Just realized we are over unsecured debt limts

[cyn5]

OMG, I am about to have a breakdown. Lawyer is trying to figure out if we can qualify for ch 7, but it is looking like we are not going to pass the means test. At first I was feeling like we were being pushed into ch 13, but now I just noticed that we may not qualify for ch 13 either due to our unsecured debt being over 336k! Between credit cards, student loans, etc etc we are over this limit.

I have just been googling this and ch 11 now might be our only option. I actually do not think our lawyer has realized this yet since she has been trying to get us into a ch 7. I am going to call first thing in the morning. I have been reading that ch 11's are totally expensive since they are usually used for businesses and not individuals, plus you have to pay quarterly fees to the trustee, etc. I am feeling like everything just caved out from underneath me. It just doesn't sound good if you ask me.

Maybe I am freaking out for no reason, but if you cannot file ch 13 because of being over the debt limits, then there has to be a way to go back and be able to file ch 7 even if you do not pass the means test, right?

[dingdong]

I don't think your SL count as unsecured debt, since they can't be discharged. I believe SL are counted as unsecured Priority debt,

I could be wrong though.


A guru would know.

[BigJohn]

Can you list your debts by category such as student loan(s), mortgage (1st & 2nd), car(s) and how long you have had each loan, etc?

[filingin08]

Our atty adjusted a few amounts down in our original paperwork in order to file us as a 13.

Some didn't file and others came in higher than we thought (even the ones she adjusted down). We're over the unsecured limit.

As you, we have SL included. She didn't think it would be an issue, and would argue SL shouldn't be considered unsecured. However, there was no guarantee and we would be a test case if it came to it.

We're in the midst of an adversarial proceeding now and nothing has been said regarding being over the limit for unsecured.

I'm interested in how your atty proceeds.

Good luck.

[JoeBankrupt33]

I don't think your SL count as unsecured debt, since they can't be discharged. I believe SL are counted as unsecured Priority debt,

I could be wrong though.


A guru would know.

I don't claim to be a guru, but I do know this answer. A student loan is not a priority debt. It is listed on schedule F with all the other general unsecured creditors.

It seems as though they would be priority because you can't generally discharge them, but it's just not the case.

[cyn5]

Thanks for all the info. After doing the means test myself, I found out that my atty entered our income as higher than it is, making it look like we have more disposible income than we really do have. I am waiting for her to fix our numbers and will wait to see what she says and if she still comes back and says we don't qualify for 7, then I am going to ask her if we then have too much unsecured debt to for 13.

I will have daycare expenses starting next month and I am not sure, but if our childcare is included we would then pass the means test and be able to file for ch 7 "I think". I see that there is a limit on educational expenses for kids, but what about childcare/daycare?

For BigJohn:
Unsecured cc debt = $90k
Student loans for both me and spouse = $365k (don't ask! long story)
House payment $2300 (have had house for 6 years - equity is exempt)
Car payment $510 (new car 5 year intallment)
Lease car payment $600 (2 years left on lease)
We do have a second property (rental that we are not able to rent and are letting it go under foreclosure --- attorney said we can include payment plus assoc fees even though we are giving it up in order to try to pass means test...is this right??) If so, the payment plus assoc fees (900/mo) plus our daycare expenses would definitely help us pass the means test.

It just seems like our atty is taking way too long to do the means test for us...she kept talking about ch 13 so I am even wondering if she is doing the means test for ch 7 or if she is just doing the numbers for 13. Aaargh!!!! So frustrating. I feel like ch 7 is the only option due to the fact that we may be over on unsecured debt limit for filing ch 13.
I did read either on this site or another that someone was over their unsecured debt limits but filed ch 13 and since nobody objected to the repayment plan or the fact they were over on unsecured debt limits, that it was approved and they can't come back after the fact questioning the debt limits. This seems risky because if one of your creditors objects, then you are sol and could be forced to file ch 11 (which sounds impossible for the average individual).

[jennordhavn]

I will have daycare expenses starting next month and I am not sure, but if our childcare is included we would then pass the means test and be able to file for ch 7 "I think". I see that there is a limit on educational expenses for kids, but what about childcare/daycare?

I don't believe there is a cap on daycare like for private education expenses ($137.50/mo. What a joke? Where does it cost this or less for private school, I'd like to know? LOL). As long as your daycare expenses are reasonable for the area you should be fine. Also, you should have receipts just in case you're asked.

[cyn5]

I don't believe there is a cap on daycare like for private education expenses ($137.50/mo. What a joke? Where does it cost this or less for private school, I'd like to know? LOL). As long as your daycare expenses are reasonable for the area you should be fine. Also, you should have receipts just in case you're asked.

Yeah, I know! Good thing my kid is not really "school age" yet! I guess if you do have a chilid in some sort of private school because the public schools in your area suck, that you are penalized and are expected to switch your child's school!?!?! I am also wondering for instance since my son is not in daycare just yet can I say this is a future expense or is it better to have my child enrolled right before filing? Do I provide receipts at the time of filing or at the meeting of creditors?

[dingdong]

If using child care costs is going to ensure that you are within means of a Ch 7 and you are at risk of not Qualifying for a 13 because of debt limits, I would pose the question to my attorney and see if gettng him in Daycare right away is a good way of ensuring a CH7 qualification..

I tried to find some case law for you for determining if SL debt is excluded from the debt limits for CH 13 since it is not dischargable, but haven't had any luck yet.

Ask your attorney, if enrolling him now helps and it is an allowable expense, it may be well worth it.

[jennordhavn]

Yeah, I know! Good thing my kid is not really "school age" yet! I guess if you do have a chilid in some sort of private school because the public schools in your area suck, that you are penalized and are expected to switch your child's school!?!?! I am also wondering for instance since my son is not in daycare just yet can I say this is a future expense or is it better to have my child enrolled right before filing? Do I provide receipts at the time of filing or at the meeting of creditors?

I have a DD in private school and put the $137.50 on the means test, but used the actual amount (about $400) on Sched. J. I used the before/after school portion plus summer and other care under childcare. It wasn't questioned by the trustee.

I wouldn't provide receipts unless your trustee asks. It would probably be either before or during the 341 meeting.

[OhioFiler]

I have a DD in private school and put the $137.50 on the means test, but used the actual amount (about $400) on Sched. J. I used the before/after school portion plus summer and other care under childcare. It wasn't questioned by the trustee.

I wouldn't provide receipts unless your trustee asks. It would probably be either before or during the 341 meeting.

The means test is just a tool used to determine if you may be abusing the bankruptcy laws. They use the 137.50 as a reasonable amount for a kid to go to school but that does not mean that's all you can actually spend. It means they aren't going to give you credit for anymore than that amount when they determine whether you qualify.

You actual school tuition would be used on schedule J as an expense because that form is the official form used to determine your solvency. The trustee could argue it's unreasonable but I doubt it. I'll bet his/her kids don't attend the public schools!

[spearmint]

Thanks for all the info. After doing the means test myself, I found out that my atty entered our income as higher than it is, making it look like we have more disposible income than we really do have. I am waiting for her to fix our numbers and will wait to see what she says and if she still comes back and says we don't qualify for 7, then I am going to ask her if we then have too much unsecured debt to for 13.

I will have daycare expenses starting next month and I am not sure, but if our childcare is included we would then pass the means test and be able to file for ch 7 "I think". I see that there is a limit on educational expenses for kids, but what about childcare/daycare?

For BigJohn:
Unsecured cc debt = $90k
Student loans for both me and spouse = $365k (don't ask! long story)
House payment $2300 (have had house for 6 years - equity is exempt)
Car payment $510 (new car 5 year intallment)
Lease car payment $600 (2 years left on lease)
We do have a second property (rental that we are not able to rent and are letting it go under foreclosure --- attorney said we can include payment plus assoc fees even though we are giving it up in order to try to pass means test...is this right??) If so, the payment plus assoc fees (900/mo) plus our daycare expenses would definitely help us pass the means test.

It just seems like our atty is taking way too long to do the means test for us...she kept talking about ch 13 so I am even wondering if she is doing the means test for ch 7 or if she is just doing the numbers for 13. Aaargh!!!! So frustrating. I feel like ch 7 is the only option due to the fact that we may be over on unsecured debt limit for filing ch 13.
I did read either on this site or another that someone was over their unsecured debt limits but filed ch 13 and since nobody objected to the repayment plan or the fact they were over on unsecured debt limits, that it was approved and they can't come back after the fact questioning the debt limits. This seems risky because if one of your creditors objects, then you are sol and could be forced to file ch 11 (which sounds impossible for the average individual).

Gees! Are you both surgeons????????? lol

[treehugger1]

The student loan numbers are BIG. I don't think they are "off-the-charts," but you need to consider whether your local trustee puts the SL's aside for the 5 years of a BK 13. You could exit BK 13 and be liable for the accrued interest on $300+K SL. In the end, you will have solved nothing other than to buy yourselves time. You could exit a BK 13 owing more unsecured than you entered with. (I'm in the same boat, but my SL's are only about $75K.) Keep in mind that currently the worst case scenario for wage garnishment based on student loans is capped at 15% of disposable income. For me, this is only a few dollars more than my current monthly payment amount. In addition, it only leaves another 10% for other creditors. The 15% garnishment law only applies to loans backed by the DOE. You should do some research and determine if your loans are ultimately tied to the department of education. Understand that these babies do NOT currently go away; BK or not.

If you are extremely high wage earners and can protect your assets through exemptions, perhaps you can survive 25% wage garnishments. You are in a tough situation. It seems that different district trustess treat SL's differently. You definitely need to know what your final outcome will look like when you exit a 13 or a 7. Both of these buy you protection from current unsecured creditors, but what is the outcome after interest is tacked onto your SL's over a year or 5 years?

Don't think you are alone with this problem. The issues related to GSL's and BK are big. IF you can get a BK 7 and immediately begin to payoff your SL's then you might be fine. However, what would you do if five years of interest is tacked onto payments for the SL's? Depending upon the interest rate, the compounding might lead to future payments that you cannot afford at all. Then what?

I'm not trying to play the devil's advocate here, but you need to take a hard look at the future as well as the present. Just my humble opinion.

[cyn5]

Thanks treehugger, yep we are aware of all the issues with our student loans. Federal loans are only about 80k and rest are private loans (yep, both spouse and I went to private undergrad and grad schools)...the grad schools did us in. If I were to do it all over again, I would have never have went to graduate school.

We do have a higher income (about $140k combined) and if we did not have all our credit card debt and private student loan debt, we could actually afford to pay our federal loans (which are in forebearance accumulating interest).

What we want to do is qualify for a ch 7 and get rid of all our cc debt and other things and then hopefully try to start paying on some of student loan debt. The private loans are a killer since they high interest and the payment plans suck. They refuse to work with us and we are to the point where we are considering defaulting on them (just the private, not the federal). One lawyer did say we could file adversary proc against the private student lenders just to force them to renegotiate the terms/payment plan. Not that we would be able to get them discharged, just a matter of forcing them to deal with you.

How exactly would we protect ourselves with exemptions if it gets to the point where they go to court and try to garnish our wages? Where can I find out some more info on that? I have read varying things regarding private loans such as they have to go to court for wage garnishment, unlike federal loans where they can just take tax refunds and start wage garnishment right away. Can they put a lien on our house without going to court? That is the only thing I would worry about.

Last resort option - file for ch 7, sell our house and move out of the country to escape our private student loan debt! Ha ha.

[biotechsolution]

I'm not sure if there agreement on using your 2nd home in your means test numbers. Especially if you're letting it go. I hope you are not counting on that deduction keeping you in the Chapter 7. At 140K you are really going to have to justify your expenses to qualify for the 7. the trustee could pay hardball and not allow any student loan payments to be used for expenses.

In a chapter 11 bk you are the trustee. You set up your own payment plan and the judge approves it. It is expensive and not many attorneys do them but in the grand scheme of things it's much easier to complete than a Chapter 13.