Question About 100% Payment Plans

[switch625]

I've always been confused by the interplay of 100% payment plans and disposable monthly income. Especially when the last sentence and last paragraph of my confirmation order says "...that no property received by the trustee for the purpose of distribution under the plan shall revest in the debtor except to the extent that such property may be in excess of the amount needed to pay in full all allowed claims as provided in the plan."

How much money does the trustee get when your DMI exceeds the monthly amount needed to pay 100% of all claims. Does the trustee take only the money required to payback 100% or does the trustee take every DMI dollar and then maybe your Ch 13 plan ends early?

Example: Your Ch 13 plan payment is $500 per month and that is 50% payback. During your plan, you then complete your car loan payment of $500 and your HELOC of $500 a month is forgiven, so you now have $1000 in additional DMI. So on a monthly basis, does the Trustee raise your plan payment to $1500 a month (because they take all DMI, but you end your Ch 13 early) or only $1000 a month because that pays 100% of all claims (and you go to end of your 13, whether it was set at 36 or 60 months).

[justbroke]

switch625 this is (now) well settled law. The Trustee/Estate is only entitled to the portion of your DMI that would allow you to pay 100% over the applicable commitment period (ACP). In other words, if you're in a 36 month, 100% plan and your DMI exceeds the amount required to complete the plan in 36 months, you only need to commit the amount required. You do not need to be in a "shorter" plan unless you choose to do so.

In your specific example, it depends on the Trustee. There are many Trustees that will not bother you over the course of your Chapter 13 so long as everything stays within a tolerance of around 10% per year. So as long as your income doesn't increase more than 10% per year, they just won't bother you. Now, you are asking a very specific scenario and there is no way to tell how YOUR Trustee would react.

First, if your car payment is completed during the Chapter 13, then that's just based on how the Trustee CHOOSES to distribute money. In fact, smart (and most) Trustees will payoff the cars and other secured debt -- secured debt that must be paid through the life of the plan -- first. This typically saves the bankruptcy estate a bunch of money in interest payments which would benefit the unsecured creditors. Your plan payment does NOT change in this instance where the Trustee chooses to accelerate the payment of secured debt. In my case, the Trustee did this that and it appears to be typical that Trustees will try to payoff secured debt within 2 years (if the plan payments so allow).

Second, if you have a secured debt that is forgiven while your plan is still active, this could get both confusing and a pain if the plan is not modified to accommodate the change. However, this should not affect your plan payment.

So, we must look at #1 and #2 and make some corrections to your scenario. Your payment to the Trustee is always your priority debt payment + secured debt payments + trustee fee (10%) + attorney fees (if there are some remaining) + your DMI. That is your payment unless you are paying some secured debt DIRECTLY (and not through the Trustee). If you're paying everything through the Trustee, then your payment would not change. How could it change? The only thing that would change is in how the Trustee chooses to distribute the funds available.

If you are paying some secured debt outside the plan and the debt is forgiven, you should contact your attorney to see if you will need to submit this money to the Trustee (if you're not already in a 100% plan).

I really don't like talking about "what if" scenarios when it comes to Chapter 13s. Each plan is unique and Trustee are individuals whom are also quite unique in how they deal with debtors and change. This is why I ask people to not speculate on different scenarios. Once you file bankruptcy, it literally "is what it is".

[switch625]

Thanks JB. I just wanted to know what does 100% means with respect to DMI. In my district, priority and secureds are paid first and I'm nearing the point where the trustee will be done paying them, and then will start on paying the unsecureds. Plus a car that is now paid off outside the plan, and the HELOC forgiveness (HELOC also paid outside the plan) leads me to believe that I could be looking at 100% payback soon, The Trustee has to know about the latter since the HELOC has a withdrawn POC and a refund of post-forgiveness arrearage payments (paid through the plan) back to the Trustee.

[justbroke]

switch625 it certainly will be interesting to find out how your attorney, and then Trustee, react to the changes. Typically, your DMI would have already been calculated so that the car being paid off outside the plan, won't require a plan modification (some attorneys will write plans with a "bump-up" when the payment goes away). Your HELOC/mortgage is an interesting scenario because, well, the plan says otherwise (and I think the plan should "technically" be modified to account for the change in status).

However, what I think is less important than how your attorney wishes to proceed, and, ultimately, how the Trustee deals with the changes.

My judge use to joke in the courtroom and once said, aloud in open court, "Mr. Justbroke, you may just end up in a 100% plan too!" (Referring to me when I was sitting in the courtroom observing a Motion to Dismiss or Modify Plan hearing. The person in that hearing had received additional, unanticipated, money that put her in a 100% plan.) Apparently, it does happen, but as one Trustee quipped, only about 10% of cases ever have a plan modification.