Considering 13, 4 years after 7

[Anonymous]

We thought our financial mess was behind us but a hit and run car accident, autism diagnosis, and other medical bills have put us way into the red again. Our insurance hasn't covered any of our son's treatment and he is finally getting approved for Medicaid for disability. For the past 3 years we have had well over $1,000 per month in medical bills, plus several surgeries from the car accident.We couldn't afford them, so we put them on credit cards. When the credit cards maxed out, we took out loans from sharks like LendingClub and Avant. Then we couldn't afford daily necessities, maxed out and took out more loans. We owe about $90,000 between the two of us.

Nothing has been late, yet. If I don't make overtime our household income is right under the limit for Chapter 7. But we aren't able to file for 7 after only 4 years.

We have 15 months left on my wife's car of $247 per month. If we decided to file again, I plan to purchase a used car for around $12,000 before filing or defaulting, since my FICO is surprisingly 682. We are 4 months behind on our house payment but it was discharged in 2012 so it isn't effecting my score.

We would like to save our house. Will we be able to add the missed payments into our payment plan? We will be about $6,000 behind in payments when and if we file.

With our expenses, we won't have much, if any, left to pay back our debt.

Filing chapter 13 seems like the best way to be able to rebuild our credit the fastest. We will need to buy a new house in 4 years. If we don't file, we will just default and face the judgements and creditors coming after us - with all the stress that comes with that.

Would we be allowed to file chapter 13? Even with little to no extra money left after expenses? Passing the means test we would be in a 3 year plan, right? With our current income and 90k in unseccured debt our repayment plan most likely wouldn't even be 5%. Is that even possible?

I know I need to speak to an attorney, but I want to have as much information on my own. The 7 was quick and painless - I know a 13 is completely different.

Thank you in advance for any advice you can give.

[Anonymous]

Sorry to hear about the challenges you have encountered, both before & more recently.

Not sure what type of math you are using to have $90k in unsecured debt in a 3 year plan?

Are you saying you will be PAYING $30,000.00 per year for three years?

My understanding from my Ch 13 process is either PAID in FULL, or as much as possible over FIVE years.

You need to see an Attorney.

Best Wishes!!!

[StartingOver10]

I agree with your conclusion about filing a Ch 13 to save your home and your sanity. 

I have no idea what the guidelines are for your state for a Ch 13.  You can check this link for some brief info, but naturally getting a good Bk attorney is essential I would speak to an attorney asap. Better yet, get a couple of attorney interviews so you can choose the best one for you.

http://www.nolo.com/legal-encyclopedia/chapter-13-bankruptcy

http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics

[Anonymous]

Sorry to here about all your misfortune here.  

1) In order to file for a Chapter 13 now, you must be 4 years removed from the date of your Chapter 7 filing

2) You house payment arrears would indeed be part of your payment plan

3) Your income and debt ratios will dictate your plan and what % payback you will need to be in.  Unless you are paying back all of your debts in a shorter amount of time, your Chapter 13 plan must be at least 36 months long but it can’t exceed 60 months. Whether you can propose a three-year plan or if you must be in Chapter 13 bankruptcy for five years depends on whether your average income for the six-month period preceding your bankruptcy is above or below your state’s median income for a similar household.  If your income is below median, your plan can usually be anywhere from 36 to 60 months long.  If you have above median income, you will have to be in a 60-month plan but some courts allow above median debtors to propose a shorter plan if they have no disposable income.

4) A Chapter 13 plan can be as low as 0% but you must pay back all of your unsecured debt including the car and home arrears.  Some states require you make your mortgage payment through the trustee as well.