Crazy to file 13 when we qualify for a 7?

[lulabelle]

After calculating our average income for the last 6 months, we are under the median. Automatically qualifies us for a 7, right? DH is worried about filing a 7 because he's afraid of losing assets. We are current on house, HELOC, auto and taxes. Assets that are concerning him are hunting guns, four wheeler and large power tools. We have 2 older vehicles that would be covered with exemptions and one that we are making payments on that is upside down. We do have equity in our house, but our state has a generous exemption amount that covers us (federal exemptions may not). Attorney suggests filing ch 13 since we still have a "good" income.

I want to do the right thing, but I'm worried about what our final payment might come out to and about possible wage cuts in our future. That and I just want this to be DONE. I've read that it is possible to "purchase" non-exempt assets from the trustee. We've had an offer of help (not enough to get us out of this mess though, which is why we're filing) that would likely cover any non-exempt assets if the trustee approved it.

So, I'm torn. Our attorney insists that we will not end up with any payment we cannot afford. But why the push for the 13?

I appreciate so much the many people on these boards that take time to answer my many questions - thank you!! You're really getting me through a hard time.

[Faust]

If you can you should do 7. I didn't think we would qualify for 7 but our attorney thinks we can so that is what we will do. We'll see what happens!

[Dst1]

No, you are not crazy to file a 13 when you could qualify for a 7. Losing assets one has emotional or historical attachments to is a good reason to do so. So people also believe they have an ethical obligation to pay their debts if at all possible.

Having said that, remember that BK is first and foremost a financial decision, even if it involves emotions and beliefs too. In other words, count the costs. Know that most chapter 13s fail before they are ever completed.

Put another way. I understand the emotions but will you just be creating a bigger mess down the road? And the end of the day only you can make this decision. But I would think long and hard before I refused to take full advantage of what the law allows me to do.

[floridian]

unless i was loaded with assets, i would gladly do a 7 and buy new assets in the future, vs time in debtors prison (which is what i consider a 13)..

[1967]

Having said that, remember that BK is first and foremost a financial decision, even if it involves emotions and beliefs too. In other words, count the costs. Know that most chapter 13s fail before they are ever completed.

What do you mean by "Fail before they are ever completed"

Mike

[AngelinaCat]

We also considered a C13 even though we were marginally qualified for a C7 because we had "good income". Then my good FT job was 'out-sourced' and 'Hub's main client for his computer consulting business, decided to use another vendor. So our "good income" quickly became 'toast', and we had no choice.

We were an asset case, in that we have some family heirlooms, namely a couple of vintage guns, a couple pieces of jewelry, 'Hub's computer equipment--Florida does NOT allow an exemption for 'Tools of the Trade' and other incidentals.

We were able to buy these back from the BK estate for $450.00 paid monthly for one year to the trustee. He did give us a discounted rate.

What state are you in?

[AngelinaCat]

What do you mean by "Fail before they are ever completed"

Mike

Because many people do not have to fortitude to stick with the strict budgetary discipline that a Ch13 enforces over a period of three to five years. Also, many variables can happen during that time that can throw everything out of whack--be it job loss, medical emergencies, natural disters, etc. It is almost impossible to plan for those. This is one reason why you see questions about purchasing a new or newer used vehicle right before filing. They are trying to get a reliable form of transportation that will last the duration of the 13.

Good luck to you!

[andy158]

What do you mean by "Fail before they are ever completed"

Mike

Five years is a long time for a major financial commitment in bk 13. If you have a steady job and know it will last at least the five years, that is priority one. A lot of bk 13 cases fail for any one of the following reasons.

Divorce
Death of one or the other in a joint filing
Health problems
Layoff/loss of job
Under employment
Missing payments to the trustee
Any major financial bumps in the road

Any one of these can cause your case to be dismissed. However, in most a conversion to bk 7 can be done working with your lawyer in extenuating circumstances. You may have to wait six months to refile under bk 7.

[lulabelle]

unless i was loaded with assets, i would gladly do a 7 and buy new assets in the future, vs time in debtors prison (which is what i consider a 13)..

See, this is how I'm feeling about a 13 right now. I keep trying to explain to DH that very few 7's are actually asset cases, but for some reason he's convinced that his stuff is better than most Even if we did have to lose some things or pay for them, at least then we'd be done. I worry that in a 13 the trustee wouldn't allow expenses for kindergarten or the kids' sports (they are only allowed to participate in one as it is), or for orthodontic bills that are coming up in the next year. Well, right now I worry about pretty much everything.

We meet with the attorney again next week, I guess I'll find out more then, but I'm feeling like I'm going to have to fight both the attorney and DH to get the 7 instead of the 13.

Oh, and we are in MN.

[Stilltheone]

Sorry, but I would try my darndest to get into a 7. Having done a 7 myself, it's a nice feeling to "BE DONE" with it all. A 13 goes on for years. I'd rather be debt free, have a nice clean slate and start over right away.

If I had to lose assets in the process, I would lose them. I walked away from $60K worth of credit card debt. If I lost a few "assets" I would just be thankful to have walked away from my thousands of credit card bills. I'd be willing to lose a few assets in the process.

I always find it so funny that some people that have filed a 13 think they're "morally" better than those of us who have filed a 7 because they're "chosen" to pay. If I'm going to ruin my credit with a BANKRUPTCY, I might as well walk away from my debts....COMPLETELY. To me, it seems stupid to continue to pay AND have a Bk on your credit report.

[Skipper]

We also considered a C13 even though we were marginally qualified for a C7 because we had "good income". Then my good FT job was 'out-sourced' and 'Hub's main client for his computer consulting business, decided to use another vendor. So our "good income" quickly became 'toast', and we had no choice.

We were an asset case, in that we have some family heirlooms, namely a couple of vintage guns, a couple pieces of jewelry, 'Hub's computer equipment--Florida does NOT allow an exemption for 'Tools of the Trade' and other incidentals.

We were able to buy these back from the BK estate for $450.00 paid monthly for one year to the trustee. He did give us a discounted rate.

What state are you in?

Hi AngelinaCat,

I would appreciate your (and all others) opinion...

I qualify for a Chapter 7. I have a 45k heloc that is now unsecured (home is underwater by about 70k not counting the heloc) and about 70k in cc debt (due to a job loss). I am slightly in arrears on the mortgage, which will be reconciled when a permanent modification is completed.

I now have a decent job with potential increases (from maybe 50k now to 80k in the future) in income over the next few years. I own one car that has no equity (value=current loan balance) that I would like to keep. In addition, I would like to keep the home, as it appears i should qualify for a modification that will keep the payment affordable, and over the next five years or so, I would expect to have some (any) equity in the home as the mortgage gets paid down, and values improve.

Question; do you think stripping the heloc in a 13 would be worth the three year "debtor's prison" sentence, or would it be worth looking at a 7? In a 7, I am just not sure what happens with the heloc in this scenario. It cannot be discharged in a 7, can it?

TIA,

Skipper