After 341 meeting question - Payments and length of plan

[Witchywitch]

Hi everyone!

We finished our meeting of creditors 2 weeks ago and confirmation hearing coming soon.
The meeting was not as bad as I expected.

I just have few questions and I would ask our lawyer about this, too (they probably overlooked).

Our payment plan was not based on percentage but was based on the equity of our property (not much).
Current payment plan is doable. However, the computation of our monthly expenses includes 2 cars.
One of them would be paid off soon (around 350 monthly payment). Would our payment increase?

We are below median income in our state but we are in a 5 year plan.

So if our 5 year plan is 30k, can we ask them to make it 30k/36 months instead? Maybe we could be so strapped for 3 years but free after that?

Hearing confirmation soon in 2 weeks.

Thank you so much for the insight.

[justbroke]

Our payment plan was not based on percentage but was based on the equity of our property (not much). Current payment plan is doable. However, the computation of our monthly expenses includes 2 cars. One of them would be paid off soon (around 350 monthly payment). Would our payment increase?

You would need to ask your attorney and whether or not the Trustee is requiring, or the Attorney proposed, a step-up plan. In many cases, the Trustee will demand a step-up plan, increasing your payment, when there is a payment that will disappear.

But, here's the kicker. Your vehicles are typically "re-amortized" by the Chapter 13. In other words, they take your current balance and then spread it out over the duration of the 5 (or 3) year plan. They then apply a new interest rate known as the Till rate. I think the current Till rate is around 5.25% or something (it's based on the prime lending rate plus a 1-3% fudge factor).

We are below median income in our state but we are in a 5 year plan.

Probably because of the equity demands which you are required to pay. For those that don't know, this can happen when the "best interest of creditor's test" (a/k/a the Chapter 7 liquidation test) reveals that the "minimum" that you should pay the creditors is higher than what the Means Test's disposable monthly income (DMI) suggests. This is always due to equity in property the debtor is keeping.

So if our 5 year plan is 30k, can we ask them to make it 30k/36 months instead? Maybe we could be so strapped for 3 years but free after that?

If you can pay it off that quick, then you can do so. However, I would take the 60 month plan and just make a lump-sum every year in which you "can" do so and only after you build a reasonable (6 month?) emergency fund.

Hearing confirmation soon in 2 weeks.

Work with your attorney on the step-up (tell them that you don't want one), and go for the 60-month plan so that you can have a stable and strong emergency fund!

[Witchywitch]

You would need to ask your attorney and whether or not the Trustee is requiring, or the Attorney proposed, a step-up plan. In many cases, the Trustee will demand a step-up plan, increasing your payment, when there is a payment that will disappear.

But, here's the kicker. Your vehicles are typically "re-amortized" by the Chapter 13. In other words, they take your current balance and then spread it out over the duration of the 5 (or 3) year plan. They then apply a new interest rate known as the Till rate. I think the current Till rate is around 5.25% or something (it's based on the prime lending rate plus a 1-3% fudge factor).

They put the current value of the vehicle 3k more than it's current value in Car 1. We are 7k upside down in Car 2.

If you can pay it off that quick, then you can do so. However, I would take the 60 month plan and just make a lump-sum every year in which you "can" do so and only after you build a reasonable (6 month?) emergency fund.

We are planning to try building an emergency fund. I already started bringing in my own lunch which would save us roughly about $300/month. Not much but it is a start. We are also trying to be frugal and find ways to lessen our expenses.

Work with your attorney on the step-up (tell them that you don't want one), and go for the 60-month plan so that you can have a stable and strong emergency fund!

Thank you! We really want to get out of this hole. Our kids are getting bigger and we need a bigger house. We are in a 2 bedroom condo with 2 kids, HOA is almost $500 a month!

[Barbisi]

Wow, Witchywitch -you sound like me! For us it's not the house itself but the burgeoning yearly mortgage payment increase ,20 year solar panel lease and the state (Colorado ) where we currently have to live. We really want to move elsewhere but can't even begin to look at other locations until we're almost done in 2022. We have zero funds and credit for travel and relocation.
Do you just want to move to a bigger house in the same area or do you want to relocate like us to another state?
Good luck in any case!

[Witchywitch]

Wow, Witchywitch -you sound like me! For us it's not the house itself but the burgeoning yearly mortgage payment increase ,20 year solar panel lease and the state (Colorado ) where we currently have to live. We really want to move elsewhere but can't even begin to look at other locations until we're almost done in 2022. We have zero funds and credit for travel and relocation.
Do you just want to move to a bigger house in the same area or do you want to relocate like us to another state?
Good luck in any case!

Thank you!

It's crazy. We just want a bigger house here. Not a luxurious house but just bigger where we are not on top of each other. It drives me nuts when I have to ask my kids to stop being kids (meaning they can't run around the house or scream out loud while playing or jump) because the neighbors would complain, esp the unit owner below us. Not looking to move in another state for now.

Good luck to you, too!

[justbroke]

It's crazy. We just want a bigger house here. Not a luxurious house but just bigger where we are not on top of each other. It drives me nuts when I have to ask my kids to stop being kids (meaning they can't run around the house or scream out loud while playing or jump) because the neighbors would complain, esp the unit owner below us. Not looking to move in another state for now.

I know exactly what you mean. I temporarily moved into an apartment hoping to buy a new condo in a development right next to this apartment community. Then I scrapped that idea. But the kids (18 and 28) keep wrestling, stomping, banging, yelling and carrying on (boys... you know!). Anyhow, they complain when they hear the neighbors and I tell them they do the exact same thing and they just shrug their shoulders!

Anyhow, we are moving soon into a single family home in April. It's "newer" (build 2017) and it's a very nice neighborhood, despite the HOA and CDD.

[Witchywitch]

I know exactly what you mean. I temporarily moved into an apartment hoping to buy a new condo in a development right next to this apartment community. Then I scrapped that idea. But the kids (18 and 28) keep wrestling, stomping, banging, yelling and carrying on (boys... you know!). Anyhow, they complain when they hear the neighbors and I tell them they do the exact same thing and they just shrug their shoulders!

Anyhow, we are moving soon into a single family home in April. It's "newer" (build 2017) and it's a very nice neighborhood, despite the HOA and CDD.

Congratulations on your new home!

I can't wait to have a single family home. I want my kids to enjoy and not worry about neighbors complaining.

[Barbisi]

Our mortgage is set to rise $215 per month(unless we can cobble together around $1800 before May 1 (which I think we will manage to do but at a cost to our health and other assorted life happenings.) So you can see why we are not thrilled with home ownership anymore. And of course the first house we ever bought is the reason we are currently in year 3 of our five year BK13 - we bought unwisely ,spent 100k (all on CCs!) fixing up this poor quality "investor home", and sold it at a loss of 20k at closing. We paid 60k in CCs and were left with just enough to buy a second house ,this time newer and in far better shape but with an iron clad solar panel lease running until 2033 that will definitely complicate selling this house in 2022!( The buyer must financially qualify to take over the lease!)
My advise ,Witchywitch : be very careful about the house you ultimately buy, because if you make a mistake like we did, it can and will ruin you financially!