Converting chapter 7 to 13 vs dismissal

[girlblue]

I filed a chapter 7 in Nov 2010 because I was closing a failed business and had zero income. Days prior to my 341 meeting I started a job that pays me 6 figures. What a genuine blessing. At my 341 meeting the UST objected to my chap 7 filing.

Long story short, my attorney wants me to convert to a chapter 13. My question is what is the benefit of a chapter 13 vs letting the case be dismissed and trying to work out with creditors on my own or with another attorney? My fear is that my 8 year old car will die within the next 5 years or that I will need to help my elderly father with expenses but will not have any financial resources to do so.

I know I should ask my attorney these questions but he just belittles my concerns. After my 341 meeting and during our prep for filing, he assured me that there was no way the case would be dismissed and that I just needed to wait for the dismissal. When the MTD was filed by the UST, he said that he had mentioned this possibility. No way did he mention it! I only found out about this possibility via this forum.

My attorney charged me a significant fee for the chap 7 filing, $5000 and wants $1300 to defend the MTD. He has not stated what he will charge for the chap 13. He mocks me for challenging his $1300 fee. I am not denying that he has a right to be paid. My thing is why keep paying legal fees when I could just use these same resources to pay my debts and not necessarily have to worry about how I will cover expenses down the road?

Also, do the chapter 13 trustees collect fees that I will aslo have to pay? I am overwhelmed and I almost want to consult another attorney, but again why spend money that could just be going to paying my creditors? Plus, I live in the same state where I filed but just a district. Will I need an attorney who practices in the same district?

Thanks for any advice! ANd yes, I do know this is just a forum and not legal advice.

[justbroke]

Long story short, my attorney wants me to convert to a chapter 13. My question is what is the benefit of a chapter 13 vs letting the case be dismissed and trying to work out with creditors on my own or with another attorney? My fear is that my 8 year old car will die within the next 5 years or that I will need to help my elderly father with expenses but will not have any financial resources to do so.

Working it out with creditors never works! I have found that the overwhelming super-majority of people who attempt debt consolidation and "work outs" end up in bankruptcy anyhow. You have no guarantees in that situation. A Chapter 13, with a 6 figure income, would probably be 60 months (5 years), and there is no other way you can virtually guarantee that you'll settle all debt and be debt free in 5 years. (Noting that those lying "debt consolidation" companies continually tell people that they'll be debt free in 2-3 years.)

I know I should ask my attorney these questions but he just belittles my concerns. After my 341 meeting and during our prep for filing, he assured me that there was no way the case would be dismissed and that I just needed to wait for the dismissal. When the MTD was filed by the UST, he said that he had mentioned this possibility. No way did he mention it! I only found out about this possibility via this forum.

I hope you meant "wait for the discharge". Anyhow, you were hit with the classic "totality of circumstances" dismissal. Your circumstances have changed and it is highly likely that the judge will dismiss due to the significant increase in income.

My attorney charged me a significant fee for the chap 7 filing, $5000 and wants $1300 to defend the MTD.

Wow, but... you did say that you operated a business, and that may be as much. If you want to defend the MTD, that's up to you. I would say $5K is probably right depending on the size of the company and the quality of your books.

He has not stated what he will charge for the chap 13. He mocks me for challenging his $1300 fee. I am not denying that he has a right to be paid. My thing is why keep paying legal fees when I could just use these same resources to pay my debts and not necessarily have to worry about how I will cover expenses down the road?

The $1,300 to defend is only about 6 hours of his time. It is probably an accurate estimate of what time he'll put into the case.

Also, do the chapter 13 trustees collect fees that I will aslo have to pay? I am overwhelmed and I almost want to consult another attorney, but again why spend money that could just be going to paying my creditors? Plus, I live in the same state where I filed but just a district. Will I need an attorney who practices in the same district?

Chapter 13 Trustees get 3-10% of the total payments made through them. However, this can come from your disposable monthly income (DMI) anyhow, so it's not really coming out of your pocket, unless you don't have enough DMI to even cover your expenses. I call that the infeasibility trap.

Thanks for any advice! ANd yes, I do know this is just a forum and not legal advice.

It's just tenured knowledge. You keep mentioning paying creditors with the $1,300. How much do you owe in total "liquidated" unsecured debt? If it's over $100K, that $1,300 won't even cover the interest on that amount (if the interest has spiked over 20%).

Additionally, why pay unsecured creditors when you could be in a Chapter 13 plan that protects you from continued process to collect? Even if in a 100% plan, you basically get to pay back interest free over 5 years... and a discharge at the end that guarantees no future collection? Your credit would be improving as well over that time. Did I mention that if your DMI doesn't support 100%, you'll pay them back less? Did I mention that there are times when fewer than 50% of the unsecured creditors even file a claim, and you get to payoff only half of your creditors? Did I mention that if your DMI only supports a 2% payback, you'll end up paying the unsecured creditors 2 cents on the dollar?

I don't know the rest of your financial story, but if you have a home, cars, and other property, it could be worth it, in the long run, to do a Chapter 13.