Loan paid off outside BK 13. Will DMI increase?

[cr4555]

Hi. I'd like to get some feedback regarding my current situation. I'm currently in month 27 of 60 - chapter 13. Our primary and second mortgages are paid outside our BK plan each month. We just recently paid our final payment on the second mortgage ($867) but there are 12 years remaining on the primary mortgage. I have a few questions surrounding this:

1. This amount was included in our monthly budget, so if it is now paid in full - does this automatically increase our DMI? If so, would we be responsible for the entire amount ($867 or could it vary)?
2. Is this a situation where we need to notify the Trustee or will the bank notify him on our behalf to indicate that we have satisfied the loan? Should we wait and see if the Trustee notifies us or should we notify him?
3. We were wondering if this is an amount we could keep each month or if generally it is considered increased DMI and turned over to the Trustee?
4. IF it is an amount to be surrendered each month - do you think the Trustee would consider that our annual income for the past 2 years is $4000 less than anticipated on our BK Schedules? Our estimated income was approximately 104,000 but we only make about 100,000. I had a seasonal job a couple of years ago that added extra income that I no longer get.
5. What are our chances that we could keep this amount? We have a LOT of home repairs that are needed.

Thank you for your feedback!

[justbroke]

(Sorry about your earlier topic being deleted. I was trying to remove the duplicate and didn't realize it removed the entire question! The following is what I answered in the other thread.)

Congratulations on paying off your 2nd mortgage. Also, welcome to BK Forum!

1. This amount was included in our monthly budget, so if it is now paid in full - does this automatically increase our DMI? If so, would we be responsible for the entire amount ($867 or could it vary)?

You need to look at your confirmed plan to see if your attorney created a "step" plan. Typically the attorney and/or the Trustee will demand a step plan when something is going to generate more DMI in the future. Only your plan can give you the answer.

2. Is this a situation where we need to notify the Trustee or will the bank notify him on our behalf to indicate that we have satisfied the loan? Should we wait and see if the Trustee notifies us or should we notify him?

No. See your plan.

3. We were wondering if this is an amount we could keep each month or if generally it is considered increased DMI and turned over to the Trustee?

You will need to see your plan.

4. IF it is an amount to be surrendered each month - do you think the Trustee would consider that our annual income for the past 2 years is $4000 less than anticipated on our BK Schedules? Our estimated income was approximately 104,000 but we only make about 100,000. I had a seasonal job a couple of years ago that added extra income that I no longer get.

I tell every debtor here on BKForum the following; if you have ANY change in income during your Chapter 13 Plan, immediately and with all due haste, contact your attorney! A Chapter 13 Plan is a living Plan and can be easily modified through the Plan Modification Process! If you do have a "step" plan, as I indicated above, you may want to have your attorney file a new Schedule I/J and Means Test to show the reduction in income and the impact on the additional available money from the paid off 2nd mortgage.

5. What are our chances that we could keep this amount? We have a LOT of home repairs that are needed.

You have to look at the plan. As such, your changes are 50-50.

[cr4555]

Thank you for your input! I appreciate your feedback. When I look over our plan confirmation paperwork from the Court, it does not indicate any type of step plan. When we filed, we still owed about $24,000 on the 2nd mortgage and we didn't consider when it would be paid off. Would that have been an oversight on our attorney's part (or our part) - or something to consider down the road (like now- since it's paid off)? Here are a few more questions:

1. If we do not have a step plan, could the trustee CONVERT it to a step plan if he is aware that our 2nd mortgage is paid off or is it likely that the plan would remain as confirmed?

2. Since we do not have a step plan, does the extra $867 increase our DMI?

3. Do we notify our attorney about the 2nd mortgage being paid off?

4. If the answer is "yes" to #3, does the attorney handle notifying the Trustee or is that a responsibility on our part?


Thanks again

[justbroke]

1. If we do not have a step plan, could the trustee CONVERT it to a step plan if he is aware that our 2nd mortgage is paid off or is it likely that the plan would remain as confirmed?

Possible, but you should tell your attorney. They may say there is nothing to worry about and you don't need to do anything.

2. Since we do not have a step plan, does the extra $867 increase our DMI?

Only if you recalculate your DMI. If it was already calculated and "baked in" to the original plan, then there is no extra DMI. If it was not calculated, then you would perform a recalculation. Since you say your income is $4,000 a year less (or more), then probably about $400/month is not DMI. Only recalculating the Means Test and/or Schedule I/J will tell.

3. Do we notify our attorney about the 2nd mortgage being paid off?

You could.

4. If the answer is "yes" to #3, does the attorney handle notifying the Trustee or is that a responsibility on our part?

The attorney would notify if necessary. Of course I'm taking the most conservative approach. I'm sure at least one person will say that you don't need to say anything since it should have been baked into your plan.

Unless you're already in a 100% plan.

[cr4555]

'Justbroke', thanks so much for your insight. I filed in Jax, FL and have been told I'm in a 100% plan. However, I'm confused about what the phrase "100% plan" actually represents. When I look at the NDC website, my base plan listed is less than the actual unsecured allowed claims listed.

1. Would a 100% plan pay the entire amount of the unsecured claims listed in NDC?

2. OR, does 100% mean that I'm paying 100% of my disposable income based on the Means test calculations?

3. I decided to email the attorney and mention our 2nd mortgage was paid off outside the plan, as I don't want to do anything that would jeopardize successfully completing the plan. We are almost half way through and are keeping our fingers crossed that we can keep the amount we were paying on the 2nd mortgage each month (home repairs needed). Any opinions about how things may be handled in Jax, Fl? As I mentioned above, our confirmed plan is not a step-plan.

[LadyInTheRed]

Your #1 is the usual definition of a 100% plan and what I know Justbroke meant. But, I have seen people say that their attorney told them they were in a 100% plan when they were not by definition #1. I think it is a communication issue. Everybody should pay 100% of their DMI, unless they are in a 100% plan in which case they might pay less than 100% of DMI. If you are in a 100% plan and your DMI increases, there is no need to amend the plan because your current plan would already pay all unsecured claims.

It is possible that the balance of your 2nd mortgage was divided by 60 when calculating your DMI (that's what Justbroke means by "baked in"). Check your Schedule J. Was the full monthly mortgage payment listed or something less? If it was the full payment and your attorney and trustee just missed the fact that the mortgage would be paid off before the end of your plan, it could be that the trustee is out of luck because they did not object to your plan before it was confirmed. Even if the pay off of your mortgage could force the modification of your plan, the fact that you need the money to make repairs, could end up making it a wash. Did your Schedule J include enough for home repairs and maintenance to cover the expenses?

[cr4555]

Thanks for your input! I just checked Schedule J - our month home expenses/repairs are $50 per month and we need to replace aged siding and eventually will need a new roof (we may be able to get by until we are done with our plan). Our full monthly 2nd mortgage payment was listed and it wasn't divided by 60.
1. Do you think our attorney will have to notify the Trustee or is there a good chance that everything will remain as-is since it's been confirmed?

2. We were definitely told we were in a "100% plan" but the unsecured claim amounts in NDC are much greater than our "base plan". How is the base plan calculated? From what I can tell, it's our monthly payment x 60. I was thinking maybe 100% plan means we are paying 100% of the approved claims but not necessarily 100% of the $ amount. We would never be able to pay 100% of the claims in 5 years. Our income would have to quadruple for that to ever happen. My husband has significant student loan debt which was a major contributor to us racking up credit card debt to get by.

3. When calculating actual income - does the Trustee go by the tax return? If that is the case, our plan has us projected to earn $104, 000 per year but we have only earned about 100,000 the past two years. We haven't said anything because we felt it would just be more money going toward our debt and if we received any raises we felt like the Trustee wouldn't be able to raise our plan payment until our income exceeded $104,000. However, if there is a possibility that we could have to start paying the money from the 2nd mortgage, I would certainly want to look at modifying our schedules to reflect current need. What do you suggest?