Ch 13 - Any information on payment plans and getting a mortgage?

[lkcrew426]

We are debating filing at this time and are trying for a chapter 7, but the attorney says we will be a complicated case and may be pushed into a 13. So . . . I have a couple questions about it. 

First of all . . . anyone willing to share details on your payment plan? I read a lot of people talking about them not being affordable. How does the percentage you get paid back get calculated? What is the benefit of this if your payment plan is going to be more than you can afford? 

Does your payment plan get recalculated if you have an increase in income down the road? I'm in graduate school and will make more money ($30-40k) upon graduation in 2018. Will this affect the plan? 

Regarding a mortgage, I've read multiple places that you cannot get credit while in a 13 . . . so how do you rebuild your credit to be able to qualify for a mortgage? Our credit is not exceptionally poor at this time; just our debt to credit limit ratio is killing us . . . but we have no mortgage and would surrender our cars in the proceedings . . . so I'm lost as to how we would rebuild our credit score to be able to potentially get a mortgage. 

Thanks in advance for the help. 

[mynameainttracy]

It would help if you shared your relative location. The tendencies of trustees can vary wild and others here may have experience in that area.

When we filed we were in an area with a very lenient and encouraging trustee. Crazy right? There are some out there.

He never took our tax returns or increases in pay and he allowed us to rebuild and apply for credit during our plan. If there could be a smooth and painless 13 we got it with this guy.

If your attorney does a lot of BKs they will be familiar with the tendencies of the trustee's office. Ask them! They will be able to tell you what to expect or what their experiences with them have been.

Your monthly payment is dependant on your case. We had a car and back taxes in ours and we paid around $1300/month and we were in a 0% plan. Everything we paid in went to the taxes, the car, our attorney's cost and the fees the trustee takes. It depends on your disposable income. Others can chime in. I don't recall the formula.

As far as a mortgage, you can try to get one after 1 year of on time payments and approval from your trustee. The only roadblock would be a lender whose overlays allow it. For us we had to wait 2 years post discharge. We closed last April on a home with a great interest rate. It was a long road but we saved and prepared and when we were ready to get a mortgage we had a large savings built up for the costs associated.

Our credit reports have been clean for a little over a year now. I recently got a 0% car loan which I would have never imagined possible a couple of years ago.

The whole process was a hard lesson but we learned from it.

[Anonymous]

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@lkcrew426 wrote:

We are debating filing at this time and are trying for a chapter 7, but the attorney says we will be a complicated case and may be pushed into a 13. So . . . I have a couple questions about it. 

First of all . . . anyone willing to share details on your payment plan? I read a lot of people talking about them not being affordable. How does the percentage you get paid back get calculated? What is the benefit of this if your payment plan is going to be more than you can afford? 

Does your payment plan get recalculated if you have an increase in income down the road? I'm in graduate school and will make more money ($30-40k) upon graduation in 2018. Will this affect the plan? 

Regarding a mortgage, I've read multiple places that you cannot get credit while in a 13 . . . so how do you rebuild your credit to be able to qualify for a mortgage? Our credit is not exceptionally poor at this time; just our debt to credit limit ratio is killing us . . . but we have no mortgage and would surrender our cars in the proceedings . . . so I'm lost as to how we would rebuild our credit score to be able to potentially get a mortgage. 

Thanks in advance for the help. 

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My bankruptcy was a Chapter 13. It was a five year payout. There is a negotiation with the creditors and the amount owed was reduced by many of them. (I don't know why some did and some did not.) Other creditors just did a write-off. It is important to never ever miss a payment so I set up an automatic payment monthly. I do not think anything is recalculated unless there are new terms requested. My bankruptcy attorney helped me with many answers. 

As to more than you can afford, I don't think that will happen as your pay and expenses are calculated and the trustee has to approve. If you have hardship (such as job loss) during the Chapter 13 you should notify your bankruptcy attorney and trustee to see what your next step should be. 

The five years I had to learn to live on "cash only" and it was difficult, but I learned so much. The plus for a Chapter 13 is that it falls off your credit reports after seven years and a Chapter 7 takes ten years. You really have to practice using your available income for "needs," not "wants." After the seven years, I was able to to rebuild my credit quickly. 

I did not surrender my car, but kept it and made payments on it until it was paid for. That can be written into the paperwork. If you have a pressing need such as transportation to your job there should not be a problem.

Good luck to you!

[lkcrew426]

Thanks for the info! We are in Arkansas in case anyone has experience with the trustee(s) here I can dream of getting a trustee as helpful and supportive as yours! Our goal is to be able to buy a house as soon as possible so I'm just trying to gather as much information as possible to prepare to be able to do that. We sold our house in an effort to be able to pay off our debt after my husband was injured on the job/off work for a couple years. My oldest daughter is 7 so I'd like to be able to do that before she graduates high school. haha! Thanks again for the information. 

[mynameainttracy]

Wish I could be more help. I was born and raised in Arkansas but went through the process a few years after I moved away. 

[Anonymous]

I'm not sure what the formula is but in my Chapter 13 case I was making $11.00 hr.I had a car loan, credit cards, finance companies. The only creditors that got paid back were the attorney (for filing the case), my car loan and the secured creditors.  I was ordered to pay $540.00 a month for 5 years.  It was tough considering what I made and I had to learn to live on a cash only basis.  At one point I got about a payment behind and was very quickley threatened with a dismissal of the Chapter 13. I immediatley began payroll deductions and never looked back.    My bankruptcy was discharged a year ago.  I started out with credit scores around 520 with no credit.  I got some help from my brother with him as a co signer on my car note, Capital One forgave my prior bankrupcty and offered me a new credit line as well as Fingerhut.

My credit scores now hover between 635-650 and are on the way up.  Just about all of my bankruptcy accounts have fallen off of my credit now. Some were disputed items and the credit bureaus removed them and some are aging off.   All of your bankruptcy accounts should fall off of your credit report at the 7 year mark from first delinquency The public record wll remain for 7 years from date of filing.

This process requires a lot of hard work and patience but you can recover from it.  If you go this route please check your credit reports after you file your case.  I had many things wrong on my file and had to do many disputes to get them corrected.  The credit bureaus sometimes make mistakes and have items that were included in your bankruptcy listed wrong .

Best of luck to you.

[Anonymous]

I forgot to mention I received 2 pay raises during my Chapter 13 case. I was not required to report this to the Trustee and my payments never increased. 

[Anonymous]

Heres my advice.  Im in a 13 with 12 months to go left.

DONT DO IT, DONT DO IT.  Find another attorney that can get you a 7.  DO NOT DO A 13 if you dont have to.  3-5 years under the trustee's thumb, is no place to be.

[lkcrew426]

That's kind of what I was afraid of, CreditNewguy. I don't like the idea of having someone else dictate all my financial decisions for 5 years. . . . especially knowing I should graduate grad school in 1-2 years and see a pay increase of $40-60k annually.