topic Re: Short list of do's and don'ts before filing? in Bankruptcy

Short list of do's and don'ts before filing?

twono — Sat, 06 Apr 2019 11:48:01 GMT

Is there a list of do's and don'ts before filing for BK? Chapter 13 most likely.

I have met with an attorney, and spoke with a few over the phone and have scheduled apptmnts.

I've been reading and reading for a week or so. Checked out the NOLO site. Etc. But trying to read every BK thread just to find one embedded pertinent piece of information that you wouldn't think would be in the thread according to the thread title, is daunting.

My questions are concerning a ch. 13.

-Waiting to file for 4 months or more because of cash advances and balance transfers.

-Opening new bank accts, change direct deposit to new bank, close all bank accts.

-Rollover IRA acct - Paying current tax bill with the IRA (leaving the IRA at $0 balance) or having the tax bill IIB filing.

-Making payments to the banks for the cash advances and BT's. ( I know that could be looked at as preferential payments?)

-What to do with current rewards points/$ on CC accts. Cash out or forfeit?

-What happens to income saved from not filing for 4-6 months and not paying creditors? Is income/bank acct balance turned over to trustee automatically when BK is filed?

-Ending up with 120 day lates because of a 4-6 month delay in filing? Is it better to try and avoid lates by trying to pay creditors in order to not completely destroy credit reports prior to BK filing? Currently clean reports.

I feel a sense of relief already just from deciding to do this. Thanks everybody.

Re: Short list of do's and don'ts before filing?

Anonymous — Sat, 06 Apr 2019 13:19:52 GMT

I'm days away from receiving my discharge from Ch 13, so I well know your anxiety and trepidation about this decision. I would highly recommend that you wait until you meet with your lawyer of choice to decide on opening /closing bank accounts or draining your IRA. As part of the process, you have to list all debt and assets to determine how much disposable income can be used to pay your bankruptcy payment to the trustee. At that time, decisions can be made about all debt, accounts, etc.

In our case, we stopped paying our largest bill (mortgage) but only incurred 1-2 30d lates on the advice of our lawyer. He also advised that we open IRAs and regularly make monthly contributions. YMMV based on your situation but feel free to ask other questions and I'll try to answer.

Re: Short list of do's and don'ts before filing?

FireMedic1 — Sat, 06 Apr 2019 16:56:00 GMT

Since you say you dont have any lates. Don't start now. Make the minimums until you file. Lates before filing are not DC'ed ever. Once you see a lawyer. You'll get everything you need to file. Bad enough the BK will affect your scores. Don't need lates to make it worse. Good Luck!

Re: Short list of do's and don'ts before filing?

twono — Sat, 06 Apr 2019 17:47:57 GMT

Thanks BKsurvivor for the ideo of not doing anything with bank accts as of yet. Guess i'm anxious to get things moving.

Firemedic....i won't be able to make all the monthly payments. And since there are recent BT's and cash advances, i need to wait at least 90 days to file, according to an attorney and my research. So, not being able to make all the monthly payments and having to wait at least 3 months to file, i have no other choice but to incur many many 'lates' on my reports before filing. I may wait up to close to a year or whenever the lst court papers start to come in. I'll know more next week. I intend to meet with at least 6 attorneys.

Are (25) 120 day lates worse than (15) 120 day lates at the end of the day? I'm mentally prepared to have a credit score of 0 when all said done with a lot of 120 day lates.

Re: Short list of do's and don'ts before filing?

FireMedic1 — Sat, 06 Apr 2019 20:05:50 GMT

They will look bad. As time goes on. They will fall off one by one and less will appear until the last one is gone. That's when you'll recoup the points. Although the charge offs will start to show up and then the collection agencies take over after the OC gets paid. Sorry you have to go thru this. All I can say is best of luck and it can only get better in the long haul.

Re: Short list of do's and don'ts before filing?

Anonymous — Sat, 06 Apr 2019 20:18:56 GMT

I don’t know very much about a 13, but my only advice would be to talk to your lawyer before doing ANYTHING financially related because they know your situation better than anyone.
Best of luck to you, hope your CH13 plan works for you!

Re: Short list of do's and don'ts before filing?

twono — Sat, 06 Apr 2019 20:45:19 GMT

Thanks all....No mortgage or family to consider, and i make too much for ch. 7, so 13 it shall be. It's time for a change. Get slapped back into reality.

If attorneys' fees are indication of the quality of the attorney, does $4400 get me a good one?

Re: Short list of do's and don'ts before filing?

sarge12 — Sat, 06 Apr 2019 21:03:35 GMT

My only advice is to get a good reputable BK attorney, and let him advise you. He might advise you to file ch.7 instead. As a do...always answer the trustee's questions honestly and fully to the best of your ability. Never try to hide any debts or assets. In most cases ch.7 is preferable, cheaper, and quicker to complete. In both types of BK, once filed and the automatic stay goes into effect, do not communicate with your creditors except to refer any questions to your attorney. If they try to contact you after that you need to tell your attorney, because they cannot do that legally. Your creditors will be notified with the case number by your Attorney in writing. There will be a meeting in the federal court set up, and any creditors can voice any objections at that time, but usually creditors do not even choose to attend the meeting. It is typical for the meeting to last less than 30 minutes. The filing will be a matter of public record, but most of your friends will not know unless you tell them, even though they could find out if they checked, they most likely wont. The meeting of the creditors is usually not near as scary as people think it will be. They are not going to call you names or question your charachter. They are mainly going to verify the accuracy of your papers for filing. They will not try to point out that you were irresposible...it is too late for that. You are required to take an online financial management class now, but your Attorney will inform you what to take and when. If you wind up filing ch 13, the payments will be set based on disposible income after living expenses, and will normally be made as single payments to the trustee for 3-5 years. Attorney fees, IRS debt are the first priority debts paid followed by secured creditors, and then unsecured debt is last. Putting down household items on a finance companies security agreement does not count as security for these purposes. There are certain exemptions allowed for both types of bankruptcy that varies by which State you are filing in. Normally, there are means to keep your house and car in both types, depending on how much equity is there. In Chapter 7 you might do so by just keeping on making the payments as long as there is not too much equity there. In chapter 13, you might keep the house and if behind on payments the arrears be included as a priority debt. Having been stupid enough in my life to have had to file both types, the chapter 7 was much easier and quicker to be discharged. Filing is for sure very stressful, and embarrassing, but it is not the end of the world either. If you use the experience to learn, it can be a means to become financially responsible. Look at my scores in my signature and keep in mind I filed twice in my lifetime...I did learn!!!

Re: Short list of do's and don'ts before filing?

FireMedic1 — Sat, 06 Apr 2019 21:32:42 GMT

@twono wrote:
Thanks all....No mortgage or family to consider, and i make too much for ch. 7, so 13 it shall be. It's time for a change. Get slapped back into reality.

If attorneys' fees are indication of the quality of the attorney, does $4400 get me a good one?

Wow. You live in CA? My 7 was $2600 in Central Fl. But I guess 13's cost more. More paperwork I guess.

Re: Short list of do's and don'ts before filing?

Anonymous — Sat, 06 Apr 2019 21:34:11 GMT

Sorry I can’t do quotes on mobile.
But as far as the attorney fees go, that sounds a bit high to me for a Chapter 13, but I did a 7 with a lawyer so I don’t really know what the rate is.
I’ve heard they normally charge $2,500 - $3,500 for a Chapter 13.

Re: Short list of do's and don'ts before filing?

Anonymous — Sat, 06 Apr 2019 21:37:50 GMT

@FireMedic1
I live in Western Washington and I paid my lawyer $750 plus the $335 filing fee, so I paid almost $1,100 total.
The average here is about $1,500 for the attorney so I guess it just goes by where you live.

Re: Short list of do's and don'ts before filing?

sarge12 — Sat, 06 Apr 2019 22:01:37 GMT

@FireMedic1 wrote:
@twono wrote:
Thanks all....No mortgage or family to consider, and i make too much for ch. 7, so 13 it shall be. It's time for a change. Get slapped back into reality.

If attorneys' fees are indication of the quality of the attorney, does $4400 get me a good one?
Wow. You live in CA? My 7 was $2600 in Central Fl. But I guess 13's cost more. More paperwork I guess.

Not only the paperwork, it runs for years, and the trustee has fees from every payment as well. Chapter 13 is just way more complicated period. The main reason someone files chapter 13 over chapter 7 is to keep a house that has substantial equity, or their income is too high to pass the means test to qualify for chapter 7. If there is enough equity in a house, the trustee might sell the house to satisfy the creditors. There are exemptions however, and most chapter 7 filings are no asset filings after the exemptions. The chapter 13 payments are based on disposable income, and they leave you more than enough to live usually. In effect, a chapter 13 is a bit like a consolidation loan with the ability to discharge unsecured debt that can't be paid in 3-5 years. IRS debt and student loans can't be discharged in either form of bankruptcy.

Re: Short list of do's and don'ts before filing?

Anonymous — Sat, 06 Apr 2019 22:46:51 GMT

@twono wrote:
Thanks all....No mortgage or family to consider, and i make too much for ch. 7, so 13 it shall be. It's time for a change. Get slapped back into reality.

If attorneys' fees are indication of the quality of the attorney, does $4400 get me a good one?

I think we paid roughly $3000 up front and another $950 inside of the trustee payment in 2014. So, your payment might not be so out of line. But definitely look at reviews and pay attention to the types of questions and answers you get. The first lawyer we visited had more experience with Ch 7 so he did more of a hard sell for that. The lawyer we picked said up front ch 13 might be better fit BUT took time to research first and asked the types of questions that considered both.

The big plus with Ch 13, our lawyer worked it out that our 60 mos payment was less than 10%, so in the long run it wasn't as stressful as some of the stories I read here. But we had a mortgage which got reworked as part of the process. The bank wouldn't work with us so BK was the only option.

Re: Short list of do's and don'ts before filing?

twono — Sun, 07 Apr 2019 00:58:28 GMT

Thanks again everybody....I'm in the great midwest. The attorney i met with would be $2300 (includes fees, court costs, and the attorneys services) at time of filing and then another $2050 would be worked into the ch.13 payment plan.

Is there another way to get into a ch.7 even if you're substantially above the median income threshold? The attorney said i had about a 10% chance of getting into a 7. Our consultation was definitely geared toward ch.13. I was told that if you try for 7 and are denied, that you will be under more scrutiny going into the 13? Doesn't really matter how much scrutiny to me because i'm laying it all out there. Could care less if i keep anything. I rent, so there is no property/home/real estate.

Re: Short list of do's and don'ts before filing?

sarge12 — Sun, 07 Apr 2019 01:27:58 GMT

@twono wrote:
Thanks again everybody....I'm in the great midwest. The attorney i met with would be $2300 (includes fees, court costs, and the attorneys services) at time of filing and then another $2050 would be worked into the ch.13 payment plan.

Is there another way to get into a ch.7 even if you're substantially above the median income threshold? The attorney said i had about a 10% chance of getting into a 7. Our consultation was definitely geared toward ch.13. I was told that if you try for 7 and are denied, that you will be under more scrutiny going into the 13? Doesn't really matter how much scrutiny to me because i'm laying it all out there. Could care less if i keep anything. I rent, so there is no property/home/real estate.

Usually being above the means tested income will pretty much kill your chances of successfully filing ch7 and getting a discharge. I have never heard that it could result in greater scrutiny from the trustee. That may be up to the trustee that handles the cases in your area. It is important to know, the trustee does not represent your interest, or even the bankruptcy court's interest. He is a represenative for the creditors, and the more he can collect for the creditors, the more he personally makes off the filing. He is paid a percentage of recovered debt, or in no asset cases a fixed amount. The old addage, you can't squeeze blood out of a turnip applies here though, and he is required to follow federal bankruptcy laws, as well as the States code for exemptions. The trustees are usually very fair unless they suspect you are hiding assets. In those rare cases, the person can be charged for federal bankruptcy fraud...so just don't do it. As long as you are honest about your filing, you will be fine. Your lawyer surely knows that trustee, so if he advises against filing chapter 7 due to more scrutiny if denied, I would listen to him. Bankruptcy is handled by the federal courts, but there are variations in such things as exemptions and the income for means testing, based on your States codes.

Re: Short list of do's and don'ts before filing?

twono — Sun, 07 Apr 2019 11:04:38 GMT

Good insight Sarge.....I WILL be completely forthcoming with my situation, without a doubt.

I'm having a hard time finding some things out online though....In Ch. 13, are you allowed to keep 'assets' that are paid for?.....recreational vehicle, hand tools, floor jacks, beater cars (some inoperable, scrap value of a few hundred) , used rims/tires/wheels, weedeater, lawnmower, ....basically garage 'stuff' that has accumulated over the years? What if total vehicle value is only about $6000 even though there are a few? I have a long distance commute for work, so having a few beater cars was always a good idea for me.

It seems that everything in somebodys house or garage could be listed as an asset. 100's of items...Where is the 'asset' line drawn in most cases/states?

Are you able to have yard sales and sell small items before/during filing?

What happens if your income changes drastically during certain times of the year due to seasonal changes? What if your income drops by 60% 6 mos out of the year, every year? Just for round numbers, if income is $40k for 6 months, then $15,000 for the other 6 months, how will your monthly payment plan be calculated? If the prior 6 months income is used to determine your median income, then that number would not even be close for the other 6 months. If the 'high end' of the yearly income is used, then it seems it wouuld be impossible to meet the payment requirements for the other 6 months.

These are questions i'll ask the attorneys no doubt, but anxious to hear possible answers in the meantime. In my lst meeting with an attorney, my 30 minute consultation turned into 45 and i still had at least another hours worth of question but i was already holding up the other appntmnt by 15 mins.

Re: Short list of do's and don'ts before filing?

Anonymous — Sun, 07 Apr 2019 12:44:51 GMT

@twono wrote:
Good insight Sarge.....I WILL be completely forthcoming with my situation, without a doubt.

I'm having a hard time finding some things out online though....In Ch. 13, are you allowed to keep 'assets' that are paid for?.....recreational vehicle, hand tools, floor jacks, beater cars (some inoperable, scrap value of a few hundred) , used rims/tires/wheels, weedeater, lawnmower, ....basically garage 'stuff' that has accumulated over the years? What if total vehicle value is only about $6000 even though there are a few? I have a long distance commute for work, so having a few beater cars was always a good idea for me.

It seems that everything in somebodys house or garage could be listed as an asset. 100's of items...Where is the 'asset' line drawn in most cases/states?

Are you able to have yard sales and sell small items before/during filing?

What happens if your income changes drastically during certain times of the year due to seasonal changes? What if your income drops by 60% 6 mos out of the year, every year? Just for round numbers, if income is $40k for 6 months, then $15,000 for the other 6 months, how will your monthly payment plan be calculated? If the prior 6 months income is used to determine your median income, then that number would not even be close for the other 6 months. If the 'high end' of the yearly income is used, then it seems it wouuld be impossible to meet the payment requirements for the other 6 months.

These are questions i'll ask the attorneys no doubt, but anxious to hear possible answers in the meantime. In my lst meeting with an attorney, my 30 minute consultation turned into 45 and i still had at least another hours worth of question but i was already holding up the other appntmnt by 15 mins.

Yes, keeping assets can be the reason that Ch 13 is attractive to some. But, when it comes to items of value, I'd recommend discussing with your lawyer whether private sales such as via yard sales are advisable in your case. Going into our case we had two cars that are completely paid off - there was never any discussion about selling them as a car is necessary in our area. However, if there is a need to have a reliable car since you have a long commute, please discuss your options with your lawyer. We had a 60 mos case and now we really need to replace BOTH cars as they are old. I'd recommend making sure that you have a reliable car that you can depend on for the length of your case.

Seasonal based income may play a factor - it sounds like they may have to look at what you can consistently pay each month when preparing your means test. We had to do our exhaustive budget several times and submit several years worth of taxes for our pattern of income/spending review AND DH had to stop working OT while we were in process of qualifying. Any means of income will be considered. I had a small business with no guaranteed income but had to keep a running spreadsheet of income and expenses for months before our 341.

One tip - You should get your financial papers in order ahead of time as its helpful to you and your lawyer.

Re: Short list of do's and don'ts before filing?

twono — Sun, 07 Apr 2019 15:32:31 GMT

Thank you.

I've been compiling all my information, creditors info, my expenses, an inventory of possible assets, what i owe, who i owe, monthly payments, separating types of debt, reading and reading, educating myself, etc....No matter how much i read and study, i still have about 30 unasnwered questions. Which i realize most are unique to my situation and can't necessarily be answered in a cookie cutter kind of way.

Part of me says sell everything i possibly can, pay out whatever i can, and then file down the road. If i did some self servicing, i feel like the BK would be easier/smoother down the road. I'm not trying to save any assets. I just want to know the cans and cants. I would prefer ch. 7. Leave me 1 vehicle and a lb of bologna. I don't even want any miracle whip.

Re: Short list of do's and don'ts before filing?

sarge12 — Sun, 07 Apr 2019 20:22:18 GMT

Forfeiting assets is not part of chapter 13 normally. That is one of the main differences between it and chapter 7. An exception to this is if you maxed out your credit cards to buy gold and then declared chapter 13. Intentional acts such as that could result in dismissal or even arrest for banruptcy fraud. It is more a form of debt restructuring with mainly unsecured debt that is unable to be paid in the 3-5 year plan being discharged. In normal circumstances no assets are surrendered. No cars, boats, motorcycles, or household goods. In chapter 7, technically all your assets are surrendered except the exclusions allowed by law, which differs based on the State you file in. In reality most chapter 7 cases wind up being no asset cases after the exclusions unless there is significant equity in property. If you have 50,000 dollars in debt, and have a million dollars in equity in your home, then the house may be sold to satisfy your debt and you might get the difference. Usually in that case a bankruptcy is not needed in the first place. Most who file do not have a huge amount of home equity, and the home can be kept as long as the payments are kept current...same goes for the car. There is a reason why unsecured debt has much higher interest rates other than just the greed of the issuers. Unsecured debts usually do not get their money back in either type of bankruptcy, so the debt carries much greater risk. Debt for a house or car can be discharged in a bankruptcy, but only if the asset is surrendered. If you owe 15000 dollars on a car that is worth 5000 dollars, it might be wise to surrender the asset, and you can do so without being responsible for the amount the lein holder loses when the car is sold. In most cases you can keep the car as long as payments are made. Some States require you to reaffirm the debt, but if not required it is almost always best to not sign a reaffirmation agreement. If you don't, and six months later the engine blows up, you can even then surrender the asset with no further damage to your credit and no possibility of be sued for the loss of the deficiency balance. On the other hand, the lein holder can repossess the car even if the payments are on time, but they usually wont, because there will usually be a loss when sold. They usually just roll the dice that you will pay it off, If the car sells for more than the amount needed to satisfy the debt, they must return the overage to the debtor, but if it sells for less they have to take the loss with no legal recourse. The holder of the lein might try to convince you they will repossess it if you do not reaffirm, and they could, so be prepared to deal with that possibility. I helped my Neice with her bankruptcy, and the lawyer told her he had never yet seen a creditor actually repossess a car that is being paid on time. The payments and debt will not be reported to the CRA if not reaffirmed, the original debt will only show as included in bankruptcy. If you reaffirm the debt will show as a new debt and any payments will report and so will a future repossession. If included in the bankruptcy, but kept, you can voluntarily surrender the asset even 2 years later without a repossession or deficiancy judgement being possible. In my Neices case, she kept her vehicle even though it was worth less than she owed, but she did not reaffirm. 3 months later the transmission died which would cost 3000 dollars, so she called the leinholder and told them to repossess it. I'm sure they were not happy, but they had no recourse.

Re: Short list of do's and don'ts before filing?

twono — Sun, 07 Apr 2019 20:33:05 GMT

Thanks Sarge....I haven't wrapped my head around what you just posted yet...but this article says keeping assets in 13 may hurt you, because the trustee/court may make you pay more in your monthly payment if you keep 'luxury' items. I guess they figure if you can pay $250 for a 'luxury' item loan, then you can pay an extra $250 a month to your debtors?

https://www.nolo.com/legal-encyclopedia/keeping-property-chapter-13-bankruptcy.html