Does anyone not ever qualify for Ch 13?

[researchnerd]

I'm really hoping we qualify for Ch 7 and are able to keep the house and 2 cars but if we don't well be doing Ch 13.

My question is what are some of the reason people do not qualify either 7 or 13?

Thanks

This is probably rare, but it is possible to be in a twilight zone where you qualify for neither Ch7 nor Ch13. With low income and/or low DMI, a Ch7 is possible. If your income is over median and/or you have higher DMI, you'll end up in Ch13. But if you also have a lot of high-priority debts -- which need to be paid at 100% -- it's possible that you won't have enough DMI left to fund a Ch13 plan plus fees. An example of this would be someone who has a lot of student loan debt, plus alimony and/or child support, plus mortgage arrears and maybe some back taxes.

If a person's total debt is too high, that can also disqualify them from filing. I think the limits are around $1M for secured debt and $330K for unsecured.

[BCA2009]

there are limits on how much debt you can have and file chap 13. So if you have to much debt for 13 and too much income for Chap 7, you would have to do a chap 11. I think this is pretty rare.

Back to the over the median topic. Just becasue you are over the median, don't give up on a Chap 7. It is all about your expenses. Go over them in detail and sqeeze every line item.

I was 24K over the median and was discharged in Chap 7. I have read on this board about people 40K or higher over the median.

Good luck!

[SMinGA]

You would not be able to do a ch. 13 if you had too much unsecured debt. I think the # is around $360k, but don't know the exact.

If you have too much disposable income after reasonable expenses/actual bills - you may not be able to do a ch. 7. Of course, there is some gray area as to what your expenses/bills actually are. Some things are clearly not allowed: claiming $500/mo entertainment for example. But other things can put you in ch. 7 territory even if you're over median. Such as higher than standard mortgage/utilities, child care that is reasonable in expense for your area/situation and needed to work, actual medical expenses you can document, etc.

You must have DMI and have regular income to be able to do a ch. 13, there is no such requirement for a 7. But if one has spotty income - then doing a ch. 7 would take care of debt but not insure firm financial footing after. What happens if you get hurt and incur medical expenses 2 months after filing? You're stuck with those bills. So if I were in between jobs (and insurance) I'd try to hold off on filing until some stability was reached.

[SMinGA]

Means test vs. Actual (I & J)...

Passing the means test does not mean you automatically qualify for ch. 7, just as failing the means test does not mean you automatically must file ch. 13.

The means test is a starting point - if you fail then your expenses may be scrutinized a bit more. It all still comes down to your DMI from schedules I & J.

Try to consider everything in your budget. Take some time, thing of the things you need weekly/monthly but also what you need on an occasional basis. Even entertainment - but not alot per month. Try to be reasonable in your figures, meaning you can live with it but its not excessive.

[Freddy03]

Thanks SMinGA

I'm pretty sure we will quailfy for 7 but now I'm wondering if doing a 13 to strip our 13k HELOC would be a better route.

I'm just so nervous getting hit with a unreasonable monthly payment.

[Maine]

If you want to keep the house file ch 7 then pay the heloc in the future, it would be cheaper than a 13 payback plan.
13k is a lot less than $400 a month for 5 years.

So, check you expenses carefully, you want them all to be legit, but you also need to make sure you remember them all. I forgot oil changes, haircuts, car registration, school supplies, field trips, dental work, tylenol, bandaids, sunscreen ($40/ month in summer!!! or $10 mo for the year.) It is all small stuff, but it will most likely add up to more than that $400 you have left right now. It is OK if your dmi is a negative number.