Ch 13 and Haven Act

[Lavish]

I just had my 341 Hearing. My case was filed a couple of weeks before the Haven Act was passed. My attorney says that the Haven act only exempts my VA disability from being counted on the means test; it doesn't have anything to do with the amount I will have to pay into a Ch 13. I don't qualify for a Ch 7 due to my income - even without the VA disability - I also have property I want to protect, so I would have filed a Ch 13 anyway. However, I was hoping the Haven Act would help with the Ch 13 monthly payment being lower, but it doesn't appear that it will. This is new so I don't know if my attorney is right or not.

I am receiving 50% VA disability and I just recently learned that I will get a huge refund for the money I paid toward my VA home loan "funding fee" when I bought my home a couple of years ago. I'm hoping the trustee can't take it, due to the Haven Act. I am also planning on appealing a disability that the VA denied. I think I will win the appeal, but I'm concerned that I will have to turn over any lump sum payment (for back pay) to the trustee or if it would be exempt under the Haven Act.

Anyone, please chime in if you have any answers or thoughts.

[justbroke]

I wrote about this a few weeks ago, regarding the Haven Act and the impact on a Chapter 13. At best, the Haven Act would only reduce the term of the Chapter 13 by putting the debtor under-the-median whereby they can propose a plan of only 36 months. (I pulled this from the Google archive since we lost a bunch of posts...)

... the question is whether you are using your disability funds in order to fund a Plan because you're trying to protect property. If you are paying... to protect a home or vehicle, and have no "disposable monthly income" (DMI) then I reckon that this new classification will not help you. There are many Chapter 13 debtors who use their Social Security income to fund a plan because they are voluntarily trying to protect property (cure arrears, save a vehicle).

A small reminder that a Chapter 13 is voluntary. The likely issue in a Chapter 13 is that Schedule I will show the income and you'll have DMI showing on Schedule J. This is the same thing that happens to those with income from Social Security (or the Social Security Act) which is exempt from "means testing." Whether or not you'll have to contribute your Schedule J remaining DMI (rather than the Means Test DMI) may be district-specific. The Haven Act only amended Bankruptcy (Title 11) by adding certain service-related payments to the exclusions of "current monthly income" (CMI).

As for your lump sum, you'll have to see what exemptions are available directly for that specific type of money. Some States have explicit exemptions and then there are the federal exemptions. If you already knew that you were getting this money prior to filing, perhaps your attorney already listed it as a contingent asset and exempted it on Schedule C.

[Lavish]

justbroke, thanks for the response. I was not aware of the refund of the VA funding fee, prior to receiving the letter and then a week later having the amount directly deposited into my account. It was a total surprise and very much needed since my son and I both needed braces and I also need to do some home repairs. I'm hoping the trustee doesn't request bank statements, other than ones prior to my filing. Although, I know that if my Ch 13 is confirmed, I will have to provide income tax statements every year... I just don't know if the refund of the funding fee is going to be taxable and I have to file it.

[justbroke]

From my Chapter 13 experience, the Chapter 13 Trustee may request bank statements. As part of their "best interest of creditor's test," my Trustee requested bank statements for the entire 6 months preceding the filing of my case. They did not ask for anything post-filing.

Is your attorney unsure of how to handle that lump sum and/or how to exempt it?

[Lavish]

justbroke, when I told my attorney about the letter I received stating I would be getting the refund, he asked if I'd received it yet. At that time, I hadn't, and he said when I get it to spend it down and he basically didn't want to know anything about it. I've spent it on braces, home maintenance and plan to spend the rest on other needed home repairs. I'm glad that the trustee didn't ask if I'd received any lump sums in my 341 hearing, I probably would have told the truth, since I was under oath. However, since he didn't ask, I'm making myself believe it isn't anything he cared about or needed to know...since I haven't been confirmed yet.

I just spoke with the VA Loan Center and asked if the refund would be taxable (so I would know whether or not it would show on my income taxes), and the guy I spoke with said the refund wouldn't be taxable since it was basically money that should have never been paid by me anyway (which is what I thought t00, but wasn't sure how VA or the IRS would look at it).

Now the only other concern is whether or not I would owe any taxes back from a deduction I received for it - since it is basically the same thing as mortgage insurance, which is deductible. Uuuugh! This wouldn't concern me so much if I wasn't having to include last years taxes in my Ch 13.

[justbroke]

Spending it on necessities is a good thing! I guess your attorney's view is out-of-sight, out-of-mind.

As for taxes, recalculate and do an amendment if it matters. I mean to say is this. Perhaps that refund wasn't part of anything you claimed for a deduction. It could have come from the downpayment or earnest money deposit?