topic Re: Possible BK after DMP in Bankruptcy

Possible BK after DMP

Math_Rocks — Sat, 03 Mar 2012 17:12:20 GMT

We have been in a DMP for more than two years and have paid off more than $20000 of our $47000 in credit card debt. I am very proud of us for doing this but the monthly payments have been killing us, especially since DH lost his overtime and it was a substantial part of our income. Stupidly, somewhere in this process we got a month behind on our mortgage even though we kept making the DMP payments. I have contacted DMP and they said that we cannot get our payments reduced or skip a payment so that we can catch up the mortgage. In fact, they recommended that we talk to a BK attorney.

I know that we make too much to file CH. 7 but as I do the math, if we submit a real budget, with all the things on there that we should be accounting for on a monthly basis but don't (like clothes and car registration, etc.), then we don't have ANYTHING to pay on our CC debt. Literally nothing. How can we file a Ch. 13 without having a repayment plan. Will they look at us and just say you have to come up with X payments despite what our budget would show?

Plus, we have a mortgage and two car loans and I have $75000 in student loans and I am hoping that none of these would be IIB. Is that possible? One of the few smart things that I have done was consolidate $50000 of those students loans at 2.875% and they are really good about giving me a forbearance when I ask for it. I'm terrified that these will be forced into the BK and transferred to another lender. Would we still have the same terms?

DH is hoping for a promotion at work so we are giving this 30 days to consider. In the meantime, we are making the DMP payment and paying what we can to the mortgage. If he doesn't get the promotion and we don't have some other significant increase in income, then next month, we will not make the DMP payment and we will try to deal with the creditors (all 17 of them) directly. Then, if they won't deal with us, we consider BK the last option. But we will catch up on the mortgage and make sure that our kids are fed and clothed.

I would appreciate the advice of others, especially if you have filed Ch. 13 and submitted a budget. How was that handled by the trustee?

Re: Possible BK after DMP

missji — Sat, 03 Mar 2012 23:45:20 GMT

I am pretty sure you can reaffirm the mortgage and at least one of the cars and pay them outside your Ch 13 plan. Your student loans however would be included but since they cant be discharged if they aren't paid in full during your plan you will still be on the hook for them after it ends. The good thing though is that they will propably be an unsecured creditor and your interest will stop accruing while you are in repayment.

Re: Possible BK after DMP

beamMEup — Sun, 04 Mar 2012 01:05:09 GMT

Hmmm.

My student loans did accrue interest during the CH 13. And my interest rate went up to 7% for - I think - 36 months or something after the BK discharge if I paid on time. Although I had previous lates on the student loans, they were current when I filed.

We paid our auto loans through the BK, and our mortgage was paid directly to the mortgage holder, but was IIB. That's the way it worked for us in a CH 13.

I think the best thing to do is sit down with a BK attorney. They will create a budget for you, and make recommendations. Walk in with your numbers so they can provide you with the most helpful information.

In the meantime, consider accepting any possible additional work - delivering pizzas, delivering papers, whatever you can to tide you over until salary bumps up again.

Best wishes - and keep us posted. I'm hoping this all works out perfectly. And congrats on your debt paydown.

Re: Possible BK after DMP

missji — Sun, 04 Mar 2012 09:06:11 GMT

You can pay either the mortgage or the auto loans in the plan but you can also reaffirm the debt and pay outside the plan. As for student loans, and with any ither debt, it all depends on when the debt was incurred whether or not it is considered secured or unsecured. If it is a secured debt then yes, you will still pay interest but if it is unsecured, you will not. That's kind of the law... I know it from personal experience. I'm in repayment now, auto loan outside plan, student loans included in plan, no interest...just sayin'

With regard to picking up additional work, you can do that but just know that if you do, that's income that you will report when you file and will be considered when your plan is developed. So unless you want your plan payments to be higher than you may be able to afford without continuing tyat work for 3-5 years depending on the length of the plan, be careful doing that.

Re: Possible BK after DMP

beamMEup — Sun, 04 Mar 2012 15:23:41 GMT

Good post!

Yep - definitely time to go talk to a BK attorney and get informed on what your options are.

If you schedule this now, you'll have more time to mull over your options.

I'm always a fan of taking a second job to pay debts whenever possible. If you can get the mortgage covered, you're still fine with your DMP and can move forward with that as originally planned? Always an option! For me personally, I'd hate to avoid earning cash to pay debt in order to look better on a BK 13 repayment plan. But it's certainly a valid factor. Everyone's got their own experience and opportunities, so it's best to look at options from all sides and find what's truly best for you. It certainly true that we never know someone else's shoes until we walk in them. That's why it's so great to hear different viewpoints and options.

One of the great strengths of theses forums is that you'll hear from lots of good folks with differing experiences and opinions. Really helpful when you're in a bind. But the BK attorney will be your most helpful source if you're considering filing. It's supremely helpful to have a free evaluation (most BK attorneys in my area will do this), and it's even better to visit with two different BK attorneys so you can compare information - and even personalities.

Again, keep us posted - We're all rooting for you!

Re: Possible BK after DMP

granny031350 — Sun, 04 Mar 2012 23:44:52 GMT

student loans become a priority debt in the chapter 13 and are paid before unsecured creditors.

The trustee will prioitize the debt. You usually pay your mortgage, but the trustee can pay for the car. In fact that will be paid OFF before any unsecured creditors see a dime.

In my chapter 13 it went rent outside of chapter 13 but the trustee paid off my IRS first, then cars, then student loans and unsecured creditors.

Re: Possible BK after DMP

Math_Rocks — Mon, 05 Mar 2012 04:25:08 GMT

Thank you for all the input! I neglected to say that DH refs soccer games on the side and accepts as many overtime shifts as he can get. I have been working a second job tutoring for over a year and a half and I am burned out. I definitely don't feel like I can commit to doing it for another 3-5 years. The constant work, having a DH who has to commute an hour each way, having a daughter with special needs. We are just spent from making it this past two years. That's why I feel like if we do end up filing, I will still feel really proud at all that we did pay down.

My primary job is as a university professor and it's more than a full-time job. I have a heavy teaching load and due to the economy, my meager salary will not be seeing any big increases any time soon. And recently, I cut down from tutoring 6 days a week to 3 days a week. I just had to. DH is hoping that a supervisor position will open up at his work soon but even if it does, we can't guarantee that he will get it. That's why we have decided to wait out this month and see if there are any significant changes. In the meantime, I think we will try to meet with a BK attorney over Spring Break and just discuss our situation.

We also have some valuables to try to sell and catch up the mortgage so there is still a lot we can try to do before resorting to this last option. However, I am beginning to feel a huge sense of relief just knowing that there is a plan B.

Sorry that my thoughts are so scattered. Please keep the comments/advice coming!

Here are some specific questions:

Is it possible to do a Ch. 13 without any extra income for credit card repayment? (That is just paying auto loans, mortgage, student loans.)

DH commutes to a city an hour away. We HAVE to have both of our cars. Is that going to be a problem since they both have loans on them? One of them is down to 16 payments.

Can they make me continue to work a second job and/or teach in the summers for extra income?

What are "acceptable" expenses for things like cell phones, internet and cable?

Re: Possible BK after DMP

scrubs — Mon, 05 Mar 2012 13:59:05 GMT

iam one month away from three yrs post bk. my scores fico ex 728 eq 723 and tu 743, and credit limit on 7 cc is 53000 dollars. so there is life after bk. my advice to you is start small, like apply bk friendly cc pay on time and ever be late if you get any type of 30 day late on top of you bk is the kiss of death to your cr and getting better cc. dont apply for prime cc and apply for too much credit that is a red flag. many cc and some banks is not bk friendly. join a good bk frindly cu. first year is the hardest, my first year after discharged i apply for orchard cc my limit was 500 dollars 2nd card was cap one for 300 dollars and my last was hooter cc for 300 dollars that was my first year keep them for 2 yrs. after that you should get better offer like barclay bank. make sure your cr items show incl in bk and show zero balance.

Re: Possible BK after DMP

beamMEup — Mon, 05 Mar 2012 14:36:25 GMT

Math_Rocks wrote:
Thank you for all the input! I neglected to say that DH refs soccer games on the side and accepts as many overtime shifts as he can get. I have been working a second job tutoring for over a year and a half and I am burned out. I definitely don't feel like I can commit to doing it for another 3-5 years. The constant work, having a DH who has to commute an hour each way, having a daughter with special needs. We are just spent from making it this past two years. That's why I feel like if we do end up filing, I will still feel really proud at all that we did pay down.
________________________________________________________________

And you absolutely should! To me, that made a huge difference - both at the time and certainly as we moved forward. Life happens and we all do our best. Sometimes filing CH 13 is part of doing our best!

Re: Possible BK after DMP

granny031350 — Mon, 05 Mar 2012 19:15:17 GMT

when you file, it is what happens to your income before you file. If you do not want the extras to be included than give them up possibly longer than 6 months.

A chapter 13 is different than a 7. Bercareful selling off your stuff. Anything over a certain amount can be clawed back the trustee if done prior to filing. Your best information is an attorney who can tell you what you can and cannot do prior to filing. But based on my own chapter 13 experience I wanted the lowest income possible so did not work any extra. The government determines your allowed expenses based on your area. That is part of the means testing. That is why an attorney consult, would be a benefit cause he can tell you what is allowed in your region. Your chapter 13 payment is based on the income you have left over after allowed exemptions. My advice to you is to INCLUDE it ALL in your chapter 13. Maybe keep out the mortgage but throw EVERYTHING else in it. THe loans, student loans, cars and unsecured creditors. The trustee will dole it out and if there is nothing left for unsecured, then they will get nothing. Now all creditors HAVE to file a claim to get paid so it is important to watch the claims and make sure they are all legit. etc. But key here income. Stop the overtime and extra if you can.

Re: Possible BK after DMP

JaneS1123445 — Wed, 07 Mar 2012 00:19:18 GMT

Math_Rocks wrote:
Thank you for all the input! I neglected to say that DH refs soccer games on the side and accepts as many overtime shifts as he can get. I have been working a second job tutoring for over a year and a half and I am burned out. I definitely don't feel like I can commit to doing it for another 3-5 years. The constant work, having a DH who has to commute an hour each way, having a daughter with special needs. We are just spent from making it this past two years. That's why I feel like if we do end up filing, I will still feel really proud at all that we did pay down.

My primary job is as a university professor and it's more than a full-time job. I have a heavy teaching load and due to the economy, my meager salary will not be seeing any big increases any time soon. And recently, I cut down from tutoring 6 days a week to 3 days a week. I just had to. DH is hoping that a supervisor position will open up at his work soon but even if it does, we can't guarantee that he will get it. That's why we have decided to wait out this month and see if there are any significant changes. In the meantime, I think we will try to meet with a BK attorney over Spring Break and just discuss our situation.

We also have some valuables to try to sell and catch up the mortgage so there is still a lot we can try to do before resorting to this last option. However, I am beginning to feel a huge sense of relief just knowing that there is a plan B.

Sorry that my thoughts are so scattered. Please keep the comments/advice coming!

Here are some specific questions:
Is it possible to do a Ch. 13 without any extra income for credit card repayment? (That is just paying auto loans, mortgage, student loans.)
DH commutes to a city an hour away. We HAVE to have both of our cars. Is that going to be a problem since they both have loans on them? One of them is down to 16 payments.
Can they make me continue to work a second job and/or teach in the summers for extra income?
What are "acceptable" expenses for things like cell phones, internet and cable?

When you file for a chapter 13, all assets will be included by law. Your unsecured creditors will only end up recieving a small portion of what you owe them, unless the Trustee decides you must pay 100 percent back, which is determined by disposable monthly income after alll your debt and income is accounted for. All creditors must file what's called a "proof of claim", which is basically them proving you owe them money. Your attorney will then object or conform to those claims. Bankruptcy plans are anywhere from a 3yr to 5yr period, at max. Your vehicles can be placed into the bankruptcy plan and possibly at a lower interest rate than you are paying now. You can also have them treated "outside the plan", which you'd have to pay on your own, seperate from your monthly repayment amount. It should not be an issue. They cannot make you work for extra income, but one of you has to be employed in a ch 13 since there is a repayment plan. As far as acceptable expenses, it depends on household size and income. There is actually and IRS guideline that must be adhered to. I would find an attorney that gives you a free consultation. In fact, see a few and don't settle until you find one who's extremely knowledgeable

Re: Possible BK after DMP

Math_Rocks — Wed, 07 Mar 2012 16:50:19 GMT

Thank you so much for the information!

I just made our appt with a BK attorney. We live in a small town so we are going to a city about 45 minutes away to meet with him. He was recommended by good friends. But I made the appt for when DH is off work and I am on Spring Break so we have to wait almost two weeks. I have so many questions; this is going to drive me nuts.

Do you have recommendations for what all we should ask about and how to tell if it is a good "fit"?

We spend $45/mo for internet, $65/mo for Dish and $150/mo for cellular. We are a family of four. Do these expenses seem reasonable? (Obviously this is just an opinion question.)

Re: Possible BK after DMP

JaneS1123445 — Wed, 07 Mar 2012 23:08:41 GMT

Math_Rocks wrote:
Thank you so much for the information!

I just made our appt with a BK attorney. We live in a small town so we are going to a city about 45 minutes away to meet with him. He was recommended by good friends. But I made the appt for when DH is off work and I am on Spring Break so we have to wait almost two weeks. I have so many questions; this is going to drive me nuts.

Do you have recommendations for what all we should ask about and how to tell if it is a good "fit"?

We spend $45/mo for internet, $65/mo for Dish and $150/mo for cellular. We are a family of four. Do these expenses seem reasonable? (Obviously this is just an opinion question.)

Yes they are pretty normal, but it will vary with the Local rules where you live. Your atty will be able to inform you of whether or not they are acceptable in your district and if the Trustee may have any issues with such expenses. You seem to have pretty good questions to ask him/her already. Based on that, I'm sure you'll be able to determine whether or not the attorney is a good fit on how well he/she answers your questions. If they give you vague answers, move on my friend.

Re: Possible BK after DMP

beamMEup — Wed, 07 Mar 2012 23:17:04 GMT

And make sure you feel comfortable with the attorney.

That's easier to determine if you're meeting with more than one. But if you're meeting with one, just make sure you communicate well with each other. BK is stressful - you'll want to make sure the attorney is a comfortable fit.

I would also recommend doing some research online and/or the library on CH 13's. The more knowledgeable you are going in, the more you'll learn. Make sure to bring a one page overview of your finances. That'll help tremendously.

Re: Possible BK after DMP

Math_Rocks — Fri, 09 Mar 2012 15:55:29 GMT

Feeling really down today. We looked at our finances last night and we aren't going to have money for food the second half of the month plus we can't pay our utilities. We really shouldn't have made the DMP payment this month but we can't change it now. I just feel like we are making bad decision after bad decision and I feel like a total failure when it comes to money. I've worked a second job and we've cut just about everything that we can think of for two years now. I'm worn out and demoralized.

In addition to all that, we have 10 more days until we see the BK attorney and I have so many questions that are driving me crazy. Does anyone know about contributing to retirement (for a match) while you are in Ch. 13? Contributing to retirement is one of the few things that we have done right. I can't touch mine but DH can take a loan on one retirement account and could cash out the other (with penalties of course). Should we consider doing that to try to settle our debts before considering BK?

I appreciate all the helpful comments and encouragement.

Re: Possible BK after DMP

FrugalRican — Fri, 09 Mar 2012 16:34:02 GMT

Math_Rocks wrote:
Thank you so much for the information!

We spend $45/mo for internet, $65/mo for Dish and $150/mo for cellular. We are a family of four. Do these expenses seem reasonable? (Obviously this is just an opinion question.)

If you feel like you are in a position in which you won't be able to eat, I'd say it's time to cut out the Dish.

And the cell phone plan is going to have to go.

I know there are children involved, but that $65 could go a long way when it comes to food.

What's the $150/mo include on the cellphone, two cellphones? Three?

Have you looked into using prepaid cells? And maybe combine that with a service like Skype?

Re: Possible BK after DMP

beamMEup — Fri, 09 Mar 2012 16:42:15 GMT

We were not allowed to contribute to IRA (and we had a match) during our CH 13.

We were sad, but it makes sense.

Have you found any helpful info about CH 13 at the bookstore, or library, or online? Gathering info will help you feel empowered and keep the frustration level down. It'll also help you ask the best questions when you talk to the attorney.

As for the food, we ate a lot of rice and beans, potatoes, kept an extremely low food budget before and during our BK (yes - all the way through!) Do you have a local food bank that could help you out this month? That's what they're there for!

Keep us posted - lots of us have been there and we're rooting for you!

ETA: and definitely give up the Dish!

We were told we had to give up daughter's cell phone when the trustee went over the plan. She was 16 and working, driving at nights and we felt she needed a basic phone for safety. We had given her a cheap phone and a cheap plan ($10 month) for her birthday. Trustee said we couldn't afford it and she should pay for it herself. It was taken out of the plan budget. We did keep paying it - it came out of our grocery budget. If you're already in contract, cancellation fees can be pretty steep. Interesting to us - the plan allotted for a clothes budget. Something we didn't have (or it was very minimal); so that was more generous than what we had been doing.

Re: Possible BK after DMP

FrugalRican — Fri, 09 Mar 2012 16:44:22 GMT

beamMEup wrote:

As for the food, we ate a lot of rice and beans, potatoes, kept an extremely low food budget before and during our BK (yes - all the way through!) Do you have a local food bank that could help you out this month? That's what they're there for!

OP, rice and beans is a cultural thing for me, so I have quite a nice few bean recipes as well :)

Re: Possible BK after DMP

Math_Rocks — Fri, 09 Mar 2012 21:36:02 GMT

Thanks for the advice and the encouragement.

I'm starting to feel like BK may not be an option for us and then what are our options? DH's employer is owned by a bank and we have a CC with them. If we include it in BK, he loses his job. And we were so late starting retirement, where will we be if we stop contributing for five years and come out of BK almost 50? Also, DH gets an annual bonus that necessitates him contributing so we would be out that money as well. And I have a loan on my retirement account that I took out about 18 months ago. How does that get handled in BK?

We still have a long time on our cell contract and a few more months on Dish. The cell bill is for 3 people. DS turns 18 in May and we expect him to pay for his car insurance and his part of phone bill starting then. We will definitely consider canceling Dish when the contract is up but we aren't going to pay the cancellation fees to do it now. We may be able to reduce the plan though. We'll look into it.

We've been married over two decades and have had our fair share of beans & rice months. I will say it's much harder when you have kids. My dad has given us some things to sell and we are looking into it. It may be enough to fill in our food budget and catch up the mortgage and utilities. Just not sure.

Re: Possible BK after DMP

beamMEup — Sat, 10 Mar 2012 06:21:16 GMT

Looks like you've got some good options. Dish can go in a few months (we cancelled ours and lived - easier than we thought), you can do the rice and beans thingy with kids (we have tons of kids and it taught them how to cook on a budget - great skill for college and beyond) and you can look at local food bank help. All those things add up.

I think you'll feel better when you have solid info - either from your attorney and/or your own research.

I do see the BK issue as a very real job threat to DH if he works at a bank, and especially if you have a card there. You might consider closing the card before filing. However, banks sometimes have a notice on job apps that if you've filed for BK you're not eligible for a job. Don't know how they'd handle that if you're already employed but it seems a real risk.

Someone will likely throw something at the computer screen, but I'd consider a loan on the retirement account. Sometimes you gotta do what you gotta do, regroup and march forward. I would pay the fees if I had the cash available to keep my family in a home and fed. But that's just me and others will have varying opinions.

Keep us posted and know we're hoping all's well. And get food for the kids. Food banks are not anything to avoid when you have children that need to be fed.