Question In CA w/ a WWYD: 7 or 13 in these circumstances

[needanswers]

Hello all. I've decided to come out Lurkville to ask a question after our consult today and they are really, really pushing for a 13 even though it looks like we can qualify for a 7 w/ our single income, 5 family household. They were pushing 13 so we can lien strip. I'm worried about the Ch 13 failure rate.

I'll keep this short. We are in California and I think we have $23,000 in exceptions that we would use on our cars. Is that right or is that amount only for a 13?

1st: 400,000 (we put $200,000 down on this house. Worth $350,000. Paid $620,000)
2nd: 80,000
Credit card Debt: 170,000

We have 2 vehicles that are paid off. We are current on everything but I don't know if we can pay the credit cards next month.

What would you do? 13 or 7?

[momofthree]

Well, an $80k second is definitely worth getting rid of. Many people file a chapter 7 with the hope of settling the 2nd mortgage after discharge, but as your attorney has already informed you, the only sure way to strip a 2nd is to complete a ch. 13. We chose a 13 for this reason even though we were under the median and could have gone with a 7.

Any idea what your payment would be like in a chapter 13?

Either way you go though, quit paying the credit cards if you know you're going to file. You're just throwing money away with each payment you make to them....

[needanswers]

Well, an $80k second is definitely worth getting rid of. Many people file a chapter 7 with the hope of settling the 2nd mortgage after discharge, but as your attorney has already informed you, the only sure way to strip a 2nd is to complete a ch. 13. We chose a 13 for this reason even though we were under the median and could have gone with a 7.

Any idea what your payment would be like in a chapter 13?

Either way you go though, quit paying the credit cards if you know you're going to file. You're just throwing money away with each payment you make to them....

We've been drowning and in denial for a long time. We just received a large income tax return that went to property taxes and credit card bills. Now we'll be scrambling to come up with the attorney fees but we will find a way.
Our payment was guessed at $250 for 5 years.

[LALADY]

Here are the exemptions for Ch7 purposes:

http://www.bankruptcyinformation.com/CA_exemp.htm

You can choose between State or Federal.

One purpose of a Ch13 is you can keep your property despite exemptions.

Is the single income over median income? Is that job secure for 5 years?

[LALADY]

Also, if you are contemplating any bankruptcy, stop paying credit cards.

If you are filing Ch13, attorney fees can be part of payment plan.

[needanswers]

Here are the exemptions for Ch7 purposes:

http://www.bankruptcyinformation.com/CA_exemp.htm

You can choose between State or Federal.

One purpose of a Ch13 is you can keep your property despite exemptions.

Is the single income over median income? Is that job secure for 5 years?

Job is secure. Thank you for the link, by the way.

Just based on what I entered in the online Means Test, we are above the monthly income about $600/month but we passed that means test because its formula says our expenses leave us with no disposable income.

[LALADY]

My guess is you want to keep the house?

Expecting any major inheritances in the next five years?

[needanswers]

My guess is you want to keep the house?

Expecting any major inheritances in the next five years?

Yes, absolutely want to keep the house. There's no equity despite having put a large down payment.

No major inheritances but my spouse has a work related injury that he might get a settlement for. Would that be taken by the trustee?

[LALADY]

In Ch7 it appears at least part of settlement can be kept (see link previously provided). In a Ch13, I'm not certain how that plays in. Have you talked to your attorney about it? Maybe someone will respond about that. See this thread. Also search in Ch13 forum for word injury, workers comp, etc. How much are you hoping to get?

[LALADY]

Link to thread (sorry) http://www.bkforum.com/showthread.ph...ersonal+injury

[LALADY]

Here's another

http://www.bkforum.com/showthread.php?t=48686&highlight=personal+injury

[LALADY]

Also, something to keep in mind with "large tax refunds," you will probably have to adjust your tax structure so that you don't get future large refunds. That income will need to come in monthly to pay the creditors (in Ch13).

[needanswers]

In Ch7 it appears at least part of settlement can be kept (see link previously provided). In a Ch13, I'm not certain how that plays in. Have you talked to your attorney about it? Maybe someone will respond about that. See this thread. Also search in Ch13 forum for word injury, workers comp, etc. How much are you hoping to get?

We forgot to ask the attorney today because we haven't really thought that far ahead. It is an injury that is still being treated with an upcoming surgery. Just based on what someone else received for the same condition, it might be about $40K. But that is just a guess at this point. Spouse is still working and employment is stable.

Thank you for all of your help and links.

[momofthree]

How new are the paid off vehicles? If they are older, then you'll want to buy at least 1 new(er) car before filing.

Also, how did they come up with the $250 payment? You said your credit cards are current. I'm guessing the minimums on $170k are pretty darned high, and if your $80k second mortgage payment goes away also, how are you only having $250/mo left over if all those payments disappear?

Just wondering if maybe your attny is telling you what you want to hear and is going to pull the old bait-and-switch on you. I mean, if you end up with a payback of $1000 a month or something, then you may be better off filing for the chapter 7 with hopes of settling your second. You're pretty much guaranteed to be able to settle for less than you would pay into a ch.13 at that rate....Just some food for thought....

[needanswers]

They came up with the $250 figure based on monthly income, mortgage payment and our family size. It was all very informal.

We met all the payments fine until a few months ago when my husband's overtime was completely cut. After that, we sold a vehicle to pay the bills and also used all of our income tax return on bills.

I think we need to meet with atty firm to compare. Our cars are both 5 yrs old. I do want to file asap, unless we are advised to wait. I don't want creditors to call my husband's work.