scares me the most. I was getting ready to seek help with credit counseling just to try to lower my interest ( I pay over 2000 in just interest now) but then the letter from the HELOC lender came and my world seemed to flip upside down.

I just edited my last post before I saw your last one. I think the edition at the end answers your question. A local attorney will be able to tell you whether the local trustees will object to a plan that takes 60 months to pay 100% without paying all of your DMI, or will insist on all of your DMI for a shorter period of time. In no event will you pay more than you owe plus attorney fees and trustee fees.

The letter from the HELOC may be a blessing in disguise. Many people try debt management plans and then later file BK anyway. A debt management plan requires cooperation from all of your creditors and will still require you to pay interest. In a Chap 13, you pay no interest in unsecured debt and the creditor's have no choice but to cooperate.

It just occurred to me that the payment in a 100% plan will be higher than the $2,900. Secured creditor's are entitled to interest, so you will have to pay interest on the HELOC as part of the plan. But, if the contracted interest on the HELOC is high, it is possible that the interest will be lowered in the Chap 13.

[switch625]

[QUOTE=Macdad123;624423]if I want to sign my daughter up for a workshop or continue her music lessons am I allowed?

Form 22C of the bankruptcy petition list certain IRS standard expense deductions that help determine disposable income for a Ch 13 payment plan. On line 43 there is a deduction for Education expenses for dependent children under 18. The instructions are "Enter the total average monthly expenses that you actually incur, not to exceed $156.25 per child, for attendance at a private or public elementary or secondary school by your dependent children less than 18 years of age. You must provide your case trustee with documentation of your actual expenses, and you must explain why the amount claimed is reasonable and necessary and not already accounted for in the IRS Standards"

When I completed my petition, I went with a figure that was far less than the $156.25 per child. My attorney raised it to the $156.25, telling me that we are going with the maximum exemption and Iread between the lines that the trustee was giving us that amount sight unseen. At the 341 meeting and pre-confirmation, the trustee never asked for receipts, never the questioned the amount. So, I, uh, consider that the budget for the kids education AND extracurricular activities. It may be different in your district. Ask your attorney consults.