% Payback question

[skyoumans]

I understand that the % payback should not or does not matter, but I finally filed bankruptcy today and my attorney told me my payback is a little over 1.14%. I’ve never heard anyone on this board say they paid this little back to unsecured creditors. We have about $10,000 in arrears. Will the trustee confirm this? I am assuming so since I have a pretty good attorney. Does the trustee usually end up making you pay more after 341?

Also, if our income goes up...how much does it have to go up for the trustee to raise the price.

I feel happy that I finally filed and got it over with, but my head is swimming with all the what if’s?

[shipo]

I understand that the % payback should not or does not matter, but I finally filed bankruptcy today and my attorney told me my payback is a little over 1.14%. I’ve never heard anyone on this board say they paid this little back to unsecured creditors. We have about $10,000 in arrears. Will the trustee confirm this? I am assuming so since I have a pretty good attorney. Does the trustee usually end up making you pay more after 341?

Also, if our income goes up...how much does it have to go up for the trustee to raise the price.

I feel happy that I finally filed and got it over with, but my head is swimming with all the what if’s?

My income went up over 36% over the course of my 60 month Chapter 13; I fiddled with my 401K witholdings which effectively showed my income was flat for the full five years; the Trustee never raised my rate.

[sophieanne]

Welcome @skyoumanss. Congrats for taking that first step to getting your finances back in order. Your attorney will put together a plan with all your financial details and proposed payment that will go to the trustee/judge for confirmation. If there are any questions/concerns or changes that need to be made you'll either hear about it prior to the 341 meeting or shortly after. Don't stress too much, hopefully your attorney has filed many cases and knows what to expect from your trustee and judge. As long as all the information you have provided is accurate it shouldn't be a problem. Your attorney should be answer your question about an increase in income...it may or may not change your plan payment. Just always be honest with your attorney and let him/her know if there is a pay increase (or even a decrease). Until your plan is confirmed, you will have lots of "what if's". Don't stress it..take one step at a time and you'll be on your way.
shipo - if a person is in a plan that is less than 100% payback, they may be told they can't contribute to the 401K till the plan is complete. I saw that happen a number of times on my confirmation day. If you are in less than 100% payback...i'm pretty sure a 36% over five years might be reason for an increase in the payment plan. As I mentioned above, the poster needs to speak to their attorney. And before the question comes up..how would anyone find out..normally if you're not in a 100% plan, you have to submit yearly tax returns. There is to much to gain from completing a plan, to risk not being truthful and trying to beat the system.

[justbroke]

A not-so-recent survey of Chapter 13 Trustees indicated that they only asked for plan modifications (increases) in fewer than 10% of cases. The theory has always been to keep your head down, make your payments on time, and report any major changes (over 10% in a single year or even decreases) to your attorney immediately.

I was originally scheduled to pay 2%, but mine ended up being a 0% plan. It happens. I will, and many on this board have, say that you should not worry about the percentage payback unless you're in a 100% plan. Unless you're in a 100% plan, the percent payback really doesn't matter.

[shipo]

shipo - if a person is in a plan that is less than 100% payback, they may be told they can't contribute to the 401K till the plan is complete. I saw that happen a number of times on my confirmation day. If you are in less than 100% payback...i'm pretty sure a 36% over five years might be reason for an increase in the payment plan. As I mentioned above, the poster needs to speak to their attorney. And before the question comes up..how would anyone find out..normally if you're not in a 100% plan, you have to submit yearly tax returns. There is to much to gain from completing a plan, to risk not being truthful and trying to beat the system.

Hmmm, my plan paid my creditors something around 30%, and since 100% of my debt was unsecured, they all got the same treatment. I had been contributing to my 401K long before I filed, and when I was asked about it by both my attorney, and then later the Trustee, I told them I was going to continue contributing, if for no other reason than my company has an almost unheard of 10% match for contributions. It was never any secret I was contributing and no constraints were ever put on me to keep my contributions at 10% (so as to get the full match).

[justbroke]

shipo what you experienced is the same for us in Florida. So long as you have been making contributions at the same rate prior to filing, there is no problem. The only minor issue is that some Chapter 13 Trustee will insist that is no more than the match rate. Since your match is 10% (mine is 6%) you should be allowed to save.

The only wrinkle is when you have an outstanding 401(k) loan. In most Districts, you can't have both a loan and contributions in a Chapter 13.

[shipo]

justbroke, cool, thanks! That makes sense.

[flashoflight]

A very low payback percentage does have one big disadvantage where it does matter. You cannot reduce your plan payment very much no matter what happens with your job or life if you insist on keeping all of your secured property like houses and cars.

[justbroke]

flashoflight BINGO! It also means taht you just don't have that much disposable monthly income (DMI) anyhow, to support your standard expenses. In other words, you're already on a tight budget.

However, that won't stop your from seeking a payment abatement. While I was in a 0% plan, I did a payment abatement for 2 months and was able to amortize the two missing months over the rest of the life of the plan. Yes, that was painful because it added an additional $50/month to the additional payments for about 24 months.

But, spot on.

[skyoumans]

My attorney had me and my husband up our 401 k to 8% if we did not have it already. He did make a note that I would decrease 401 k amount of needed to make the payment.

@jusbroke

[sophieanne]

Good discussion...all I can say is that in WA state (District 9)...filers were not allowed to contribute to their 401K plan unless they were in a 100% payback plan. That was in 2012...and I was here and it was talked about back then. Every district has it's own guidelines. The premise was that filers should not be contributing to their retirement plan when creditors were not getting the full debt paid back to them. Just sharing how different districts have different rules.

[justbroke]

The 9th is the only district in which a BAP (bankruptcy appellate panel) somehow reasoned that contributions to 401(k)s were only protect "pre-petition" while all other appellate circuits and courts have found otherwise. That was from 2012. No one has wanted to run this all the way up to the circuit and then full circuit and then the Supreme Court for review.

Just because the 9th is the only place in which this BAP decision is used, that doesn't mean that in other Districts/Circuits the Chapter 13 Trustees aren't trying to discourage 401(k) savings.

[skyoumans]

A not-so-recent survey of Chapter 13 Trustees indicated that they only asked for plan modifications (increases) in fewer than 10% of cases. The theory has always been to keep your head down, make your payments on time, and report any major changes (over 10% in a single year or even decreases) to your attorney immediately.

I was originally scheduled to pay 2%, but mine ended up being a 0% plan. It happens. I will, and many on this board have, say that you should not worry about the percentage payback unless you're in a 100% plan. Unless you're in a 100% plan, the percent payback really doesn't matter.

This doesn’t seem so bad. My husband’s paycheck has fluctuated 10% or more in the last 3 years and 4 years ago it was 20%. It’s just hard to tell when he is actually making more because he could make a lot one week and nothing the next.

[shipo]

Good discussion...all I can say is that in WA state (District 9)...filers were not allowed to contribute to their 401K plan unless they were in a 100% payback plan. That was in 2012...and I was here and it was talked about back then. Every district has it's own guidelines. The premise was that filers should not be contributing to their retirement plan when creditors were not getting the full debt paid back to them. Just sharing how different districts have different rules.

Interesting, I had no idea different areas of the country had such different Chapter 13 rules; thanks for pointing that out.

[justbroke]

It's even more interesting shipo as even Districts within a State can have different procedures and so-called "local" rules.