New to the Forum a Few Questions

[Fisherman]

Hello,

I'm new to the forum and have been trying to research on my own some simple questions to way the positives against the negatives for filing a chapter 7 vs chapter 13 in the State of Virginia.

I have about $40k in unsecured debt which is mostly CC. I let my home go back to the bank last July because I was 75K upside down and there was no way to modify the payments due to split up/divorce. The 1st foreclosed in trustees sale, but the 2nd for $100k with Ocwen got wiped out. I have had numerous consultations with my attorney and we had to stop my overtime and get my income straight lined out in the past 6 months. I qualify in the state of Virginia for a Chapter 7. If I go chapter 7 I have about $2000 of personal property at risk due to the exemptions. I am also worried about the truck my ex is driving in another state that is free and clear, but in my name. I have another vehicle here in VA, but my exemptions cover both vehicles according to my attorney. I have some firearms that would also be at risk, but nothing that I wouldn't absolutely be able to live without or that I couldn't replace down the road.

If I go chapter 13, my attorney said my payment would likely be relatively small, under $300 per month. I also owe about $5000 in Federal income tax for 2008 and waiting for a payment schedule with them. So, in a nutshell:

Are there some long term credit benefits of going chapter 13 and discharging early?

Is there less impact down the road on credit re-establishment?

Would 7 be better because I wouldn't be tied to the trustee for the next three to five years and I could start rebuilding credit?

My current HR Manager knows my situation and it is because of a divorce more or less. I am not worried about my current job, but maybe future employment?

I am thinking to going to graduate school in the fall, and want to know if there are any avenues for student loans or grants after BK?

Anyway, sorry for a long post, but I'm sure there is someone out there who has done the comparisons or was presented with the same decision.

Thank you.

[AngelinaCatHub]

Hello,

I'm new to the forum and have been trying to research on my own some simple questions to way the positives against the negatives for filing a chapter 7 vs chapter 13 in the State of Virginia. Welcome to the Forum.

I have about $40k in unsecured debt which is mostly CC. I let my home go back to the bank last July because I was 75K upside down and there was no way to modify the payments due to split up/divorce. The 1st foreclosed in trustees sale, but the 2nd for $100k with Ocwen got wiped out. I have had numerous consultations with my attorney and we had to stop my overtime and get my income straight lined out in the past 6 months. I qualify in the state of Virginia for a Chapter 7. If I go chapter 7 I have about $2000 of personal property at risk due to the exemptions. I am also worried about the truck my ex is driving in another state that is free and clear, but in my name. I have another vehicle here in VA, but my exemptions cover both vehicles according to my attorney. I have some firearms that would also be at risk, but nothing that I wouldn't absolutely be able to live without or that I couldn't replace down the road. My understanding that your cars, both of them are exempt? Then no problem there. The guns, price them as if you would purchase them at a gun show or pawn shop as they probably aren't worth a lot. Did you say 2K of other stuff that could be at risk? You can purchase your equity back from your estate to your C7 Trustee.

If I go chapter 13, my attorney said my payment would likely be relatively small, under $300 per month. I also owe about $5000 in Federal income tax for 2008 and waiting for a payment schedule with them. So, in a nutshell: My opinion is C7 is cheaper, easier, and no appreciable difference in your credit rating. It will be damaged and already is by your foreclosure.

Are there some long term credit benefits of going chapter 13 and discharging early? Most likely not. A bk is a bk.

Is there less impact down the road on credit re-establishment? Not really. However, due to the vast and growing amount of bk's, you will blend into the crowd. Same with credit ratings now. Even good credit, these banks are next to impossible to work with.

Would 7 be better because I wouldn't be tied to the trustee for the next three to five years and I could start rebuilding credit? Forget the credit thing. What got you here? CC's? Try cash or you can't afford it.

My current HR Manager knows my situation and it is because of a divorce more or less. I am not worried about my current job, but maybe future employment? It is being discussed and perhaps even passed that your credit cannot be looked at for a job application. I am not sure of this as fact yet. Again, there are many out there in bk and more to come.

I am thinking to going to graduate school in the fall, and want to know if there are any avenues for student loans or grants after BK? Now is the time to look for grants. Stay away from student loans. They cannot be discharged and are a mortgage to your future. Try PAL grants and that type of thing.

Anyway, sorry for a long post, but I'm sure there is someone out there who has done the comparisons or was presented with the same decision. I was going to C13 but after my wife lost her job, it put us into a 7. The 7 was bad enough with our poor lawyer, but 13 drags on and on. A majority of them fail.

Thank you.

My advice is to purchase the Nolo Press C7 book online in PDF format. It is very good. They also have a C13 book. The 7 will tell you the differences (as will the Internet). I am pleased with my C7 and we now live within our means and with less "stuff" are happier.

Glad to have you with us. Please read all the "stickies" on the threads regarding 7, 13, and others. They are a wealth of education also. 'Hub

EDIT: Add on: Your IRS debt will be tolled in the automatic stay. Any monies secured by the Trustee less his fee, will be paid to IRS anyway, so buy your stuff back from the Trustee and it will mostly be paid to IRS. A no lose situation.

[momofthree]

The only way you'd be able to discharge a chapter 13 early is if you pay off all of your debts before the plan ends, including all of your credit card debt--or if you qualify for a hardship discharge, but those are few and far between & normally require that you become severely disabled to the point where you'll never work again.

Even if you worked out a plan at $300 a month, you'd still pay over $10k over the next 3 years.

Chapter 7 is your best bet.

[SMinGA]

Is the $2,000 of non-exempt property your ONLY reason for considering a ch. 13? If you do qualify for a ch. 7, keep in mind:

Your attorney will almost certainly charge more for a 13 than for a 7. I've not heard of an attorney that charges the same - because the 13 involves more work/time.

Part of what you pay goes to the trustee as a fee to administer the plan. It varies by district, but tends to be 5-10%.

You will pay less overall by going with a 7 and working out payment arrangements to the IRS directly even if you give up $2,000 worth of assets. That math is certain because you'd have to pay unsecured creditors at least the value of non-exempt assets in a 13. Then the trustee fee & attorney fees as mentioned...

If your attorney says you can do a ch. 7, then make payment arrangements with the IRS-using disposable income to pay the IRS directly rather than a 13 plan payment. Depending on what assets & how they are valued - the non-exempt items may not materialize into anything the trustee wants.

[Fisherman]

Is the $2,000 of non-exempt property your ONLY reason for considering a ch. 13? If you do qualify for a ch. 7, keep in mind:

Your attorney will almost certainly charge more for a 13 than for a 7. I've not heard of an attorney that charges the same - because the 13 involves more work/time.

Part of what you pay goes to the trustee as a fee to administer the plan. It varies by district, but tends to be 5-10%.

You will pay less overall by going with a 7 and working out payment arrangements to the IRS directly even if you give up $2,000 worth of assets. That math is certain because you'd have to pay unsecured creditors at least the value of non-exempt assets in a 13. Then the trustee fee & attorney fees as mentioned...

If your attorney says you can do a ch. 7, then make payment arrangements with the IRS-using disposable income to pay the IRS directly rather than a 13 plan payment. Depending on what assets & how they are valued - the non-exempt items may not materialize into anything the trustee wants.

Thank you for the suggestions so far. The attorney suggested the chapter 7, and it is not about the money for them at this point. I have paid him upfront and trust him. My concerns about the 7 were possibly loosing items that are listed on the schedule at liquidation values, but in reality would be much more expensive to replace new. I am also worried about the other car in CA, even though my ex has made all the payments on it (paid off since 2006) and has the insurance in her name for two years. I was not aware that I could offer to pay the Trustee the difference of the items that are not covered by my exemptions.

Also, in my limited knowledge, I thought there was some possible upside down the road to a chapter 13.....only 6 years on credit report vs 10? I also thought some future creditors view it more favorably. I was hoping to eventually buy another house down the road. My credit was spotless and very deep up until a year ago. I had very high Ficos, then a life event and all went to hell. Anyway, thanks again for suggestions. The Attorney is ready to file, he just said I have to decide. Thank you

[ToughTimes]

I agree with those who tell you a Chapter 7 will be faster and less costly overall.

You can, indeed, pay the trustee for your non-exempt items that you'd like to keep. More, the cost is generally less than the value of the item as listed for your BK, because the trustee will, by accepting your offer, save any money s/he would otherwise spend to store and sell the item, not to mention administrative expense. In my case, the trustee was happy to accept half the stated value of my non-exempt items that I wanted to keep. Surely your attorney knows about this as well as how to go about it.

If you read the "Mortgage After BK" area (under "After the Discharge") in this forum, you'll see that most are able to obtain a mortgage two years after their BK, and some even sooner.

If your BK attorney tells you your ex's vehicle will be covered by your exemptions, and if you trust your attorney, I don't see the issue there.

Many on this forum had enviable FICOs prior to whatever put us into the situation where bankruptcy became the best business decision. Most of us no longer care, other than to be amused at the irony. Some of us will do what we need to do in order to get into a position to obtain mortgages one day, and I'm in that group. Still, I am disgusted to feel a need to participate in just one more avaricious business that I believe really only exists to take my money.

I think it's worth rereading AngelinaCatHub's excellent post to you. Post BK people are a growing segment of the population and I, too, expect we'll see perceptions of FICOs and BKs on people's records change in the not too distant future.