topic Re: Chapter 13 - fill me with your knowledge... in Bankruptcy

Chapter 13 - fill me with your knowledge...

masscredit — Tue, 24 Aug 2021 19:36:24 GMT

I spoke with a bankruptcy attorney today. After going over my info, he strongly suggests that I file CH13. He said he'd send me on my way if I really want to do a 7. Two reasons are my income. I'm self employed with a lot of expenses/deductions. I don't have the best paperwork when it comes to those. He said that could cause a problem because they like to see everything layed out very nicely from A-Z. And also, I have a high amount of credit card debt (about $150K that includes building late charges and fees). He said they get very picky after about $100K so they'll throughly dig into everything. It might not be worth the headache. Especially if I can't satisfy what they are looking for. They could push it to a CH13 anyway.

I'd be looking at payments for 3 years. Based on his calculations, he's suggests we offer $200-$250 per month. I wasn't planning to go this route but I think $7200-$9000 paid over 3 years will be worth the greatly reduced stress. I have two cars. One is paid and one has a loan. I won't have to worry about those.

A benefit is CH13 will only stay on my reports for 7 years. Most of my cards are coming up on 6 months since the first missed payments so everything will fall off around the same time. I currently have two open cards with a zero balance (DCU and Merrick). Is there a chance those cards might not be closed? And if they are, can I apply for new credit after the CH13 balls starts rolling? I'm not looking to get cards to have balances hanging. I'd like to start rebuilding as soon as possibly with the first goal being the 680 range (my EQ08 somehow increased 25 points to 507). The other reason why I'd like to have a card or two is for the buyer's protection securiety when making purchases. Plus a card is needed for some reservations. I'll get a secured card if that's my only option for awhile. My new way of life is to only make a purchase if I have cash to pay for it. Well, unless it's a car.

Is there anything else I need to know about Ch13? Maybe things that I don't know I should know?

And people sometimes ask how much. The cost for mine through this attorney will be $1600 plus fees so about $1920 total.

Re: Chapter 13 - fill me with your knowledge...

Horseshoez — Wed, 25 Aug 2021 01:38:17 GMT

@masscredit wrote:
I spoke with a bankruptcy attorney today. After going over my info, he strongly suggests that I file CH13. He said he'd send me on my way if I really want to do a 7. Two reasons are my income. I'm self employed with a lot of expenses/deductions. I don't have the best paperwork when it comes to those. He said that could cause a problem because they like to see everything layed out very nicely from A-Z. And also, I have a high amount of credit card debt (about $150K that includes building late charges and fees). He said they get very picky after about $100K so they'll throughly dig into everything. It might not be worth the headache. Especially if I can't satisfy what they are looking for. They could push it to a CH13 anyway.

I'd be looking at payments for 3 years. Based on his calculations, he's suggests we offer $200-$250 per month. I wasn't planning to go this route but I think $7200-$9000 paid over 3 years will be worth the greatly reduced stress. I have two cars. One is paid and one has a loan. I won't have to worry about those.

A benefit is CH13 will only stay on my reports for 7 years. Most of my cards are coming up on 6 months since the first missed payments so everything will fall off around the same time. I currently have two open cards with a zero balance (DCU and Merrick). Is there a chance those cards might not be closed? And if they are, can I apply for new credit after the CH13 balls starts rolling? I'm not looking to get cards to have balances hanging. I'd like to start rebuilding as soon as possibly with the first goal being the 680 range (my EQ08 somehow increased 25 points to 507). The other reason why I'd like to have a card or two is for the buyer's protection securiety when making purchases. Plus a card is needed for some reservations. I'll get a secured card if that's my only option for awhile. My new way of life is to only make a purchase if I have cash to pay for it. Well, unless it's a car.

Is there anything else I need to know about Ch13? Maybe things that I don't know I should know?

And people sometimes ask how much. The cost for mine through this attorney will be $1600 plus fees so about $1920 total.

Hmmm, lots of disconnects with what I *think* I know about Chapter 13s and what you were told. The points which immediately jump out at me are:

"He said they get very picky after about $100K so they'll throughly dig into everything."
- I've never heard anything like that (not saying it isn't true); I look forward to hearing other comments on this.
"I currently have two open cards with a zero balance (DCU and Merrick). Is there a chance those cards might not be closed?"
- There is a "chance", but I wouldn't bet on it.
"And if they are (closed), can I apply for new credit after the CH13 balls starts rolling?"
- It depends upon where you file as there are different rules for different localities. Just north of you here in New Hampshire, no credit without Trustee approval for the life of the Chapter 13.
"I'll get a secured card if that's my only option for awhile."
- I wish I'd known about secured cards during my Chapter 13; I ended up going nearly two years before I filed and then the full five years of my bankruptcy living off my debit card.

Re: Chapter 13 - fill me with your knowledge...

Shooting-For-800 — Wed, 25 Aug 2021 11:49:12 GMT

I am not an attorney but I doubt you can get away with 3 years at $250 per month on over $100k of credit card debt.

If you only have $250 left over in income, you should be close to chapter 7.

What is your income you pay taxes on?

Family size?

State?

Re: Chapter 13 - fill me with your knowledge...

masscredit — Wed, 25 Aug 2021 14:04:14 GMT

@Shooting-For-800 wrote:
I am not an attorney but I doubt you can get away with 3 years at $250 per month on over $100k of credit card debt.
If you only have $250 left over in income, you should be close to chapter 7.
What is your income you pay taxes on?
Family size?
State?

That's all that I can afford and it will be a stretch to do that. Income that I pay taxes on is about 35K. Family size of one. I live in MA.

Re: Chapter 13 - fill me with your knowledge...

MileHigh96 — Wed, 25 Aug 2021 15:33:37 GMT

Honestly with everything you list, I don't know why your attorney categorically refuses to go the Ch7 route. I think you should talk to at least one more attorney because just like with doctors, getting a second (or even third) opinion is worth it. Plus most attorneys first consultation is free of charge, so it makes it doubly worth it (IMHO).

Re: Chapter 13 - fill me with your knowledge...

masscredit — Wed, 25 Aug 2021 16:25:09 GMT

@MileHigh96 wrote:
Honestly with everything you list, I don't know why your attorney categorically refuses to go the Ch7 route. I think you should talk to at least one more attorney because just like with doctors, getting a second (or even third) opinion is worth it. Plus most attorneys first consultation is free of charge, so it makes it doubly worth it (IMHO).

I think it's me being self employed and a numbers of deductions. He said things like that can trigger an audit. But he was leaning towards Ch7 until I gave him the my credit card total. Then he said definitely Ch13.

I'll probably talk to another attorney or two so I can get their opinions. Currently, I feel comfortable with the guy I talked to yesterday.

Re: Chapter 13 - fill me with your knowledge...

masscredit — Thu, 26 Aug 2021 00:35:48 GMT

Another queston about CH13. I believe the trustee gets 10% of the amount paid. So in my case, if I'm playing $250 per month, the trustee will get $25. That leaves $225 to be devided between 14 creditors. Actually, them and one divorcee attorney that really sucked 10 years ago. So they are each getting $15. per month which is $540 total. Is that correct? And if it is, the divorce attorney will be getting more than I actually owe her which is $480.

Re: Chapter 13 - fill me with your knowledge...

Horseshoez — Thu, 26 Aug 2021 01:51:07 GMT

@masscredit wrote:
Another queston about CH13. I believe the trustee gets 10% of the amount paid. So in my case, if I'm playing $250 per month, the trustee will get $25. That leaves $225 to be devided between 14 creditors. Actually, them and one divorcee attorney that really sucked 10 years ago. So they are each getting $15. per month which is $540 total. Is that correct? And if it is, the divorce attorney will be getting more than I actually owe her which is $480.

I'm pretty sure in a Chapter 13 scenario, unsecured creditors only get what they claim; if your divorce attorney claimed $480, then that's all she'll get and the rest of your money will be divided up amongst your other unsecured creditors.

Re: Chapter 13 - fill me with your knowledge...

FLLGuy — Sat, 28 Aug 2021 23:19:59 GMT

@masscredit- I'd get a 2nd opinion something sounds off.

Wish I was given $250mo pay during my 5yr of BK 13.

My attny was about $2300 bucks
Trustee was paid $3100

Each year my plan graduated to higher payout. Originally I was on a 3yr plan paying about $2600 then i was laid off and play readjusted.

Re: Chapter 13 - fill me with your knowledge...

kr43002 — Thu, 26 Aug 2021 03:45:59 GMT

something id suggest is if you have the time, start building the paper track record so you when there is an audit you have some proof.

Re: Chapter 13 - fill me with your knowledge...

jmw1 — Thu, 26 Aug 2021 20:48:24 GMT

Are your expenses and deductions on your bank statement. If so, it's easy to create documentation like your P&L. If not, you will need invoices or receipts to prove your expenses. Otherwise you may be in a real pickle as far as trying to avoid having the trustee increase your disposable income.

Re: Chapter 13 - fill me with your knowledge...

masscredit — Thu, 26 Aug 2021 22:38:26 GMT

@jmw1 wrote:
Are your expenses and deductions on your bank statement. If so, it's easy to create documentation like your P&L. If not, you will need invoices or receipts to prove your expenses. Otherwise you may be in a real pickle as far as trying to avoid having the trustee increase your disposable income.

I have some receipts for purchases but not everything. I have a record of income through the bank. Expenses are paid out with cash.

Re: Chapter 13 - fill me with your knowledge...

masscredit — Sat, 28 Aug 2021 23:22:16 GMT

@FLLGuy wrote:
@masscredit- I'd get a 2nd opinion something sounds off.

Wish I was given $250mo pay during my 5yr of BK 13.
My attny was about $2300 bucks
Trustee was paid $3100
Each year my plan graduated to higher payout. Originally I was on a 3yr plan paying about $2600 then i was laid off and play readjusted.

The way I understand it is payments are based on what a person can afford. I can squeeze an extra few hundred dollars each month if I get creative with my finances. That's after all of my monthly expenses and hoping work doesn't slow down more. I just did a quick search as I'm typing this. My income is below my state's median income so this should apply -

If your income is lower than the median income. You won't have to complete the second form if your income is low enough. The court will base your disposable income on your income and expense schedules: Schedule I lists your actual monthly income from all sources, and Schedule J lists your actual monthly expenses. The difference between your income on Schedule I and your expenses on Schedule J will be your Chapter 13 plan payment. Your unsecured creditors will receive a percentage of the disposable income that remains after secured and priority creditors receive payment.

And that is why mine would be based on 3 years.

Re: Chapter 13 - fill me with your knowledge...

jmw1 — Fri, 27 Aug 2021 02:16:15 GMT

@masscredit wrote:
Expenses are paid out with cash.

That's going to be a problem unless you have receipts/invoices backing the cash expenses. You will likely have disposable income increased by unprovable cash expenses because in chapter 13, they don't take your word for it unlike the IRS. It's very similar to normal chapter 13 wage earners who don't have receipts proving the specific expenses and then the trustee removes the expense and increases your disposable income to unsecured creditors. I would not expect to have a super low $250 payment if you can't prove the expenses.

You also have to remember that chapter 13 budgets are designed to be very tight and minimalistic with all unproven expenses given to creditors. It takes a lot of pre-planning to make the 13 more comfortable, but it will always be tight. If your self-employment is irregular, your chances of failure are higher than wage earners.

Re: Chapter 13 - fill me with your knowledge...

Shooting-For-800 — Sat, 28 Aug 2021 01:53:36 GMT

@masscredit wrote:
@Shooting-For-800 wrote:
I am not an attorney but I doubt you can get away with 3 years at $250 per month on over $100k of credit card debt.
If you only have $250 left over in income, you should be close to chapter 7.
What is your income you pay taxes on?
Family size?
State?
That's all that I can afford and it will be a stretch to do that. Income that I pay taxes on is about 35K. Family size of one. I live in MA.

Why would they let you off in3 years when they can require 5 years?

If I was that close, I would look hard at Chapter 7.

Re: Chapter 13 - fill me with your knowledge...

masscredit — Sat, 28 Aug 2021 14:08:08 GMT

@Shooting-For-800 wrote:
Why would they let you off in3 years when they can require 5 years?
If I was that close, I would look hard at Chapter 7.

It's based on income - If your income falls below the state median, you can propose a three-year repayment plan. But if your income is above the median, you typically must be in a five-year plan. Whether your income is higher or lower than the state median, your plan can't exceed five years in length.

The median income in my state is $81K. I'm just under $40K. I don't have as much work because of Covid.

Re: Chapter 13 - fill me with your knowledge...

Shooting-For-800 — Sun, 29 Aug 2021 03:19:22 GMT

I would go for 7 unless 13 protects a car or house or something.

Whenyour income goes up in13, your payment could/would also.

GL!

Re: Chapter 13 - fill me with your knowledge...

Bmac66 — Wed, 01 Sep 2021 20:49:04 GMT

I am currently in a 13--5 year plan. There is no way you will get away with $250 a month for 3 years. Mine is less than $100k and over 5 years I'm repaying just over $46,000. My monthly plan amount increases as things get paid off but eventually I will be repaying well over $1,000 a month. I'm in year 2 and already paying $300 a month. It will go up to $1,000 in October when my $700 car note is paid off. That's how they do it. As loans get paid off then add that amount into your plan.

Re: Chapter 13 - fill me with your knowledge...

masscredit — Wed, 01 Sep 2021 21:29:01 GMT

@Bmac66 wrote:
I am currently in a 3--5 year plan. There is no way you will get away with $250 a month for 3 years. Mine is less than $100k and over 5 years I'm repaying just over $46,000. My monthly plan amount increases as things get paid off but eventually I will be repaying well over $1,000 a month. I'm in year 2 and already paying $300 a month. It will go up to $1,000 in October when my $700 car note is paid off. That's how they do it. As loans get paid off then add that amount into your plan.

I spoke with the attorney again today. He confirmed I would have a 3 year plan because of my income. And with my expenses, $250 is the most I could afford. I have just over 4 years left on my car loan so that wouldn't be paid off before the end of my payment plan. I asked what happens if my income goes down and I can't afford to continue with payments. He said it would be converted to a CH7. At that point they wouldn't give it a second thought because I made an offer and effort with the payment plan.