Car Payment Question

[tunskit]

I'm attempting to help a friend file Ch. 13 pro se. I'm not actually filling out anything, because I don't want to be classified as a "preparer", but I'm trying to help her, since I did Ch. 7 pro se (which is simpler than 13, obviously). Anyway, here is her situation:

She and her husband have an old vehicle that is unreliable that secures a title loan. They've recently decided they have no alternative to Ch. 13 after washing out of a DMP, because it was unsustainable. They decided to finance a used car through their bank before their credit scores start dropping. They have all their checking and savings with the same bank, and their car payments are current. I know they have to list the account on their petition, but are they allowed to keep paying the car loan directly, since it is debited from their account? I think the loan is too recent to qualify for a cram-down, and the bank rep told them the KBB value of their vehicle was almost $10K (and they financed $4,400 of the $4,600 purchase price), so I'm fairly confident it will need to be repaid 100%. They don't want to damage their relationship with the bank or fall behind on the loan. So, we're trying to figure out if they should list the car loan payment on their Schedule J, or leave it off and just include it with the secured creditors? I believe they are also worried about cross-collateralization, though the loan is current, and they want to keep it that way. Any advice/insight?

(P.S. I know some people get snippy when the person doesn't join and post for themselves, but my friend has terrible eyesight and can't use a computer for more than a few minutes at a time w/o getting headaches.)

[justbroke]

If you are keeping the car, you must include it on Schedule J. If you are paying outside the plan, you need to check your local procedures! Most Districts allow, after motion and hearing, a debtor to continue paying a secured debt outside the plan (not through the Trustee) when the debt is current at the time of filing. Typically, you need to list it in the Plan as "paid outside plan" and you may also be required to file a motion with the Trustee.

Unless that District has a Model Plan, filing Chapter 13 on your own can be very very difficult and almost impossible to get through confirmation. Even with a Model Plan, you must know what to do with the various classes of creditors and how to pay those creditors. Please have them check to see if there is a Pro Se clinic or a Pro Bono clinic to help them prepare a Chapter 13 Plan. The plan is the single most important thing. You will live and die by the plan.

[LadyInTheRed]

Has your friend consulted with any attorneys? Most BK attorneys give free consultations and it is a good idea to go for some consultations to get an attorney's perspective on your case before filing pro se.

Filing a Chap 13 pro se is risky. It can be done, but attorney fees can buy a huge piece of mind. Does your friend realize that a bulk of the attorney fees can usually be paid through the plan? Most people who have enough income to require a 13 instead of a 7 can usually afford to pay an attorney. If things are so tight that she can't stop paying unsecured debt and save money to pay an attorney, that is a sign that BK may not help her.

[tunskit]

They're facing an unexpected lawsuit from an old debt. They need to file ASAP, so they don't have enough time to save for the cost of an attorney. She told me the attorneys she contacted all wanted at least $1,500 down, and then another $2-4,000 in the plan. When I look at her expenditures vs. income, I'm sure she can pay at least $600 per month. They are below median, so 36 months of $600 will cover their secured debts that have to be paid.

I'll suggest they look for a pro se clinic, but I doubt there is anything like that in this area. Thanks for your help, both of you.

[tunskit]

Oh, and chapter 7 isn't a possibility because her husband had one five years ago, before they married. Since both are listed on the lawsuit, it wouldn't help if only one of them filed Ch. 7.

[justbroke]

I'm not sure if you're aware, but just saying that they can afford $600/month is not quite how disposable monthly income (DMI) or the Means Test work. As you may recall, it's a complex formula, and even when using Schedule I/J, only "allowed" expenses are used to calculate what the total payment would be.

If they are in a community property state, they could benefit from one filing and the other receiving the hypothetical discharge of the debt. Things an attorney can answer. (I say this because Idaho is a community property state.)

This is why consultations are going to be important and paying someone to do a Chapter 7 and have the community debt discharged with only one spouse filing, would be the best of both worlds. (I don't know the affect of the hypothetical (community) discharge where one spouse is ineligible. It would be interesting to learn more about this specific scenario!

It's a complex area and here's a sample case where the debtor husband was ineligible for a discharge due to a prior filing. In Re FRIENDLY FINANCE SERVICE-MID CITY Civil Action No. 05-1826. (W.D. La. Mar. 21, 2006)

https://casetext.com/case/friendly-finance-service-mid-city#.U5RlRxDaw2c

(I am not saying that trying to use this hypothetical (community) discharge is the best scenario or the easiest, but it is there.)

[LadyInTheRed]

Your friend may be better off trying to delay a judgment as long as possible by answering the lawsuit. Even if the creditor gets a judgement, it won't be the end of the world. Yes, her wages could eventually be garnished, but it could be several months before it gets to that point and BK will stop the garnishment. Here's a brochure about execution of judgements in Idaho. It will help determine how much of her wages could be garnished http://www.idaholegalaid.org/sites/i...20brochure.pdf

At the very least, she should consult with at least a couple of attorneys before filing a pro se Chap 13. As JB points out, she may find out that her filing a Chap 7 alone will help, especially if she and her husband have no separate property. Don't let the lawsuit rush her into filing before she has taken advantage of all possible sources of information.

If there is a cross collateralization issue with the car, your friend and her husband should move their checking and savings account to a different bank now.

[tunskit]

Thank you, Lady. I'll pass this along to her.

[tunskit]

Oh, and the $600 figure is based on running the I/J and B22C forms with their information. It's actually $612-something that Sched. J showed as their leftover DMI.