Chapter 7 & then Chapter 13

[mclawdawg]

Is my life over if I filed Bankruptcy twice? 4 years ago I filed a 7 and now a 13. I'm at a loss of words. Is there any coming back from this??

[shipo]

Simple answer, yes.

Longer answer; live within your means, even if you need to do what I did and moved into a living situation which is A) dirt cheap, and B) requires you to do some form of labor to help offset your rent. In my case, I moved onto a working horse farm into a "caretaker apartment"; part of this deal is to work in the barn taking care of up to 12 horses, 3 days per week, and by that I mean, feeding them, moving them out to the pastures in the morning, cleaning their stalls, and bringing them back in at night and feeding them again. If you play that gig for 5 years until your discharge, then you have the luxury of pretending you're still in your bankruptcy, however, instead of paying the Trustee, you get to pay your savings accounts. Pretend long enough and suddenly you'll have enough money saved to buy a house.

[justbroke]

Yes. I am living proof. I did a Chapter 20 (Chapter 7 followed by a Chapter 13) to deal with income taxes which were not discharged in the Chapter 7. I actually started as a Chapter 13, converted to Chapter 7, and then filed a Chapter 13 4 years later and have been discharged for 2 years.

This should be my last bankruptcy. Mine was caused by the housing crisis of 2008-2012 and I had to get rid of properties. I spent way too much of my 401(k) to try to stay afloat and then I switched jobs for a bit and my 401(k) loans were converted into distributions, which were heavily taxed (33% because of the amounts and my already high tax bracket).

So, it does happen. We learn each time. I learned that I should have just stayed in the original Chapter 13!

[flashoflight]

Yeah, chapter 13 is sometimes the medicine you need to turn your life around.

Chapter 7 veterans often learn nothing from their experience and repeat many of the same mistakes. I see so many go to myfico and start their credit "rebuild" right away making the same mistakes by equating FICO to wealth and drown in debt again after the car breaks down, catch covid, or lose a job. You should be building a savings account sufficient to survive 3-6 months, not get into debt on purpose except for mortgage scores. As a chapter 13 filer, I don't feel sorry for those that end up drowning again and gripe about not being able to do a 7 again for years. You can do a 13 like the rest of us.

Chapter 13 is like enlisting in the military. If you survive your enlistment unscathed, you will become a better person. Chapter 13 forces you into a "coming to Jesus" moment with credit and budgeting. For some us, we finally get knocked on the head and realize our incomes don't support $600/month credit card and car payments. Many people figure out how to survive on junker cars and don't do auto loans anymore. You will not live on credit for 3-5 years. You have to live on a Dave Ramsey-like existence with debit cards and cash. Even borrowing just $1000 is a huge risk to derailing your chapter 13 so you really have to stay away from debt except for true emergencies. If you get permission from the court to borrow for an emergency, you will pay a lot of money to your lawyer on top of the interest if you are on a 100% plan. So don't borrow money unless you really, really, really have to.

If you survive the 13, you won't be repeating your debt mistakes ever again.

[Ekop785]

Is my life over if I filed Bankruptcy twice? 4 years ago I filed a 7 and now a 13. I'm at a loss of words. Is there any coming back from this??

No, your life is not over, and you will come back better (less debt, less stress). The good people on this site will help get you through it. Everything is going to be okay...

[mclawdawg]

Thanks everyone for the kindness. So happy I found this community. I've hit rock bottom, goes to show even being a good person you still can.

As of right now I need to move & find an apartment... I literally just started my Chapter 13. Luckily for me I have some money saved up in the bank so hopefully the trustee doesn't want to utilize some of that money but you guys said it should be safe. I'm sure the lawyer is going to love me in the beginning. I need a car and a cheap place to live.

With my girlfriend leaving me, I'm sure the vehicle will go with her too. Child support will kick off but.. that will offset the vehicle..... I'll find a way. Sometimes it feels like I was born to lose but everyone reading this keep on fighting the good fight!

I realized I posted the personal stuff in another post and not here so sorry for anyone new reading.

[justbroke]

... I literally just started my Chapter 13. Luckily for me I have some money saved up in the bank so hopefully the trustee doesn't want to utilize some of that money but you guys said it should be safe...

Generally speaking, Chapter 13's allow you to keep your property. Chapter 13 Trustees rarely get into liquidating assets. If you filed with some money in the bank on the day of filing, your attorney likely exempted the money using existing exemptions. Or, your Chapter 13 will pay the unsecured creditors at least as much as they would have received had you filed and discharged with a Chapter 7. This is known as the Chapter 7 Liquidation Test (a/k/a the "best interest of creditors" test.)

It's worth repeating that from a property (and asset) standpoint, Chapter 13s behave a lot differently than a Chapter 7. A Chapter 7 is a quick liquidation. A Chapter 13 is a pay-to-play where you promise to pay your unsecured creditors at least what they would have received had you filed a Chapter 7, or your disposable monthly income, whichever is more (or pays 100% of the allowed unsecured claims).

[shipo]

I need a car and a cheap place to live.

Assuming you haven't filed yet, talk to your lawyer about your need for a car. I expect he or she will recommend you buy something new(er) before you file.

To that point, my attorney strongly encouraged me to buy a new(er) car before I filed; due to my naivety regarding all things Chapter 13, I didn't think it would have been ethical for me to buy a new car and opted to soldier on with, what was at the time, a 14 year old Honda Accord which was already showing signs of corrosion. That last point is key, at one point during the 4th year of my Chapter 13 I came out to my car and found it leaking coolant, transmission fluid, brake fluid and gasoline from both the fuel lines and the fuel tank. Then there was the body corrosion, it was severe enough the trunk would fill with water if the car was driven during the rain and the floors of the interior would get wet. It would have cost over $3,000 just to have the mechanical issues corrected to make it road legal, and probably that again to clean up the body work; I opted to scrap the old girl.

So, there I was, 25 miles from work, in a Chapter 13, and no car. In the end I needed to drain my meager savings account and eat "beans and franks" for a month to buy something in good enough shape to last the rest of my bankruptcy. Had I taken my attorney's advice and gone out and bought something simple like a new Toyota Corolla, it would have been fully paid for by the Trustee as a Secured Claim, and I would have exited my Chapter 13 with a saleable asset worth a heck of a lot more than the car I currently have.

[flashoflight]

I'm normally not a fan of newer cars, but you may need one to survive the 3-5 years of chapter 13. Your budget will have a bigger allowance for transportation if the newer car is financed by you. So it's newer car + financing. I know a friend who did the same and it's not as good with a 100% plan since it will lengthen the plan and drain money that could have been generated to payoff the 13 early. But with a less than 100% plan, I'd definitely finance it no matter the interest rate. So talk through it with your lawyer.

[lookingforward]

Yes, you will come back and it will be okay. We had a chapter 7 in 2008 when our business took a nosedive and then another chapter 7 last year. This second one was the result of the large amount of debt accumulated after my husband's cancer diagnosis. I never thought we'd do it again, but here we are. First time around, we ended up selling our house because we couldn't manage the payments. At least we had enough sense this time around to have a totally affordable house payment, now 1/5 of the monthly payment of the one we sold. So we must have learned something. Good luck to you.