I am at the point where I believe filing Chapter 13 will be inevitable. That or a foreclosure on my home. I have about 37,000 in credit card debts, 17,000 in student loans (which I know will not be included in BK) and owe about $640,000 on my two mortgages on a house I purchased 4 years ago for $665,000 and my yearly property tax bill is about $6900. Right now, I am current on my mortgages and my credit cards although I use a little bit of savings every month to cover all expenses from the tax refund I received earlier this year. I anticipate though that I will may need to file Chapter 13 (or have my house foreclosed on which is something I also want to avoid) next year around this time. My first mortgage, which was a 5% interest only loan for 5 years, is due to reset next year in June to an ARM with P&I based on a 23-year amortization schedule. At the current interest rate, that would increase my mortgage payment for $2160 to somewhere around $3300. Since my second loan is $900 and my credit card payments (minimum) is around $750, and it is difficult to make ends meet as it is, but we are doing it.
The question I have for people who have been through Chapter 13 is basically how reasonable are the courts in letting you keep enough money for living expenses and still have some resemblence of a life for 5 years. I know there are certain things like cell phones, internet, and cable TV that are not considered expenses by the court (unlike gas/electricity, water and garbage, groceries), but are you generally allowed to keep enough of your money to keep those items? If I'm going to be couped up in the house for 5 years, I would at least like someway to keep myself entertained. I am also looking into starting a home-based business (web site and videography business) so I will need at least the internet and cell phone too.
If one has to live on a very tight budget, how are expenses that don't remain constant (like the gas/electricity bill, fuel for cars, etc.) budgeted so that you will have enough money when the bill shoots up. My utility bill is usually doubles in the winter and gas pump prices still keep going up.
My last question is, does anyone know if your credit cards still accumulate interest or late fees while you are in Chapter 13? I thought about going to debt settlement route at one point, but it didn't sound like a good idea because I've heard some people ended up with higher debts owed than when they first started plus the bad credit. The reason why I ask this question is, if by chance, my business starts making enough money that I can afford the new and second mortgage and all my other expenses on my own, and I was curious if Chapter 13 had the same effect on credit card balances that debt settlement does when you stop making payments.
Hope this all makes sense. Thank you.
They allow for those expenses, in a round about way sometimes, but they're allowed. Your attorney should know how to handle that on your budget.
I forgot where ... and I wish I could find it now, but google this and you should be able to find the "limits" allowable for living expenses under BK law. They include things like car payments, car maint, insurance (health and auto), utilities, food, clothing, personal items (toiletries, etc), I think even charitable giving. There is a chart for your zip code that gives certain allowable expenses like utilities and car maintenance.
Like I said ... I wish I had it, but I know I've read it. It's in a PDF document online somewhere. Sorry so vague, but at least you can search for what you are looking for.