Silly questions regarding Chapter 13…

[LadyDoveFL]

I've just started researching what's involved with filing Chapter 13... My main goal is to get my 2nd stripped with the 13 after I’ve gotten an acceptable loan mod on the first...

I saw a foreclosure attorney pro-actively a few months back. No need to go into the details as a lot of what he suggested has been affirmed in this sub-forum, but I have some questions as to what assets I can keep...

1) If I understand correctly, I can keep what little $$ I have in my 401K and Roth IRA. Correct?

2) What about appliances (large & small), furniture, clothes, home decor, craft supplies, etc. that were all paid off long ago (good quality stuff that will likely last a lifetime) -- can I keep them?

3) I inherited a number of antiques from my maternal great-grandmother and maternal grandparents; they're not really valuable, but have great sentimental value to me. Will I be forced to give up (or sell) my beloved great-grandmother's trendle Singer sewing machine, her 1902 Wedding picture and 1914 doctorate degree, my grandmother's 1920s Lane cedar chest, the violin my mother played as a child, etc.? Should I find a temporary home for these items with friends/relatives?

Outside of my underwater mortgage, the only other debt that I have is my car loan (which I'm 3 years in on a 5-year loan) and 1 credit card balance (which is how I paid for my state-of-the-art hearing aids 2 years ago) that, with reduced mortgage payments (and a full-time job) could probably be paid off within 36 months – from now.

I want to keep my house because of all the DIY work I've put into it. I kept my last car for 12 years and I want to keep my current one for as long or longer... Can't give the hearing aids back as they're custom-fitted for my ear canals (LOL)...

4) If, while I’m under the Chapter 13 payment plan(?), I have excess income left after paying my debts and expenses, is that excess mine to keep?

Thanks!

[davephx]

whwt you can keep as exempt is different in every state.. Maybe a couch a dinning room table 1 tv %$500 of clothing etc. But it all depends on the state.

[justdeb]

Nooo... you can keep more than a couch, dining room table, 1 tv, etc...... Good lord, if that were the case - our house would be empty!

How it works is you get exemptions - personal property, vehicle, wildcard homestead, etc. For a single person, the exemption is around $5,000 for personal property I believe; 10K if married - but it does vary depending on your state laws on whether you can use federal exemptions or your state exemptions, so you need to know what's what there. You will value all of your personal property at yard sale prices basically, not what you think they're worth but what someone is willing to pay for them in their current condition. Anything over your allowed exemptions are considered an asset and that amount is put into your plan.

The trustee can make you sell certain things, yes - thats true - but thats when you have a very good attorney who will advise you so that you wont have to sell certain things. And no, you cannot "put things in a different place for safekeeping" - thats illegal - the lookback period applies. Just like removing monies from your account and giving it to a relative to hold - thats illegal and considered preferential treatment; the trustee will get it back from whomever you gave it to - including any loans/ people you paid over $600.00 to in the past 6 months to a year.

Any excess income you have you cannot keep - it goes to repaying your debt. You will have 0 dollars left a month after every single bill is paid and your plan is funded, thats the goal of CH. 13 - to get every $ out of you that is considered "excess". You also must qualify for it - just like a Ch. 7 - if you cannot support the repayment plan in a 13, you will not be able to file it and then will have to consider Ch. 7.

Its best to get the mortgage modified first, yes...that way you know going in that its a done deal.

Best advice I can give you is to consult with several attorneys prior to selecting one - and learn as much as you can about BK, both chapters, so you know upfront the questions you can direct at each attorney when you meet with them.

[LadyDoveFL]

Thanks for both of your responses! I guess it's how I'm looking at things... I intend to pay the modified 1st (once I get a good modification), my car payments, and the credit card that I used to buy my hearing aids (plus monthly expenses -- utilities, etc.).

Haven't paid the second loan since October. Got a 6-month deferment on the 1st, which expired March 1st; I've missed March and April payments.

Therefore, the only debt I need released in bankruptcy is the 2nd loan. So if I find a decent-paying job in my field, I would likely have excess $100-$200 monthly. Would it go toward the 2nd loan?

BTW: Instead of making the loan payments, I'm socking away what I can to help me when I'm unemployed again this summer. So, it might be a few months or many months before/if I file bk.

Just thought of another question...Under a 13, can I contribute to my 401K or the IRA?

[justdeb]

Thanks for both of your responses! I guess it's how I'm looking at things... I intend to pay the modified 1st (once I get a good modification), my car payments, and the credit card that I used to buy my hearing aids (plus monthly expenses -- utilities, etc.).

Haven't paid the second loan since October. Got a 6-month deferment on the 1st, which expired March 1st; I've missed March and April payments.

Therefore, the only debt I need released in bankruptcy is the 2nd loan. So if I find a decent-paying job in my field, I would likely have excess $100-$200 monthly. Would it go toward the 2nd loan?

BTW: Instead of making the loan payments, I'm socking away what I can to help me when I'm unemployed again this summer. So, it might be a few months or many months before/if I file bk.

Just thought of another question...Under a 13, can I contribute to my 401K or the IRA?

LadyDove,

is the value of your home less than what is owed on the 1st mortgage? If not, you cant strip the 2nd. It has to be less in value than what you owe on the 1st mortgage, so thats the first thing - look at your property assessment from the county and see if its at 100% FMV (our county does 100% FMV for assessments). If its not, then add about 25% to the value and that will give you a ballpark figure of the value of your house (but ONLY a ball park - you will need a full appraisal more than likely).

For your 13 - you know that anything you're late on mortgage wise will be tacked onto your plan, making it higher, right? You can catch up arrears in it, but its going to be at whatever the payment was before modification, so make sure you know that upfront.

You need to meet with a lawyer to determine how it all works out - you're basing everything right now off of what you think you have left over each month - it doesnt work that way, unfortunately. Its based on your assets - that determines your % you pay back, and you'll be in no less than 36 months to no more than 60 months in a payback schedule. Just because you think you only have 100-200 left each month, doesnt mean the trustee isnt going to tell you you have to pay more into your plan. If you owe more due to assets than what you have left each month in DMI - then he will not approve the plan and you will have to go CH. 7.

As far as the 401K - we were told that is not a "mandatory expense" and it was pretty much up to the trustee if we could contribute or not. We will find out next week when we have our 341 hearing.

Its very complicated (Ch. 13) - moreso than a Ch. 7, which is why you need a good attorney. These are things you need to ask attorneys you meet with and write them down, but I'd bring a recorder with you so you dont miss anything they tell you (ask them first if its okay) - if you plan on meeting with more than 1 (which you should).