Chapter 13 payment increase!

[Witchywitch]

Hi everyone!

Anybody here experienced significant increase with their Chapter 13 payment (more than double) after the trustee objections?

Thanks!

[shipo]

As a general statement, such an increase is highly unusual. What did your attorney say about it?

[Witchywitch]

As a general statement, such an increase is highly unusual. What did your attorney say about it?

Trustee is objecting the money we pay our FIL every month since he owes half of the house. House title on his and my SO's name.

[shipo]

Understood, but what does your attorney suggest for your next step?

[despritfreya]

Owe or own half the house? Who is paying the mortgage? Who is one the mortgage? You mention your significant other rather than your spouse. It this person your FIL or the father of your significant other? Who is living in the house? Lastly, why did the Trustee object to the payment? He/she must have stated a reason other than simply the payment was to a FIL. Possibly diversion of disposable income?

Des.

[justbroke]

I have (had) the same questions that desprifreya wrote. Some wording needs clarifying in order to give a response. Once we understand what significant other, "owes" half, and just who lives on and pays the expenses of the the property, we can provide some sort of answers.

As a preview, some of Chapter 13 Trustee's objection, related to the home, could be boilerplate. Regardless, if you can't prove that you're paying the FIL (cancelled checks for at least 12 months) this could be where the Chapter 13 Trustee sees an issue. For example, if you're claiming the entire rent/mortgage and non-rent/non-mortgage expense, but the FIL is paying half of it, the Chapter 13 Trustee would be correct to reduce the amount of your rent/mortgage expense or to increase your income by the amount the FIL pays on the mortgage (and non-rent/non-mortgage) expense.

[Witchywitch]

Hello everyone!

Sorry for delayed response. I have no access at work.

Back story. Few years ago, my FIL bought a house (his money) but put my husband's name in the deed. That time, I don't have a job.
He did that so we would not be homeless just incase he dropped dead. We pay him a certain amount each month (we have cancelled check to prove), we pay taxes, HOA fees and all expenses related to the house.

Fast forward now, after the 341 meeting the trustee thinks that the house was gifted (although it's not because if FIL passes away, house would be sold and split into 4 siblings). House appraisal $120k so technically my husband had 50% equity (even though he has not).

The lawyer said his hands are tied up because of the equity of the house and the claims. He said he had to make a decision or our case would be dismissed.

Our 341 was January. The lawyer said they could find a way to at least lower the payment. Waited for the numbers.

They rescheduled the confirmation from March to July and called me yesterday 3 days before the confirmation hearing. I was thinking, they should at least give us time and other options. I was also e-mailing to follow up our revised schedule since after the 341 but have not heard anything until yesterday.

My dilemma is if we would be confirmed for $1800/month. We might not be able to pay it after few months. Husband still does not have a job due to COVID.

He said, we could sell the house and proceeds would go to creditor. Let's say my FIL would agree (we would owe him the money). Where would we live?

I don't think we could get a mortgage with this situation.

I looked at PACER and it looks like they already re-sched the confirmation three times.

Any help or idea would be appreciated.

Thanks!

[Witchywitch]

I have (had) the same questions that desprifreya wrote. Some wording needs clarifying in order to give a response. Once we understand what significant other, "owes" half, and just who lives on and pays the expenses of the the property, we can provide some sort of answers.

As a preview, some of Chapter 13 Trustee's objection, related to the home, could be boilerplate. Regardless, if you can't prove that you're paying the FIL (cancelled checks for at least 12 months) this could be where the Chapter 13 Trustee sees an issue. For example, if you're claiming the entire rent/mortgage and non-rent/non-mortgage expense, but the FIL is paying half of it, the Chapter 13 Trustee would be correct to reduce the amount of your rent/mortgage expense or to increase your income by the amount the FIL pays on the mortgage (and non-rent/non-mortgage) expense.

We have bank statements and copies of check to prove we pay him each month. We live in the house and pays all expenses.

The argument is that we "legally" do not have to pay him. We have to. This is suppose to be his rental income.

[justbroke]

It also reads as though the home was purchased with cash and there is no mortgage.

The argument is that we "legally" do not have to pay him. We have to. This is suppose to be his rental income.

Legally, your spouse doesn't have a legal obligation to the FIL. Even if there was a mortgage, the legal obligation would only be to the bank.

Back story. Few years ago, my FIL bought a house (his money) but put my husband's name in the deed. That time, I don't have a job. He did that so we would not be homeless just incase he dropped dead.

I'm assuming that is deeded in both the husband and the FIL's name as a tenancy in common? You see, that's the issue. Your husband owns at least a 50% "legal" interest in the property (based on the deed).
I would think your attorney would have caught all that up front... or did they just say that we'll see what happens?

Fast forward now, after the 341 meeting the trustee thinks that the house was gifted (although it's not because if FIL passes away, house would be sold and split into 4 siblings). House appraisal $120k so technically my husband had 50% equity (even though he has not).

Based on the deed, though, it is complex. If that deed reads "with right of survivorship" or simply "tenancy in common" those mean different things... legally. If it's a "tenancy in common" then your spouse owns 50% of the property and the FIL's estate would own 50% of the property. Your spouse could actually get, if there are 4 children, 62.5% of the property because of the wording on the deed. But if it is "with right of survivorship" that's an entirely different ball of wax.

(I'm not an expert in estate planning, but the "better" way to have titled the home may have been with a Life Estate. Even those, from my experience, can have issues.)

The lawyer said his hands are tied up because of the equity of the house and the claims. He said he had to make a decision or our case would be dismissed.

If there is equity, your spouse owns 50% of the equity and that is a factor in the "best interest of creditors test" (a/k/a the Chapter 7 liquidation test). That means that your Chapter 13 payments to unsecured creditors -- not including all other creditors -- would need to be at least as much as if the home were liquidated in a Chapter 7.

My dilemma is if we would be confirmed for $1800/month. We might not be able to pay it after few months. Husband still does not have a job due to COVID.

Due to CoVID, the attorney can stretch out the Plan to 7 years if necessary. Additionally, no one who is unemployed due to CoVID should have Chapter 13 payments right now. It should be placed into abatement. At best, the attorney could put in a step-up plan to get over the sticker-shock up front.

It reads to me as though your attorney has conceded the Chapter 13's assessment that your spouse owns at least 50% of the equity in the home. That was indeed a gift of equity (by placing his son on the deed).

You should never sign on to a Chapter 13 Plan that you can't afford day 1. It's simply a plan to fail.

Why did you not qualify for a Chapter 7 since you appear to have little to no household income at this time? The problem with the Chapter 7 is that you'd still be in a liquidation question (because of the equity).

My bottom line assessment, the equity in the home is the key issue. I don't know any way to get around that issue. Your FIL could take out a mortgage and you could negotiate with your creditors. Or, if you'd be in a 100% plan, do the same thing but inside the Chapter 13.

I sorry to bring that type of news, but this is a complex case.

[Witchywitch]

I am not sure if it's tenancy in common or right to survivorship to be honest. The property is paid in full and my husband "technically" owns $60k equity minus the exemption in BK13.

We are upfront with them with the situation. The equity of the house, ownership and the payment.

We did not hide anything.

They put the $ payment in the schedule, I have to check what description.

After the 341 meeting the lawyer told us that they would adjust the schedule J (which he said they usually do) to at least cover some if not all of the cost the trustee was objecting. He said wait for the papers (adjustments) so we could see and then sign.

Followed up for months. Never heard anything about the revised paperwork.

Calls me 3 days before confirmation hearing giving me options. Confirm or be dismissed. Or make a plan to sell the house (very vague).

I needed to know those options and plans way ahead of time to weigh things out. Not 3 days before confirmation hearing.

If he is proposing to sell the house, we should at least discuss what it would mean for us and how we can find a place to live.

[Witchywitch]

You should never sign on to a Chapter 13 Plan that you can't afford day 1. It's simply a plan to fail.

Why did you not qualify for a Chapter 7 since you appear to have little to no household income at this time? The problem with the Chapter 7 is that you'd still be in a liquidation question (because of the equity).

We have a steady income when we filed. I still have my job this time but if my husband can't find a new job soon or would be back to work soon, the payment would be half of my net pay for the whole month.

If we will be left with $1800 for the month, we still have to pay my FIL, car, HOA, insurance. We will have no money left for food, emergency car repair or medical/dental bills.

[justbroke]

I needed to know those options and plans way ahead of time to weigh things out. Not 3 days before confirmation hearing.

I 100% agree! I think the attorney may have overlooked the fact that your husband has a 50% ownership interest in the property. That's a big miss in my book, because it makes the "minimum" amount payable to the unsecured creditors a bigger number.

If he is proposing to sell the house, we should at least discuss what it would mean for us and how we can find a place to live.

You should definitely look at all "your" options (and not necessarily what the attorney is suggesting). As I woudl say, perhaps get a mortgage/HELOC and use that to offer/negotiate with creditors. Or, if the Chapter 13 total amount would be less than the HELOC, stay in the Chapter 13 but propose a 100% plan.

We have a steady income when we filed. I still have my job this time but if my husband can't find a new job soon or would be back to work soon, the payment would be half of my net pay for the whole month.

I would not sign onto a Chapter 13 with a high payment when the plan is based on either a.) 100% of the allowed unsecured claims because of equity (in a home), and/or b.) the plan is based on the income of two spouses and one is not working.

If we will be left with $1800 for the month, we still have to pay my FIL, car, HOA, insurance. We will have no money left for food, emergency car repair or medical/dental bills.

That's the problem. At the present time you cannot afford that plan.

[Witchywitch]

Is it possible to get a HELOC or even refinance the house while in BK13?

[Witchywitch]

Is it possible to get a HELOC or refinance the house while in BK13?

[justbroke]

Is it possible to get a HELOC or refinance the house while in BK13?

That procedural within the bankruptcy. Since the home is owned outright, the FIL could do this... but needs to have court permission.

The attorney "could" file an amended plan that has $0 payments for the next few months (abatement because of loss of income), then step up the payments, and show that you would make a lump sum payment at some point. The lump sum would come from proceeds of the sale or financing/HELOC on the home. Whether or not the FIL would want to mortgage the property -- to otherwise save it -- is another story.

There are ways to do this, but your attorney should be able to craft a reasonable plan. Right now your Chapter 13 Plan is infeasible because you simply don't have the household income to support the plan.

I was going to ask why you were filing Chapter 13, but that's moot at this point. Your spouse has a 50% ownership interest in an unencumbered home. The same thing would happen in a Chapter 7 where your spouse would be forced to liquidate the property to pay the creditors.

It may be time for a really good and thorough meeting with your bankruptcy attorney. I think you, personally, have already come to terms with the fact that the equity in the home is the issue. A come-to-Jesus meeting will need to revolve around your husband, your FIL, and your attorney crafting a way to get through this in a reasonable manner.

But remember, these are my personal opinions. You will need to gauge what I have written with the advice of your attorney. My bottom line is that the equity is the issue and it will have to be addressed one way or another.

(Some examples of what's in my head: if you're in a 36-month plan at $1,800/month that's $68,400. If you seek permission to extend the bankruptcy to 7 years -- allowable because of COVID-19 -- then you could lower those payments to $775/month. You could also, after so many years, decide whether you want to payoff the bankruptcy by selling the home or obtaining a HELOC/mortgage. If, however, you're at $1,800/month for 60 months, then the payments could be stretch to 84 months at $1,290/month. But... I still would not go into that with one spouse not working and COVID being so unpredictable with respect to the job market.)

[Witchywitch]

Thank you! I will look into this. The lawyer said he would draft a statement and certification to prove that we have been paying since we moved here. Hopefully it would be considered.