Ch 7 Or 13? Problems With Both
Here's my situation: Live in Illinois Single Unemployed for the last 11 of 14 months. Still drawing unemployment of $326 for the next 4 months. $35,000 in unsecured credit card dept Sold a house in April 2002, netted $10,000, which was used to pay off other credit card depts. Cashed out 401K, proceeds went to buy a mobile hone and furnishings. Chapter 7 questions: I sold a house in the last year. It did not go to a relative, and there is a paper trail of the proceeds being used to pay for other unsecured debt. But will this eliminate me from Ch 7? I own my home outright, and it's worth more than the $7500 exemption. BUT, it was paid for from proceeds of a 401K which would have been exempt had I not cashed out. I have two cars, each worth probably $3000. I assume I'll have to get rid of one of them, but is there any way to keep both? (Both are paid off). If I was somehow able to get a secured loan on them, and use the proceeds for paydown to one lucky creditor (or spread it around) would that allow me to keep them? I also anticipate $6,000 in taxes owed for 2002, since the 401K withdrawal. I know that this will not be discharged, but what does that do to complicate things? Chapter 13 questions Since I'm still unemployed, but drawing unemployment, is Ch 13 even an option? How is it determined what % of the overall debt would be paid? I have heard that a minimum of 10% would have to be paid, but how is that decided? What happens when I finally do get a job? (Assuming it's better-paying than my unemployment draw right now). I do have two decent leads right now. Would the case be re-evaluated, and possibly increase the % of payback? Thanks for the constructive advice and help!
These are the sort of detailed questions that you are far better getting answers to from your attorney. Generally, however, unemployment payments are a "regular source of income" that would allow you to qualify for Chapter 13, and the fact that you sold your house would not disqualify you for a Chapter 7.
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