CH7 vs CH13 Question

[Dannmcg357]

OK, it is generally understood that if you are over the median income and have xx disposable income you are forced into a CH13. With the above circumstances being true but the debt totaling more than can be paid in 5 years, what then? Now are you back in a CH7 or is the amount over and above what can be paid discharded?
Example:
Income $55K yr
Disposable Income $175.00 mo ($10,500 5yrs)
Unsecured debt $60k

Is $54,500 then discharged or is a 7 viable?

To add to the above scenario, lets say that $30K of the unsecured debt is negative equity in a home being surrendered. This question is bugging me to death.

[flyinbroke]

Not sure about the house part but a 13 does not have to be 100 percent. 175 over is enough disposable to put you in a 13; if it is not enough to pay back everything then you will pay 175 over five years with the remainder of the debts discharged.

[HHM]

The amount over and above what you can afford to pay back is discharged in a chapter 13.

Think of a chapter 13 like this; you are telling the court.
"I can't afford to pay back what my creditors want me to pay, but I have some money left over at the end of the month, so I can pay that amount." Chapter 13 is a way to pay back something to your creditors. But you are not required to pay back everything.

For example, if you have $80,000 in unsecured debt, but only have $300 is disposable income, you will pay back $18,000 (minus trustee fee). The remaining $62,000 is discharged at the end of your chapter 13.

[AMISLANDER]

Whether you file 7 or 13, you're still going to have bk on your record; that $175/mo that you think is disposable just might end up paying a bill you weren't expecting.

[Dannmcg357]

Thanks HMM. I thought everything HAD to be paid back in a CH13. Expounding on that question: if one files CH7, surrenders home but ends up with a defiency of $80k after foreclosure sale, this becomes unsecured debt. With me so far? Now the case is converted to a CH13. Is the plan changed to include the defiency or is that just discharged? I don't understand how the courts handle this because the defiency isn't real at the time of filing and in fact will take months to realize.

[forgotten]

If you file a CH7 and surrender the home, that's it, the deficiency is also discharged, there is no liability.

If you file a CH13 the lender will file a claim for the defiency and it will be added to your unsecured debt.

Example: $30k in credit card debt and your DMI is $175/mo. You will pay $175/mo in to the plan and that is it, the rest will be discharged. If you surrendered your house and the lender files a deficency claim for $40k you are still only going to pay the $175/mo (which is your DMI).

[Dannmcg357]

So if your income increases and your DMI is more, then you have to have your payment adjusted? That sux

[kornellred]

Debtors do not get to decide which BK chapter to file. The means test will make that decision. A bankruptcy attorney will inform you on this matter. If you file pro se Chapter 7 and you do not qualify, your case will be dismissed.

[Dannmcg357]

Debtors do not get to decide which BK chapter to file. The means test will make that decision. A bankruptcy attorney will inform you on this matter. If you file pro se Chapter 7 and you do not qualify, your case will be dismissed.

I read post from people on here that have a 7 converted to a 13 and vise versa? My question was about DMI and amount of debt owed and that I was under the impression the entire debt had to be repaid in a CH13. FYI I filed 7 with an atty-blew the means test out of the water.

[pcn]

Debtors do not get to decide which BK chapter to file. The means test will make that decision. A bankruptcy attorney will inform you on this matter. If you file pro se Chapter 7 and you do not qualify, your case will be dismissed.

We could have filed ch 13 strip our 2nd mortgage, but opted for a ch7.

[flyinbroke]

No, you can be liable to 100 percent payback but it depends on your disposable income. If it is less than 100 percent, then you will pay back that amount and the rest of the debt is dismissed.

Now if you are paying back 60 percent and some creditors don't file proof of claim, it can mean you are now paying 100 percent because you are making the payments based on disposable. I think it can also mean you may finish sooner than 60 months, though not sure about that.

The amount paid is based on what you have left, not what you owe.

[kornellred]

I will amend my statement to say that debtors who wish to file Chapter 7, and do not qualify for Chapter 7, will not be permitted to file under Chapter 7. If a debtor actually qualifies for a Chapter 7 and needs to retain assets that would be liquidated in a Chapter 7, then they have the right to file under Chapter 13.
But under no circumstances should a debtor considering bankruptcy simply assume that Chapter 7 is available to them.

[Dannmcg357]

I understand more now what the means test is for. Thanks for your time answering my post and clearing it up.