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Should I Come Out of My Chapter 13 Bankruptcy and How Will It Effect My Credit Report? – Franne

“Dear Steve,

I filed bankruptcy in Feb of 2009 in order to save my house. I have a base payment. At the time it was figured I had to submit tax returns to the IRS, When the IRS adjusted my debt the Bankruptcy court did not change my base. I contacted my congressman and my mortgage has been modified, I now a 4.375 interest rate and the stay has been lifted. My car has been paid for in the bankruptcy. I have a second mortgage and my IRS debts to pay. I also owe the trustee 3,300,00 My payment to the trustee is 1,400.00 a month and this is killing me. I read that I can come out of the bankruptcy if I choose. Would this be a good idea, or should I continue to suffer through this payment. My latest statement said I owe 63,000.00 on the base that was not adjusted.

Should I come out of my Chapter 13 and how will this affect my credit report?

Franne”

Dear Franne,

If your debts are the mortgage, car payment and current IRS debt, none of those debts will be reduced by bankruptcy. You will need to make the full payments inside or outside of bankruptcy. So dropping the bankruptcy doesn’t seem like it would increase your payment any. I don’t know if you have any unsecured debt in the bankruptcy but if you do those creditors would go right back after you when you terminate your case.

You can always voluntarily discharge your case but it will remain reported on your credit report for seven years from the date you filed, you will lose the legal protections you are now entitled to under bankruptcy, and you will be prohibited from filing again for a period of time.

Before you do anything, you MUST talk this over with your bankruptcy attorney and get their advice on this.

The IRS comes first and if you can’t afford their payment, they are not willing to modify your payment and you still can’t get by then you may have to reduce your expenses further to meet the IRS payment. This may mean giving up your house and renting to lower your expenses. $63,000 is a lot of money to owe the IRS.

READ  Our Chapter 13 Bankruptcy Was Dismissed. What Happens Now? - Kim

For IRS help you may want to contact an Enrolled Agent.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

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Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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