What are you allowed to pay after filing Bankruptcy?

[vbchick]

First let me start by saying I have found a wealth of information on this site. Thank You!

Secondly, I recently filed for CH 7. on April 10 as a Pro Se filer. Yes, I know, I should have contacted an attorney but at the time I had no funds to pay an attorney, not even a retainer fee and I had not happened across this site until after I filed. I had to file quickly because of a Default Judgment Request pending in a lawsuit against me.

I found many of the forms self explanatory but one of the things I am not clear on is what I am allowed to pay or should not pay during the bankruptcy?

I cannot seem to find a definitive answer.

Basically in a nutshell, according to the means test, my expenses are $200 greater than my income during an average month. But if I am not paying the credit card companies, the IRS, and one of the vehicles my husband and I owe as we do not plan to reaffirm, it is obviously going to leave me with surplus income during the term of the bankruptcy. What am I supposed to do with this surplus income. Can the Trustee take it? Obviously I should be paying my rent, utilities, groceries, gas, insurance and the car payment for the other vehicle we are keeping. But what about the IRS? I know their debt will not be dischargeable as it is newer than what the three years that the law allows. Do I still keep paying them the agreed upon installments? I also have a State tax debt that I make installment payments on. DO I continue to pay them?

Please help me make sense of what I am allowed to or should pay or what debts should I stop paying.

Thank you for your assistance.

[MountainDude]

DO NOT PAY ANY CREDIT CARDS. Most Taxes and student loans have to be paid back in full.

You should have been contacted about who your BK Trustee (the attorney for the U.S.) A lot of jurisdictions just have you cut a monthly check to the Trustee, and he decides who gets paid what and for how long.

If I were you I would keep paying my rent, insurance, food and gas. There shouldn't be any surplus after that.

[vbchick]

Thanks for your response but it does not seem right what you are saying. Obviously if you are not paying some of your debts there is going to be surplus income. In my case many of my debts are consumer debts and a recourse loan from a foreclosure. With the foreclosure, we are still responsible for repayment of the debt because it is considered a recourse loan in California because it was not our original purchase loan but a refinance of said loan. My total unsecured debt is over $800k. Yes, that's right. I said $800k. Only about $35k is secured debt (automobiles) 1 I drive and 1 my husband drives. We obviously do not meet the criteria for CH 13 because of the amount of unsecured consumer debt. So, our only option was to file CH 7.

Basic expenses are easily covered with our paychecks but there is no way we could afford to pay back all of these creditors and since we cannot file CH 13 I guess that is mute.

I guess my concern stems from a few issues. After necessary expenses of food, rent, insurance, payment for the automobile we are planning on reaffirming, utilities, child support, and medicine for my husband (which varies), we will have a surplus of about $1300 a month give or take during the bankruptcy.

I have the Trustee's name and I have contacted his office about a few questions but he has not requested and monies from us or anything as a matter of fact. I was only told to mail our tax returns to his office.

So, with that $1300 a month surplus, what do we do with it?

[MountainDude]

Believe me when I say, your Trustee will request monies. In fact, he'll request everything you're able to give him. After all, part of the check you send to him every month will include his fee for paying everyone off.

If you don't have an attorney, the bottom line is you're going to have to pay what he tells you to pay. Right now I would take a good hard look at your expenses you pay every month. The more you pay the Trustee, the less you have to pay on other items. More than likely, you'll have to amend your schedules because you either forgot or underestimated your schedules. I guarantee you that the Trustee will hold your feet to the fire once he figures out how much you can pay every month. The Judge he pleads his case to, he's probably infront of at least 15 times a week, and their probably on friendly terms.

If you think that the Trustee is doing you any favors, you're deluding yourself and giving up any leverage you started with. Again, a percentage of your payment is going to him. The more you pay, the more he gets.

The more informed you are, the better decions you will make.

k

[CreditMaven]

WHOA! Take a deep breath. The purpose of a CH7 filing is to receive relief from your debts. You should NOT pay on ANY of your debts that are dischargeable. YES! You should continue paying your IRS and state tax installments on time. The last thing you want to do is stir up that hornets nest

Since you now have surplus income, I suggest a consult with an atty. Might cost you $2-300. An atty will advise you on exactly what your rights and responsibilities are while your CH7 is pending, and can advise you about how to handle the remaining hurdles of your case like the meeting of creditors and any trustee concerns.

That said, I recommend you consider paying additional monies toward the outstanding balances of the debts you are still responsible for. I suggest the taxes first

GOOD LUCK!

[LadynRed]

Believe me when I say, your Trustee will request monies. In fact, he'll request everything you're able to give him. After all, part of the check you send to him every month will include his fee for paying everyone off.

That is only true in a Ch 13, otherwise the Trustee collects NO FUNDS from the debtor - unless it's determined that you have to pay something to the Trustee to keep an asset.

Even the IRS is stopped by the automatic stay, they are not immune. If you correctly listed them as creditors on your schedules, then they know you have filed and they also know they can do nothing to collect from you w/o asking for a relief from the automatic stay.

You continue to pay on your SECURED debts, since you can't keep that property w/o paying, and all your normal living expenses. YOU don't decide what's a non-dischargeable debt, the BK court does. No, the tax debt isn't dischargable, but it's also NOT a 'normal living expense' nor is it a secured debt. You need the advice of an attorney. With 1300/mo surplus, you can afford at least a consultation if not full representation.

This is EXACTLY the reason why filing pro se under the new law is a bad idea, despite the expense of a lawyer. There are too many traps in the law, and you've got way too many thorny issues. The payments to unsecured creditors should NOT have been included in your budget and calculations of expenses for the means test and the IRS limits on expenses. You're in a difficult position - too much unsecured debt for Ch 13 (even with the new higher limits) and too much disposable income for a Ch 7. Cases like yours under the new law could actually wind up in a Ch 11.. which is one hairy beast and very expensive.

You need a lawyer, NOW, or your case could very well end in dismissal. I hope in your rush to file you completed the required credit counseling.

[vbchick]

Thanks Lady in Red. I appreciate your comments. You solidified some of my beliefs. We received a statement from the IRS yesterday stating that we did not have to pay anything during the bankruptcy until the judge made a decision. Although I know it will not be dischargeable. But I can deal with that.

As far as Chapter 11 goes, we did not own a business so Chapter 11 would not apply.

I bellieve I will take the advice and see a lawyer since we will have surplus income to pay for it. I realize how sticky our situation is. With the means test, we did not include any of our unsecured debts in the calculations we just happen to be caught up on my husbands medicine right now and do not need to purchase his prescriptions, which are a huge cost to our budget. Maybe we will will continue to buy some more to further stock up so there is no surplus.

PS. Yes we did attend the counseling. It was of no use. The lady was like "Why have you not already filed?" We laughed! These classes that are required are a real joke. YEAH BUSH!

[LadynRed]

As far as Chapter 11 goes, we did not own a business so Chapter 11 would not apply.

Under the old law that would be true. However, under the new law an individual could wind up in a Ch 11.

we just happen to be caught up on my husbands medicine right now and do not need to purchase his prescriptions, which are a huge cost to our budget.

Spread the costs for his prescriptions across 12 months to get an AVERAGE MONTHLY expense.

These classes that are required are a real joke.

Yes, they are, and most BK lawyers and judges would agree with you. You can thank the lobbyists who put that into the ill-written law - the ones who think all consumers are just going out and racking up credit cards for the hell of it. They didn't buy what all the BK pros said - that most BK's are the result of medical bills, divorce, job loss or loss of a spouse and NOT reckless spending ! Based on the statistics from filings since the new law went into effect, including data from the credit counseling places, the pros were right all along.

[vbchick]

Quote:

Under the old law that would be true. However, under the new law an individual could wind up in a Ch 11.

Do you mind explaining this? Everything I read this only applies to individual businesses. We have no business assets.

We are still going to go to a lawyer but for my curiosity sake would you let me know how we could be forced into a CH 11?

Thanks!

[LadynRed]

I never said you could be forced into anything, I said it was an option for people with amounts of debt that is above even the Ch 13 limits. However, few inidividuals would ever take that option because of the huge cost and the immense amount of paperwork.

[vbchick]

Sorry. I didn't mean to say forced. I am just confused about how we would even qualify for a CH 11. Obviously I do not want to go that route.

Thanks for your responses.