Help! Seen 4 lawyers. 2 said 7, 2 said 13

[ironman60]

Now what? How do I know for sure? What do yo think:

Family of 3, I earn $19k over median income for our area in TX (73k salary).

We owe $290k on house. It's value is around $260k. Current
Owe $35k on car 1. Car value is around $15k. Way upside down. Current.
Owe $24k on car 2. Value is around $12k. Upside down. Current.
Owe $135k in cc's. Have not paid in 7 mos.
Owe IRS $45k in recent taxes.
No savings or assets.
We have about $75 of disposable cash every month IF we do not pay anything to cc's. We have not paid any cc in 7 months. So, we are barely getting by. We are basically living on soup and crackers right now.

No red flags or recent cc spending. The 2 attorneys that suggested 13 only cited the fact that we are too far above the median income. The 2 lawyers that suggested 7 both said that there are no assets - nothing to for anyone to collect in a 13 plan.

[MSbklawyer]

If you are close to the line on your expenses, what would be the harm in at least trying for a 7? If the UST gets his panties in a knot over some of your expenses and tries to force you into a 13, you can fight him and maybe win. Or you can waive the white flag and voluntarily go into a 13. But is there any harm in trying for a 7?

[southernbelle]

I agree with BKlawyer. If I were in this situation, I would try for a 7 since your schedules I and J will show almost no disposable income and use the 13 as a last option.

[HHM]

Well, you are fairly high over the median. Any good attorney would at least set an expectation that you would be a 13. Anyone that said, chapter 7, no problem (in your circumstances), is probably doing a bait and switch. Plus, you probably would benefit more from a chapter 13 as it would be a more comprehensive solution because a chapter 13 can address the cars and tax issue, where as a chapter 7 would not (although, you could try for a 722 redemption loan for the cars). At least in chapter 13, you will pay the taxes over the life of th plan, and no further interest in penalties would accrue. (you mentioned these were "recent" taxes, so I am assuming the taxes cannot be discharged). I think you would be a high risk 7, I am guessing your combined car payments are probably higher than allowed. But, the silver lining for you in chapter 7, is that assuming the taxes are non-dischargeable, you can use the monthly payment to the IRS as a expenses.

Just because you are no asset, doesn't mean you can go chapter 7. Based on what you describe, I have more doubts about the attorneys that say chapter 7 than chapter 13. For the average case, $10,000 over median is about the cut off, short of actually running the means test at a consultation, any attorney that would say you can definitely file a chapter 7 when you are more than $10,000 over median is probably trying to bait and switch. A conscientious attorney would say something to the effect of, "you are probably a chapter 13, here are the benefits to you in a chapter 13, but once we get all your financial information if it turns out you can do a chapter 7, and a chapter 7 otherwise makes sense in your case, then we will do a chapter 7."

[backtoschool]

I would have to see a list of your expenses, but my guess is that the trustee is going to be able to find another $100 a month to squeeze out of your expenses and put you into a chapter 13.

Giving up the car that you owe $35k on would put you into a chapter 13 plan.

The trustee and your lawyer are not going to reaffirm a car that you are $20k underwater on, and giving up that car will give you money to fund a chapter 13.

[ironman60]

Thanks for all of the advice everyone. What do you mean by bait and switch? What are the attorneys trying to accomplish in selling me on a 7 plan?

[OhioFiler]

Thanks for all of the advice everyone. What do you mean by bait and switch? What are the attorneys trying to accomplish in selling me on a 7 plan?

They get your Chapter 7 retainer then "discover" you're really a Chapter 13 and they need more cash from you.