Opinions wanted on chapter 13 plan proposal

[daisey]

Attorney said the schedules showed 1600 a month of disposable income.........What ever! She is proposing a plan that pays back 100% of our unsecured debt over 5 years and the payments are 776.00 a month. WE have a home I do not know if they will come back for a diffiiemcient balance or now, she does not seem to think they will........What are you thougths on this plan........is she going to leave us open for problems with the process? She says with 100% payback the trustee is going to be just fine with this. I thought that he would want us to pay the full disposable income and finish the plan out in 3 years......she says that he prefers 5 year plans as he makes more on them...........

[AMISLANDER]

My attorney had tried to put me into a 13 when I first started this bk road but I backed out of that before the electronic filing took place....I knew better that it would get f*cked up....

I understand about the means test and how if you do have that disposable income, it's a 13 for you...but....not knowing your situation, $1,600 is a lot of disposable income to have.....why are you filing & why couldn't you pay that $1,600 a month to your creditors on your own & not file bk?

I see a lot of people who get tricked into the 13 only to find out that it doesn't work and then have to deal with a conversion to a 7....it's still on your credit report....

[keepmine]

I'd see another couple of lawyers.

[daisey]

Well we have a house in another state that will not sell as the property values in that area have dropped and we were on a 100% LTV loan with it. My husbands job has changed and we now live in a new state with a new home but between the house payment and some other debts we have aquired we cannot handle the debt. We have had so many problems with renters its a constant emotional rollercoaster. We do not qualify for a chapter 7 via the means test. We are paying back 100% of our credit card debt and car payment and according to the attorney 13 thousand in additional funds for their payment and the trustees fees. She feels the trustee will be pleased with our proposal. The means test shows us at 700 disposable income the schedules I and J show the 1600. To be honest their is no way we can pay the 1600 that is more then what we would pay to keep the house and pay for it ourself. When she said the 1600 I about got sick. We only make about 12 Thousand more then the median income for our state so how on earth could they justify a payment plan that would infact put us at 7200 below the state median income level. I had a hard time figuring that one out myself when the suggest was first made. We had a paralegal prepair our papers at his office when she came up to this number she went in to the attorney who said put them in at 100% payback and just make the payment what it would be to cover that since they won't make us pay more then what we owe. Our only problem will be if one of the 2 mortgage companies come and try to obtain a difficient judgement.

[AMISLANDER]

see another lawyer....maybe two...because, maybe I'm dense, but $1,600 is a lot to have left over not to be able to pay something other than a trustee...

[SamanthaJones]

I am sorry to be so obtuse, folks-

But- to file a bankruptcy, and end up paying all of your debts (CH13?) I simply can't get the point. Are there no other ways you can alter your income or expenses to avoid that like the plague?

[AMISLANDER]

But- to file a bankruptcy, and end up paying all of your debts (CH13?) I simply can't get the point. Are there no other ways you can alter your income or expenses to avoid that like the plague?

That's why I could never figure out a ch. 13's purpose.....any which way....bankruptcy should mean you're broke & can't pay....I don't know....

[daisey]

Samantha I want to pay most of my debts the only reason I am filing is because we have a house we cannot sell and cannot keep rented thanks to a nasty POA board. Its been a nightmare, we have very little in cc debt and a very good loan on our home we wish to keep. Life happens, I don't want to be dishonest but we just cannot maintain the property and need to rid ourselves of the burdon. If they way they figure income was more accurate to a monthly budget we would be ok but they put you on a 6 month budget and in our case that included a extra check every 6 monthes but they are taking a cut of it too and we are expected to try to stretch out the funds over those 5 months inbetween. The plan would leave us almost 300 shot of paying our debts on a monthly basis. How on earth do they expect a filer to move on and try to better their situtation. The way they set those up is basicly setting you up for faliur. I would rather they just put us on a monthly plan that works and turn over the check to them on those months. It would be a more realistic schedule.

[HHM]

That's why I could never figure out a ch. 13's purpose.....any which way....bankruptcy should mean you're broke & can't pay....I don't know....

There really is some benefit for a chapter 13. Even people with decent income can get over there heads, have business that fail, investments that go belly-up etc. Or they have a decrease in income but still make more than would allow them to file Chapter 7. A chapter 13 puts YOU back in control of your creditors. In most chapter 13 plans, even 100% payback, interest stops accruing on the principal (that is huge, when you consider the default interest rates on credit cards are 30%).

In the end, chapter 7 is for the truly broke, chapter 13 is for those that have had set-backs. Chapter 13 is more a financial management tool.

[lrprn]

That's why I could never figure out a ch. 13's purpose.....any which way....bankruptcy should mean you're broke & can't pay....I don't know....

Chapter 13 is the wage-earner's bankruptcy plan. First, not everyone pays back 100% to their creditors - it's typical to pay back a lower percentage than that. Second, frequently not every creditor asks to be paid back through the Ch 13 plan - they just write off the filer's debt and move on - so those debts are completely wiped out. Ch 13 allows assets to be kept that aren't possible to keep in a Ch 7, and also you can be in arrears on asset payments in Ch 13 and still keep the asset when you file - again unlike Ch 7 where you have to be current on payments to file. Lastly, you can pay your lawyer a partial payment and still file because the full retainer is paid through the plan as a priority.

Again, Ch 13 isn't for everyone, but when it's right for a filer's personal financial situation, it can stop a home foreclosure and also stop creditor and collector harrassment in its tracks as effectively as a Ch 7.

[SamanthaJones]

Give up the other house-

Tell the lender to come and get it. Then see where the dust settles, maybe you'll need to file BK after you see what happens. Either wya your credir is ruined- but you do not want that rental house, so why would you file BK just because of that? The BK will cost 3-4000, you'll be on 'lockdown' by the court for years, etc. Even if you get a deficiency- you would be better off paying that than going 13, if you do the math?

[daisey]

If we forclose on it I would have no idea how much we would have to pay after the dust settles. Does anyone know of a way to figure that?

[SamanthaJones]

Here's an example, from one of several lawyers.

(And so far all of them have been lackadaisical with details, and left me absolutely untrusting of their ability. I am going it alone, if BK must happen down the road!)

Mortgage balance $134,500
You default
They foreclose
They sell it at auction for $96,000
The loss to the lender is about $38,500

They can 1099 you for that amount- meaning for the current tax year you owe income tax on $38,500 due to the lender's loss. For me, that would be a tax bill of over $10,000. Compare something like that to the $3-4000 to file a CH13, plus being tied to the court for years.

Interesting tidbits:
The lender buys back 80% of its own houses at foreclosure sales, since there is a lack of other qualified bidders.
The average foreclosure costs a lender $30,000.


BTW- is that rental house occupied?

[daisey]

Yes it currently has renters in it. They are the worlds worst renters they bounce check after check but they have minors and we cannot evict them or so we are told by indiana housing authority untill they are 3 months behind. Or their lease is up. We were contacted by the housing authorty on their behalf when we sent eviction notice after 5 bounced check.

[SamanthaJones]

Nasty tenants are the cause of my woes.

Never again~

Maybe you ought to forget about the rent, and stop making the mortgage payments, and let the place foreclose? However- I've also been told that it is better to file BK prior to a foreclosure, since then no deficiency judgment can be claimed against you.