Getting ready to file a chpt 13

[kdowd771]

What is the name of your state? Texas

I just got back from the first meeting with a lawyer going over if I can go chpt 7 or 13. He says that if I give up my rights on the 2 houses I have I now have TOO much disposable income to file for a chpt 7. basically to file 7 my understanding is you need to be unemployed or making very little Is this true? I am going through a divorce that just won't end. One of the houses we are both on the mortgage and the other one she is on the deed by herself and I am on the mortgage by myself. I can't sell the house because she won't let me and still she wants a jury trial on a case with no kids. Even if I could sell both houses today the best case would be breaking even. More than likely it would be a debt still owed. Not to mention the fact it will take 2 to 4 months to sell them while I still make the payments. I have $40,000 in credit card debt over this nightmare. Is there any way of getting rid of some of the credit card debt also? I am being told I will be set up with a payment plan and I have 5 years to repay ALL of the $40,000 back plus lawyer fees. I will not be able to get ANY type of loan until the money is paid back. Is this true?? I am going to go to another lawyer to get more than one look at this. I just wonder if I am being told the WHOLE situation. I have heard of TOO many having a ROSEY picture painted in front of them only to find out there are even worse shape now than they were before. HELP!!!!!!

 

[Ladynred]

Question - what did you list as your normal expenses ?? This is the single thing that people underestimate by far too much and they get pushed into a Ch 13 when they may not really have to go there. Its worth reexamining everything you NORMALLY spend money on over the course of a year (then avg it out). You can even include things like holiday and b'day gifts !

I'd take a long hard look at that before you see another attorney. If you need some ideas, I have several posts around here that list most of what you should be including. You may be surprised what you REALLY find. It could also be that you'll still end up with a 13, but I'd go thru the exercise anyway.

Ch 7 is not just for the unemployed or small income folks. The key is DISPOSABLE income. If you show $100 or more a month left over, your bound for a Ch 13. The closer to zero that number is, the better candidate you are for Ch 7.

 

[Elmo-1]

You can still file Ch 7 and keep the houses (temporarily) if keeping them will get your disposable low enough to file Ch 7. You'd have to be current and stay that way until discharge to keep foreclosure & subsequent projected higher disposable income out of the picture. After your case is discharged, you can just walk away from one or both houses if you want to. You could actually keep yours and quit paying on the house your X lives in. This would force your X to pay up or get evicted. Bk is considered more 'binding' than divorce judgements.

The question that comes to mind is whether your lawyer figured a 5-year 100% payback plan using your disposable income before or after loosing both houses. If you're borderline Ch 7 using your disposable calculated BEFORE loosing the houses, then pushing your reasonable living expenses up to the max would help, but not guarantee a Ch 7. If you're 100% to unsecured BEFORE loosing the houses, then a few bucks a month may not help your case in the slightest. Conversely, if your 100% payback plan is based on having no expense from the houses, then the first paragraph (above) applies - keep both houses and max out your list of living expenses & dump one of both after Ch 7 discharged.

If you end up in a Ch 13 what you were told about credit availability during the term is partially/mostly true. Reality is that home loans are once again available after 12 months of regular payments (FHA & VA). It's probably harder to find vehicle loans during the payback period, but 12-24 months after filing - if you have a good pay history with your Ch 13 payments - you should be able to find a lender.

You'll still need Trustee approval on any new debt that you take on after filing. The Court needs to know that you're not endangering your plan with the new debt, and creditors need to know that the Trustee feels you can afford the new debt. Expect high interest rates and large down payments. This is anything but ROSEY, but tolerable if you can adjust to your budget - which IS the court-approved 'reasonable living expenses'. This is why you list EVERYTHING you can imagine and at the MAXIMUM amount the attorney feels will be allowed. That way if you don't get your Ch 7, you'll have a liveable budget in Ch 13.

 

[kdowd771]

Ok if the houses are given up on I have a total of almost $2,000 left per month. I think it would be VERY difficult if not ridiculous to try and justify $2,000 per month extra of living expenses. I understand I could only keep one of the houses at $400 and $1234 a month for mortgage payments. Either one I gave up will still give me a chunk of disposable at the end of the month. So I figure that is out. Another problem is that if I were to try and keep one of the houses and the finalization of this divorce beating I have been taken is completed can the judge order me to pay on one of the houses in such a way where it would be non-dischargeable?? I am leaning towards just getting rid of them altogther. The lesser of 2 evils here. Also she would be liable for the house with $1234 payment since her name is on the loan also. I know she can't make the payment so she will have to file a chpt 13. This would cancel her credit card which she has been using to finance this jury trial and maybe it will get the divorce completed. Does this sound like a good game plan??? Am I making sense here??

 

[Elmo-1]

Your plan will work, but the captain's going down with the ship. Reasonable expenses also include an amount to keep a roof over your head. If you give up both houses you could be in a bind for a place to live. Even Ch 13 100% payback finding an apartment may be difficult. Unless you have family you can move in with or a friend with property you can rent, it may be better to keep your house for a year or so.

Also while your credit allows, make sure you get a vehicle that you can depend on for the next 3-5 years. This will take some of your 'disposable', but would save you from expensive repairs while on a strict budget, or having to buy after filing and paying outrageous interest rates & 20% down.

You can also list your expenses on the forum if you want suggestions on additons or amounts turned in. It's always a good idea to get 2nd and 3rd opinions from different attorneys regarding your options. There's a great disparity of talent out there - find one that is honest and willing to do some digging for you.

 

[kdowd771]

I just found about the 10% fee for the trustee to file for chpt 13!!!!!!!! I about had a cow!!!! Not only am I in debt up to my eyeballs I have to incur MORE debt to get out of debt???? I can understand the attorney fee to set it all up but what the heck doies the trustee do??? They are like the judge over the case aren't they??? I am wondering if this is the right thing to do now. Is this true or am I being taken for a ride???

 

[Ladynred]

The Trustee manages your bankruptcy 'estate'.. basically everything you own for the life of the plan. Your payments would go to the Trustee, usually, and the Trustee pays your creditors. So, 10% is a helluva cut !

 

[Elmo-1]

10% is the standard Trustee fee. Some places it's 15%. That's still a bargain when you consider you won't have to pay interest on the $40k compounded for 3-5 years, finance charges, over the limit charges, annual fees, late fees and any other tack-on goodies (credit life insurance, for example) that you may not even know you have.

The estate the Trustee administers in Ch 13 is your disposable income. If you end up at 100% payback to unsecured you can pay out your plan before the minimum 36 months if you run into some cash, or have income you can put aside until you can do a payout. This is the only plan that allows an early out - all others require a minimum of 36 months. Any questions on C13 100%payback to unsecured, let me know because that's what I'm currently doing. It really isn't bad for us because the monthly payment is MUCH less than what we were paying on the combined debt before filing, and not making a dent in the principle - just chasing our tails.

 

[kdowd771]

I just talked with another lawyer over the phone. After giving her the basics with her I find out she might get it where I only have to pay back 80% of the total unsecured debt. Plus her fee to do all this is $600 cheaper than the first lawyer I went to!!!! if she could get it lowered down to 80% that would also lower the 10% fee for the trustee. Is there any negatives that might go along with this? I can see the positives but am wondering. That first lawyer never mentioned anything about the trustee. Only after I started looking at the numbers did I see where almost $5,000 was added on. The fact that he neglected to tell me that is of some concern to me.