Chapter 13... so exactly how does one survive it?

[qofcc]

I'm fairly certain that I wouldn't go through it voluntarily, but do you know anyone who went through it and how did they survive?

I understand chapter 7 and the fresh start, but chapter 13 sounds pretty scary. You still have your house and a cheap car, but your cash is gone and your credit is gone and the court gives you a very strict budget to live by and you have to turn over the rest of your money every month for 3-5 years.

So what happens when your car dies and you need to get to work and there's no public transportation or your furnace dies and you need to get it fixed before the pipes freeze or some other emergency comes up and you have to come up with a couple thousand dollars?

Assuming you have no friends or family to help you, what does a person do?

[fairlycrazy23]

Well, I'm no expert, but on chapter 7 I thought you could reaffirm your house and car so only if you have a large number of assets would you consider chapter 13, for most people chapter 7 would probably be better, but I only looked into this years ago and the laws may have changed.

I know of several people that went through chapter 7 but none that went through 13, most didn't have a home, but i think one did.

[raeoflyte]

Your attorney will work with you on the budget--the court doesn't dictate it to you. If your car is older, then they can work into the plan that you will have vehicle expenses. Even if your car is newer, you get to include reasonable maintenance and repair work in your budget.

Also, if you do have something like a furnace that needs to be replaced, your attorney will request the courts to give you a month or two break from payments so that you can get it fixed.

DH and I filed a chapter 13 (I know we broke the ym 11th commandment, and yes I feel guilty. We did learn our lesson, and will not end up like this again).

Talk to a lawyer (or more--you need to find someone you are comfortable with). It may be that it wouldn't work for you. You won't know until you really look at #'s.

[Clever Username]

The whole idea of a Chapter 13 case is that all of your disposable income goes towards your debts.
The tragedies you have listed are (supposedly) typical recurring expenses, therefore have already been built into your monthly budget.

The trouble lies where the folks who get into a Chapter 13 case typically don't have the financial wherewithall to make such a plan work.
There's something like a 10% success rate for 13 plans.

[qofcc]

for most people chapter 7 would probably be better

oh, definitely, but there's an income limit.

[Clever Username]

If you've solved in income or spending issues, Chapter 13 can work quite well.
If you have not, the plan is too long, it will come back to haunt you.

[Clever Username]

for most people chapter 7 would probably be better

Very true.
And this is how things work in reality.
There are 4 major types of Ch13 filings.
High asset, high income, prior ch7 and stop foreclosure.
Barring those reasons, the case should be filed as Ch7.

[8 Bit WWBG]

...:::"oh, definitely, but there's an income limit.":::...

This is what I thought too. I'm sure anyone filing Bk would much prefer to have the slate wiped clean. But if you have a high income or assets, the people left holding the bag will have a very different opinion.

[qofcc]

But if you have a high income or assets, the people left holding the bag will have a very different opinion.

Oh, I don't disagree that if you have income or assets that you should have to pay your debts. And if the chapter 13 was going to end up paying off most of the debts anyway, I really think it would be better to just keep juggling things around and maintain control yourself rather than give up that control to the court.

I'm just wondering about the logistics of the cash flow thing, how you would work that if you don't have credit and you don't have savings.

[thyme4change]

It depends on how smart you are. You are not forced to reaffirm your car or your house, that is a choice. If you are upside down on a $40k car and have a $20k income, you will have a better chance of success at Ch 13 if you walk away from the car. Some judges will not reaffirm houses or cars if the debt is too staggering - but some judges let you make the decision. I believe this is where most people get into trouble. They think it is the credit cards that are sinking them, but make the same two mistakes that starts the whole process - too much car, too much house.

[haapai]

I've heard that there's a heck of a lot of variation by state. Some states are pretty good at making sure that Chapter 13 repayment plans have a spitting chance at success through a combination of allowances and counseling. Other states have no problem with Chapter 13 plans that are doomed to failure.

I've caught glimpses of how someone struggling under a tax garnishment stays afloat and it isn't pretty. You land up on a budget that has absolutely no allowances for increased expenses associated with increased income. You can't take a second job to pay off the debt quicker because the extra transportation expenses are not subtracted from the extra income.

I suspect that a lot of folks working under such restrictions find financial sponsors or under the counter jobs.

[Elizabeth]

I am one and a half years away from completing CH 13. The payment is very affordable since we make more now than when we filed, but even back then it was doable. We affirmed our cars, so we still have those. We ended up being responsible for paying back about 20% of the debt because it depends on which creditors bother to demand that their share of debt be part of the repayment plan. Only a few of the creditors did. The rules we have are no new consumer credit, and we had to give the first years tax return to the trustee as a "gift." The lawyer and court fees all came to about $2,500. This isn't something you want to try to do on your own without professional help. By all means file CH 7 if you can!

[Mad Dawg Wiccan]

Mar 8, 2011 16:10:24 GMT -5 qofcc said:

I'm fairly certain that I wouldn't go through it voluntarily, but do you know anyone who went through it and how did they survive?

I understand chapter 7 and the fresh start, but chapter 13 sounds pretty scary. You still have your house and a cheap car, but your cash is gone and your credit is gone and the court gives you a very strict budget to live by and you have to turn over the rest of your money every month for 3-5 years.

So what happens when your car dies and you need to get to work and there's no public transportation or your furnace dies and you need to get it fixed before the pipes freeze or some other emergency comes up and you have to come up with a couple thousand dollars?

Assuming you have no friends or family to help you, what does a person do?

What you describe here is the way I believe it was done years ago. I have had to file Ch 13 twice, and it's not done that way any longer.
When you file, your lawyer (DO NOT attempt to file without one) will notify all of your creditors that you are filing. If they do not respond, they have no further claim on you. Those who do file a claim will be put into the pool. The court Trustee will then look at the budget plan which you and the lawyer have worked out, which includes all of your debts and what you need to live on. If it's workable, he will accept the plan. You then have to send the amount he sets for you each month to him. He is then in charge is paying back your creditors in the pool. Secured debts are paid first, usually at 100% of the debt. Unsecured creditors are paid last, and may be paid less than what was owed them. They cannot do anything about it, or come after you for the balance.