Out of plan payments? Can I do that?

[pahu3]

Never been late on house payment or vehicle payments. Can I continue to pay these items out of plan when I file Chapter 13 for my unsecured debts? No other debts beside secured and unsecured.

[justbroke]

If you are current on secured debt, you can seek permission to pay them outside the plan. There is not need to have the Trustee write checks for things that are current. Some districts, though, want to have you paying "something" through the plan. If you're in a 0% plan, then this may not work because the Trustee wouldn't get paid to administer your case.

Are you filing Chapter 13 to save property, or is it solely because you are over the median income and have the ability to pay some dividend to the unsecured creditors? If it's the former, I'm confused. If it's the latter, then there would be at least something being paid into the plan, your disposable monthly income, which would keep the Trustee happy. Okay, maybe not happy, but at least earning their commission for managing the case.

[pahu3]

Justbroke, thank you for the quick response. I was hoping we could continue to pay our mortgage and vehicles out of plan. We have never been late in our payments to them. This way I do not have to worry about these payments being included in my Disposable Income if paid off prior to the Chapter 13 plans timeframe. CORRECT?

[justbroke]

I write this to serve as a guide to you and others that are reading.

Paying "outside the plan" does not mean that it's not included in the Plan. Your Chapter 13 Plan of Reorganization contains everything and may specify whether the specific item is to be paid outside the plan. When we say "paid outside the plan" we mean that the payments are direct and do not go through the Trustee. When we say "paid inside the plan" we mean that the payments are paid to the Trustee and the Trustee then sends checks to the creditor(s). It's really a term of art as far as bankruptcy is concerned.

As far as vehicles being paid off -- outside the plan -- during the pendency of the Chapter 13 gets interesting. Some Trustee would want you to increase your plan payment (in a step plan) should that occur because your DMI increases. When something is typically paid "through" the plan (inside the plan), it is re-amortized over the life of the plan so this phenomenon does not occur (because there are equal installment payments over the term of the Chapter 13 and not based on the original contract terms).

It's something you have to plan for.

[pahu3]

Thank you. I hope to find out tomorrow when I go see the attorney. Just trying to be prepared as possible.