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Options when Unsecured debt exceeds Chapter 13 limits???

Submitted by on Sun, 10/19/2008 - 19:29
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I have just calculated that my total unsecured debt is $385,000 which includes $250,000 in student loans. I've learned the Chapter 13 debt limit is $336,500 for unsecured debt.

Now what do I do??! I've asked 3 different reputable bankruptcy attorneys and they seem to still be scratching their head, flipping through bankruptcy manuals, and reviewing case precedents trying to find an answers for me. I have yet to hear back from any of them.

I have 2 credit card judgments pending and have to appear in court on Oct 28th.

I live in Missouri. Together, my husband and I make $160,000 gross per year, but with the 1st & 2nd mortgage payments, his truck & trailer payments, basic living expenses and all my debts we are barely holding on to our home. We are one month past due on both mortgages.

I stopped paying on all the credit cards and payday loans as one of the attornies suggested I do, but now I feel like he just left me out there on a limb because he hasn't called me back to tell me how to handle this situation.

By the way, my husband will not and does not need to file bankruptcy.

Is there any way I can file for a Chapter 7 since I have so much debt, large mortgage payments, and high living expenses??

I would appreciate some feedback.


You have to be able to pass the means test in order to file for Chapter 7, and it sounds like you make too much money. However, living expenses are also taken into account in the means test. If you go to legalconsumer.com/bankruptcy and enter your zip code, then click on "means test calculator", there is an online calculator that can help you determine whether you are eligible for Chapter 7. There is also a lot of good information on that site about both Chapter 7 and Chapter 13 BKs.


Submitted by alias1958 on Sun, 10/19/2008 - 20:14

alias1958

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debt settlement program or debt management program can avert bankuptcy of any sort.

Debt settlement helps to slash your debt by 40 to 60%.

Debt management helps you with credit counseling and brings down the interest rate. It also waives off the late payment charges.


Submitted by on Sun, 10/19/2008 - 20:45

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Yes, most of my debt is a Sallie Mae student loan. All that education, two masters degrees, and I'm not smart enough to not be in so much debt. Aghh!! Does anyone know if student loans are ever discharged or eliminated in a Chapter 7, particularly when the debtor is already 49yrs old, can't afford a $1000/mo payment and would never be able to pay off this student loan in their lifetime. Makes me want to just put a gun to my head and pull the trigger. Help me somebody!


Submitted by on Mon, 10/20/2008 - 22:49

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I'm a bankruptcy attorney in Colorado. Student loans can only be discharged if you can prove they are an undue hardship that is likely to continue. This would include if you became permanently disabled or something that prevented you from working and earning a living. Have you checked with the Federal Direct Student Loan consolidation program? That can make your payments more affordable if you enroll in the income contingent option.

Don't give up on filing bankruptcy because if you have too much debt to file Chapter 13. You need to find someone in your area who can help you file a Chapter 11 Consumer debt case. Chapter 11 usually is thought of to help businesses but it also helps consumers whose debts exceed the Chapter 13 limits.

Good luck!


Submitted by lwyrchck on Tue, 10/21/2008 - 18:20

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I didn't know this was possible until today when the 4th lawyer I've talked to finally called me back and shared this info.

Thanks also to LWYRCHCK for confirming this.

The big issue for me still is $$$$! The lawyer that called me today said Consumer Chapt 11 is very, very expensive. I have no money and am already one month behind on both home mortgages. I'm sinking fast. Most attorneys want to be paid in full before they file a Chapt 7 or 11. If I had that kind of money just lying around, I wouldn't be in this bad financial bind.

I just recalculated my total unsecured debt again. It is now $417,369 which includes the $249,000 of student loan debt.

Can student loan debt be subtracted from total unsecured debt for Chapt 13 debt limit purposes??


Submitted by on Tue, 10/21/2008 - 22:02

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If you file for Ch.7 you cannot liquidate unsecured priority claim which you have ( student loan). Maybe if you can prove undue hardship. See 11 USC Section 109 (b) re who may be a debtor and there is no debt limit for Ch.7. There is a limit for Ch.13 ($336,900 of unsecured debt) see 11 USC Section 109 (e). good luck :) Do you have someone in the family that is disabled and that you are helping them? Anyway go for Ch.7 to liquidate what you can but you will need 13 or 11 if you want to keep the house.


Submitted by on Thu, 11/20/2008 - 09:15

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The house is in my name & husband's, but 1st mortgage is in my name and my aunt who is elderly. The 2nd mortgage is in my husband's name only. 2nd mort would now be considered unsecured debt as property values have dropped so low we are upside down in our house and have no equity at all. All vehicles and the trailer are in my husband's name only.

I already consolidated my student loans once with Sallie Mae.

Does anyone know what might happen if I try to file a Chap 13 with my unsecured debt way over the $336,900 limit if the Chap 7 fails?

The student loans are going to kill me. Payment is almost $900 a month and I'm already 2 mos behind.

To answer someone else's question, Yes, I need to start helping to care for my mother who has recently been diagnosed with Alzheimer's. How does this effect my Chap 7 filing exactly?


Submitted by on Tue, 12/02/2008 - 15:03

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I have a situation similar to yours - $416,000 in unsecured debt, mostly student loans, and I was told by a lawyer that I can first declare a Chapter 7 to eliminate some of the debt and then immediately declare a chapter 13 to restructure the rest of it. I've done some research and this seems to be true


Submitted by on Mon, 01/05/2009 - 13:42

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Yes, you can file a chapter 7 and then immediately after discharge file a chapter 13 to take care of the all the items that didn't get discharged in the 7 -- informally known as a chapter 20. You just can't get a discharge in the 13 for 4 years after filing if you do them serially like that. The only problem with this strategy is if you have material goods that you can't exempt in the 7 because of your state's exemption limits, you will have to find a way to come up with cash to keep them, or the trustee is likely to sell them to pay your creditors. Definitely go talk to a BK attorney and have them do some number crunching and see if you stand to lose any assets in a 7. The beauty of an 11 is that, like a 13, the trustee can't take your stuff.


Submitted by on Sat, 02/07/2009 - 22:28

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There's a reference in a comment above to student loans being priority claims, although I can't find that in the bankruptcy codes. It's important because if they do qualify as priority claims (I'm talking about student loans I owe the Federal Govt.), the payments would help me meet the Chapter 7 means test. Yes? No? Maybe?


Submitted by on Tue, 03/03/2009 - 21:23

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Simple. You're not bankrupt. You're broke. Bankruptcy gets you out of debt. But debt isn't your problem. It's your spending. You spend too much.
Budget like this: Income 160k/yr - 25k/yr student loans - 27k/yr paydown on other unsecured = act like you have 108k income and no debt.
Max house payment = 25% = 27k/yr = $2250/mo
Live on the rest.


Submitted by on Thu, 06/04/2009 - 10:08

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Student loans are not priority debts. They are nonchargeable unsecured debts. If they were priority debts, they would have to be paid in full within the plan. They can be paid pro rata during the plan but the unpaid balance remains at the end of the plan period.

None of this helps with "What do I do when with high student debts put me over the Chapter 13 unsecured debt limit and I can't meet the means test? "Your not bankrupt" sounds good in print but obviously they are and should be entitled to bankruptcy relief of some sort! Can anyone out there think of anything besides a Chapter 11 (based on the stated debt)?


Submitted by on Mon, 07/06/2009 - 12:00

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I am in the same boat waytoomucydebt...however, I don't think there is any ruling on the "student loans" putting you over the limit, so it can be determined at this point by the trustee/court....until there is some ruling by a court regarding student loan is not secured but not dischargeable and the limits...we are sinking together my friend or maybe be the ones to make some sort of changes to the law ...but at our expense...good luck...post an update to help me and others...


Submitted by on Thu, 08/20/2009 - 09:42

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Just came across this (even though this question was started last year). Has anyone had any luck with how to proceed with either a 7 or 13 when student loans put you over the 336k unsecured debt limit for ch 13, but then do not pass the means test (make too much $$), and cannot afford a ch 11? Seems outrageous that since student loans are non-dischargable, but also not considered "secured" to allow you to file ch 13. We are contemplating filing, but are are worried that a 7 will really not help us as most of our debt is student loans and could be dismissed by the court, but I am wondering what they would suggest us do instead? A 13 and then get denied for being over the unsecured debt limit. I am at a loss here as to how to proceed as most lawyers I have talked to just scratch their heads and cannot give any answers!


Submitted by on Fri, 10/02/2009 - 12:41

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If you can prove that you are broke, you can file a pauper's affidavit and the court will waive your filing fee. Read up on the bankruptcy process, file your petition pro se, only if you can pay attention to detail and follow directions.


Submitted by on Mon, 12/14/2009 - 20:36

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My heart bleeds for professional students who live off their student loans for a good portion of their adult years then try to find ways to get out of paying them back. And, yes, I had student loans and I worked two jobs to pay them back in just over 13 years. Unlike the OP, I had to sacrifice my dream of buying a home until after I paid back my student loans. No sympathy from me.


Submitted by on Tue, 06/01/2010 - 18:08

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Quote:

Originally Posted by Anonymous
My heart bleeds for professional students who live off their student loans for a good portion of their adult years then try to find ways to get out of paying them back. And, yes, I had student loans and I worked two jobs to pay them back in just over 13 years. Unlike the OP, I had to sacrifice my dream of buying a home until after I paid back my student loans. No sympathy from me.


You dont have to be a professional student to owe a good amount of debt. You can buy a home and pay a student loan at the same time.


Submitted by SOAPLADY on Tue, 06/01/2010 - 18:21

SOAPLADY

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Quote:

Originally Posted by Anonymous
debt settlement program or debt management program can avert bankuptcy of any sort.
Debt settlement helps to slash your debt by 40 to 60%.
Debt management helps you with credit counseling and brings down the interest rate. It also waives off the late payment charges.


Rright, only if you don't have a lump sum they'll likely sue you first. Been there done that.


Submitted by on Wed, 06/02/2010 - 06:52

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sub # 22...what do you mean "only if you don't have a lump sum they'll likely sue you first.....?" do you mean that if you pay a lump sum to settle your debt, that they will sue you to get the remainder? I don't understand your statement??? can you clarify???


Submitted by on Wed, 06/02/2010 - 22:14

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The house value dropped. Both 2nd & 3rd mortgage and other debits exceed the unsecured debts limit. Can Husband file Ch 13 first alone (2nd mortgage is under husband), to eliminate his debts, then the wife filed another ch 13 to eliminate(3rd mortgage is under wift) her debts. Will it work?


Submitted by on Wed, 06/02/2010 - 22:21

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Quote:

Originally Posted by Anonymous
sub # 22...what do you mean "only if you don't have a lump sum they'll likely sue you first.....?" do you mean that if you pay a lump sum to settle your debt, that they will sue you to get the remainder? I don't understand your statement??? can you clarify???


I mean that if you want to settle with a CC company for 40-50% of a (high) balance, they will want a lump sum settlement. I was sued by Citi for 45K and Amex for 25K and the only way to avoid a judgment was to settle with a lump sum (or 3 payments over 2 mths). I filed instead.


Submitted by on Thu, 06/03/2010 - 16:42

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I need debt relief hepl...I get $472.00 a month from the state for disability.I was laid of last year and I owe money on my credit cards.are there any programs out there for people in my siutation.I've been trying really hard on trying to pay them off.but its just getting really difficult to keep up...I'd say I own close to $10,000..please I'm sesperate...there are a lot of debt relief programs but I don't know how reliable they are..


Submitted by on Mon, 06/07/2010 - 00:57

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Quote:

Originally Posted by Anonymous
I have just calculated that my total unsecured debt is $385,000 which includes $250,000 in student loans. I've learned the Chapter 13 debt limit is $336,500 for unsecured debt.
Now what do I do??! I've asked 3 different reputable bankruptcy attorneys and they seem to still be scratching their head, flipping through bankruptcy manuals, and reviewing case precedents trying to find an answers for me. I have yet to hear back from any of them.
I have 2 credit card judgments pending and have to appear in court on Oct 28th.
I live in Missouri. Together, my husband and I make $160,000 gross per year, but with the 1st & 2nd mortgage payments, his truck & trailer payments, basic living expenses and all my debts we are barely holding on to our home. We are one month past due on both mortgages.
I stopped paying on all the credit cards and payday loans as one of the attornies suggested I do, but now I feel like he just left me out there on a limb because he hasn't called me back to tell me how to handle this situation.
By the way, my husband will not and does not need to file bankruptcy.
Is there any way I can file for a Chapter 7 since I have so much debt, large mortgage payments, and high living expenses??
I would appreciate some feedback.


If you are over the debt limit for a 13 you can file a 7 regardless of your income.


Submitted by on Fri, 07/23/2010 - 07:19

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I don't think there is any way around it that you have to walk away from your house. Rent an apartment and then try to restructure the student loans. Your $160k of income is extremely high and with that type of income you should be able to repay the student loans. But you may have to do bk for your other unsecured debt.


Submitted by Debt Free to Be on Tue, 07/27/2010 - 07:13

Debt Free to Be

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You want to get out of paying your student loans? Filing for Chapter 7 or 13 will not help you get that unless of course there is an undue hardship. And the undue hardship is very rare. And it sounds like you just don't have enough money (i.e., you are living beyond your means). They changed the laws a while back because everyone used to to go to school rack up a bunch of student loans (like you) and file for bankruptcy immediately after they got out of school (like you are trying to do). But they changed those rules because people abused them. You may qualify for Chapter 7 even though you have a high combined income, if your secured debt payments are high enough along with other factors. Run a means test and find out. I've seen people with your income qualify for Chapter 7. I don't understand your insistence on filing under Chapter 13. Chapter 13 is generally not a good choice because of the long repayment period and in your case it would be 5 years. But if you want to get rid of a completely unsecured 2nd mortgage on your residence it is still worthwhile. Chapter 11 is very expensive but you shouldn't complain about the fees, it requires A LOT of work. Chapter 7 is relatively inexpensive when you consider all the facts. Good luck!


Submitted by on Fri, 09/17/2010 - 17:38

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[COLOR=black]That is what happens when you go to "bankruptcy attorneys", they have no clue.[/COLOR]
[COLOR=black] [/COLOR]
[COLOR=black]All you had to move was a Chapter 11.[/COLOR]
[COLOR=black] [/COLOR]
[COLOR=black]Bankruptcy is a forum to decelerate the default and reconstitute the payment stream, and possibly discharge specific non secured items within the plan.[/COLOR]


Submitted by on Mon, 11/08/2010 - 15:03

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