Really Need help!!!! Please!

[litlgi74]

What is the name of your state? Pennsylvania

I will try to keep my situation short.

I run a small photography studio… I had $98k balance remaining of a promissory note. At that time I was not in default or behind in payments for anything. In fact I was actually ahead on a few payments… But because it is a seasonal business and sales have been on the decline. I decided to call one of my creditors to inquire about a early payoff of a lesser amount. After he declined I thought it would be in my best interest to speak to an attorney about my financial options to avoid the possibility of a future forced judgment.

My attorney asked if my wife and I owned our home… (this was before I found out about tenancy by the entireties.) I said yes. He never asked to see a copy of our deed or did any research to confirm the status of which my name as well as my wife’s maiden name is titled (we purchased the home three months before our marriage.)

He then suggested he write a letter to one of my creditors asking for an early payoff amount. He stated in the letter that if this payment amount ($10k of $65k owed) was not accepted within 30 days, bankruptcy would be filed and he would end up getting nothing. (This creditor had really given me the shaft over the years as far as business practice, and I really did not mind if this creditor got the what was coming to him. But I was hoping he would accept the offer.)

The creditor’s attorney gave a counter offer of $35k and made my attorney aware that since we had stopped payments he could now force judgment and force sale on our home which was not covered by the tenancy of the entireties.

My attorney then said don’t worry... Because of the time frame when the house was purchased and when I got married the trustee would consider it protect by Tenancy by the entireties. We should file Chapter 7 BK. So at my attorney’s request, I took the deed to a real estate attorney to have the deed amended to say Tenancy by The Entireties. Three days later my attorney asked me to get the deed back from the attorney (hopefully unchanged) because had discovered case law would not support the deed change.

My attorney said don’t worry… Because we could always file Chapter 13. He said our home would be protected as long as we made 60 small monthly payments ($160) to a trustee who would distribute the money to our creditors. This sounded good to me. So I agreed and let him file the petition.

At the meeting of the creditors (of which my attorney never introduced herself to me) the trustee suggested I was able to pay more than my attorney suggested. $2000 more to be specific. I almost threw up on the table... This was all new to me and my attorney in the room offered no explanation.

I called my attorney’s office in rage… He once again said don’t worry! He then said he would be able to make the numbers work and probably get my plan payment down to $200. He then also mentioned for the first time that over the next five years…. I would not be able to have a savings account or make any extra money whatsoever. He said that any extra income my wife or I earned would be considered disposable and it would have to be turned over to the trustee. I would also be forced to live on a very fixed budget accounting for all income and expenses. This made no sense to me!

Who in the world would sign up for this. Cutting costs in my business or home expenses would be hurting me. As the saved money would now need to be turned over to the trustee. And Oh yeah… any extra profits I make will also be considered disposable income and would need to be turned over to the trustee.

My wife and I are now really frightened. It seems as though our attorney talked us into this without asking or researching the facts up front. And when things went bad… he tried to fix the problem with more problems.

My case has yet to be confirmed or dismissed because of the objections my attorney needs to file.

If our attorney had told us about this in beginning we would have never had done this. Why would I screw up my life and my business to avoid paying $35k to a creditor who was willing to accept it. I could have easily taken a home equity loan for that amount.

I am now in a worse situation than I was before… and it seems there was no reason for this.

Is my attorney responsible for any of this mess? Or is this all my fault for not knowing the law and hiring the wrong representative?

[Ladynred]

He then also mentioned for the first time that over the next five years…. I would not be able to have a savings account or make any extra money whatsoever. He said that any extra income my wife or I earned would be considered disposable and it would have to be turned over to the trustee. I would also be forced to live on a very fixed budget accounting for all income and expenses. This made no sense to me!

Well, that IS the general nature of being in a Chapter 13 repayment plan. Technically all disposable income has to go to the plan payments. So, you really can't put any 'extra' money away in savings because if you have 'extra' then all your disposable income isn't going to the Trustee. If your lawyer didn't tell you any of this from the beginning, then that is a serious shortcoming.

However, the reality is often somewhat different. Your lawyer should have gone over your budget and your expenses very carefully with you. Secured debt must continue to be paid, so unless you have no house or car payments, I don't see how your plan payments could be as low as you were told... UNLESS you would be paying those outside the plan. What your payments are depends on the amount of disposable income and the total amount of the CLAIMS filed by your creditors. If a creditor fails to file a proof of claim, that creditor gets ZERO $ - the debt winds up getting discharged. The rest is spread out over 60 months of payments.

Now, Ch 13 does mean living on a tight budget. It DOES mean making lifestyle changes to do it. People who cannot or will not make those changes are doomed to fail and become one of the 70% of failed Ch 13 plans. While the law say Trustee's are supposed to periodically review your case, and make plan readjustments as needed (raising payments if you have more income, lowering if you have less income and/or expenses). How often those reviews and adjustments actually take place is a question for a GOOD bk attorney because they SHOULD know how your Trustee runs things. Many people wind up having 'extra' money that doesn't go to the Trustee and many Trustee's don't do regular audits.

Why would anybody sign up for a Ch 13 ? To save their homes mostly, that's the #1 reason for filing a Ch 13 these days. When income is too high for a Ch 7, you have to file Ch 13. For many it DOES work, it's not easy, but they do it.

Now, at this point, even if you move to voluntarily dismiss your Ch 13, the bankruptcy will be on your credit reports for the next 10 years. Something to consider.

Is my attorney responsible for any of this mess?

He/she may have been negligent in not explaining ANY of the Ch 13 process to you ahead of time, but I doubt you can go after the attorney for it in any legal way.

Or is this all my fault for not knowing the law and hiring the wrong representative?

Most people don't know the law. However, it might have helped if you'd done some research prior to going ahead with the bankruptcy. It's also usually a good idea to talk to more than 1 bankruptcy attorney before you hire one.