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I Can’t Afford My Chapter 13 Payments And Worried About Foreclosure Deficiency. – Lars

I am recently divorced and due to hardship filed for chapter 13 bankruptcy. After 5 months of negotiations with the trustee; it has now become questionable if I am able to do the chapter 13 and still make monthly ends meet. Based on the latest proposal from the trustee; I would need to pay approximately 1000 per month to the court. Alimony and Child support are 2000 per month. I make net 4400 per month. Student loan debt is 565 per month. Long story short, I have 44 dollars per week to live off of after rent, electricity, heat, etc bills and above alimony, child support and chapter 13 plan. So, since the chapter 13 has not been agreed upon yet and confirmed; I am considering “pulling out of my chapter 13 plan” and go negotiate with creditors.

If I do this, I will have to negotiate approximately 20,000 dollars with unsecured debt to credit cards for a manageable payment. I also owe 25,000 on my truck (420 per month payment) that I will let go back to the bank; and will likely owe a deficiency of 8000 or so. And then I have a second house that will likely foreclose on. My concern is if I let the house foreclose; potentially I might have a large deficiency debt to contend with to the mortgage bank.

My thoughts are that if I pull out of the chapter 13 plan, I would use a consumer credit counseling or debt management company to negotiate with the credit card debt and truck deficiency for a reasonable repayment.

But, if there is a deficiency on the mortgage after foreclosure; and the mortgage company (Bank of America) is not willing to do a short sale; …….my question is

How is the repayment on a deficiency mortgage determined if a judgment is filed against me???? I tried calling Bank of America and they won’t talk to me as long as the bankruptcy filing is still in effect.

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and do you see any other alternatives for me other than chapter 13 and not be able to make it each month or the above plan of negotiating and using credit counseling/debt management companies.



Dear Lars,

The first issue that comes to mind is why are you in a Chapter 13 bankruptcy? Is there a specific reason you did not opt for a Chapter 7 bankruptcy or did your bankruptcy attorney advise you otherwise?

Has your attorney or the trustee talked to you about a conversion to a Chapter 7?

It sounds like your goals may have changed from when you first entered your Chapter 13 bankruptcy, and possibly the payment as well. These factors may alter the path you select next.

A more perfect solution would be to include all your obligations, including the truck, and going for a quicker second chance.

But what are your goals now? You seem to be ready to put this all behind you are get a legal fresh start.

Please post your responses and follow-up messages to me on this in the comments section below.


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About the author

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.


  • Good day, Lars,

    In my opinion, a Chapter 13 is going to do better for you then debt settlement at your income.  The problem is that in debt settlement, you can be sued.  Unless you are one of the people living in one of four states that does not allow garnishment, a suit that ends in judgment can mean you get garnished.  For example in California, 25% is the upper limit on garnishment and at your income, that is probably what will be taken.  So that is not massively different then your chapter 13 payment, BUT with debt settlement, after that 25% is gone, you still will be trying to negotiate with everyone else.

    If you really have only $44/week left, that may mean you are getting hit unduly hard by the trustee.  However, it also may mean the “rent, electricity, heat, etc bills” are something that the trustee thinks you ought to lower.  Do you need the truck for work?  Can you do things to cut back on the other bills?
    Neither a Chapter 13 nor debt settlement can solve the problem of having expenses that are greater then your income.  That may not be the problem, but it is something you owe it to yourself to examine.

  • thanks for the response.  I am in chapter 13 because of my income.  According to my lawyer, I make too much to do a chapter 7 (gross income 90000) and he says the median is 65000.  Originally the first proposal to the trustee came in at 220 per month; and i thought wow; i can afford that.   Then after she (trustee) objected and continued “negotiations” it has now increased to 965 dollars per month; which seems crazy to me based on my “need”.  My goals are to live pay check to pay check.  It seems to pay 6-7 credit cards, the truck, and pay a second house payment which i can not afford.  So yes, i do think I am ready to put this all behind me.    I am not sure what you mean by this “A more perfect solution would be to include all your obligations, including the truck, and going for a quicker second chance.”  thanks.  Lars

    • Lars,

      It’s time for you to get a second opinion on your bankruptcy. I’ve seen people qualify for a Chapter 7 bankruptcy with substantially more income. The income alone is not the determining factor here.

      It might just be that a new strategy is warranted here since you are now willing to turn in the second home, truck, etc. I’m not convinced that you would not qualify for a Chapter 7. Let me know if you have problems finding a bankruptcy attorney for a second opinion.

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