Worst case scenario

[southernbelle]

[HHM]

Has your attorney suggested doing a "chapter 20". It would seem that with that amount of priority non-dischargeable debt, you might be a prime candidate.

Basically, you file chapter 7 to discharge all unsecured debt, then turn around and file chapter 13, to pay off the priority claims. The only catch is, your chapter 13 plan would have to pay, in full, your priority claims over the 5 years.

[southernbelle]

I thought the Chapter 20 was eliminated when the Bk law changed in Oct.2005. Would I have to wait several years to file the 13? He didn't mention it, but I will absolutely ask him about it tomorrow and if it is possible, I assume I file Ch. 7 first then the 13?

[HHM]

It closed the door on the "old" chapter 20 whereby you could still discharge some priority debts at the end of your chapter 13, but there is still room for it even under the new law. The caveat is you have to be able to pay off ALL your priority debt during the 60 month payment plan; reason being, you will not receive a discharge in your chapter 13...but not receiving a discharge is not a problem since you already discharged all your unsecured debt in your chapter 7.

[southernbelle]

Would I have to wait several years prior to filing the Ch. 13 or can I file right away? Being able to afford the monthly payments to pay all of the priority debt in a ch. 13 will require me to something like sell my home or just walk away from it if the claims are filed for all of the tax due, but it sounds like a better option than dealing with the IRS for more than 5 years.

I can't imagine what my credit would look like after this is all said and done.

Thank you.

[HHM]

You can file it right away...that is what I mean by not getting the discharge.

You can file BK whenever you want, the restriction is on whether you can get a discharge. You CAN file a chapter 13 right after filing a chapter 7, you just can't get a discharge from your chatper 13 if you do so.

Your big challenge is whether you can afford to pay your priority debt over a 5 year plan...given the size of that debt, only you know whether you can afford such a payment. I only throw this idea out because this situation is the very type that would still work with a chapter 20 (assuming you can afford it).

[CindyLou]

Exactly HHM!!! This is a perfect situation for a chapter "20" and what the law was meant to still allow them for!

[southernbelle]

WOW!!! This is GREAT news. I haven't had a lawyer mention this scenario to me yet, which is why I keep coming to you guys for advice. It seems like most lawyers around here specialize in one area of BK and get weird when I ask about some of the things I've learned here. I thinks most of you guys would be better lawyers/paralegals than the ones handling some of our cases now.

The one thing I will need to do is to make sure I have enough money to file the 7 then the 13 because this atty. is expensive, but it will definitely be worth it or I guess I can use someone that specializes more in 13 cases after the discharge from the 7. This gives me options.

Thanks again.