CH13 Not Modifiable Paralegal says? (Rent going up $$$)

[Franco]

Hello Folks! I haven't posted in a while, I think it's been a year, my username was Trevor, but I was unable to access that account or reset password. Glad to be back posting, thanks BKforum!

Well, to keep it short and sweet, or Painful for me.... My Apartment complex sent out the new lease agreement, and I have 60 days to respond if I want to stay. I moved in here in 2018, rent was $750 for the base rent without all the extras, utilities, water, sewer, pest control, etc. In the 2019 lease it went up $150 ($900 base rent)..... I made adjustments to my spending, was able to survive. NOW, get ready for it, my BASE rent is going from $900 to.........$1150!!!!!!!!!!!!!!!! Yup, $250!! I was so pissed off when I got the email 2 days ago.

Now, I emailed my Attorney's Paralegal, and she basically said that because I'm not paying back my Unsecured Debt, my CH13 is not modifiable. In my CH13 plan I'm basically only paying off my Secured Debt which is my 2017 Truck, the Unsecured Debt is not being payed in full, and the plan will be over in 3 years to get my discharge.

Keep in mind my yearly income has been the same, I make $58K Per year, and my initial 6 month look back period estimated I would be making around $62K Per year. At this point I feel like just living out of my Truck LOL, well that won't happen.

So basically if I stay in the same Apartment, in the next few years I won't be able to make my CH13 payments because the rent in Arizona keeps rising, I thought if your expenses goes UP you can modify the plan?

Cheers folks, and God Bless! Glad to be back on this Forum!

[justbroke]

Welcome back Franco. We had some issues late last year and we lost about 2 years of posting history.

So basically if I stay in the same Apartment, in the next few years I won't be able to make my CH13 payments because the rent in Arizona keeps rising, I thought if your expenses goes UP you can modify the plan?

If you have no disposable monthly income (DMI), then the paralegal is correct. The only way to show this is really by example.

Debtor files Chapter 13 in 2019. At the time the debtor only had secured debt of a 2018 Ford ($16,000 @ 6%), and her attorney fees of $3,000. The debtor had income of $3,000/month and the car payments were $265/month. The car payments stretched beyond the length of the plan (5 year loan), so the car was not re-amortized within the bankruptcy. Based on the debtor's city/county and region, the Chapter 13 plan called for the debtor to be in a 36-month plan paying back the car, the attorney fees and Trustee fees only. This amount was $348/month with a Trustee fee of 10% ($34/month) for a total payment of $383/month. The debtor, although she had $30,000 in unsecured credit card debt, had a negative disposable monthly income (DMI) thereby keeping the total payment to the Chapter 13 Trustee at $383/month.

A year later, the debtor's rent goes up from $1,000/month to $1,250/month. The debtor attempts to get reprieve from the bankruptcy court to lower her payments so that she can afford the new rent. The attorney informs the debtor that the plan cannot be modified because the debtor is not paying anything to the unsecured creditors (DMI is $0).

In this scenario, the plan is already at the lowest amount that it can be. A plan with $0 of DMI has no wiggle room to account for any changes in the debtor's cost. This would be no different than if you weren't in bankruptcy. If you don't have the money, there's no recourse other than reducing your expenses.

Now, I don't know what the value of your DMI. It reads as though it's quite low. Combined with the additional attorney fees, it reads as though modification wouldn't get you much ($10/month from the existing DMI)?

The bottom line is this. At $58,000/year you should "technically" be able to afford -- or allocate. your resources -- at 30-33% of your gross income. My calculation is that your rent expense should be able to support rent as high as $1,595/month (33% of gross monthly income, not including non-mortgage/non-rent expense).

So where it the money going? Is your Chapter 13 plan payment significant? Is the paralegal mistaken that you're paying "nothing" to the unsecured creditors? It reads to me that you are paying DMI and it is more than your increase in rent. If your DMI is actually hundreds of dollars, I would go back to your lawyers office and ask for an appointment with the attorney. If your DMI is $0 or near $0, then you just don't have any wiggle room.

[Franco]

Thanks JB! You always gave informative, great advice to me, and so many others I remember, just forgot everyone's names haha been busy grinding, working.

Well it looks like I'll have to make more decisions to cope with this, already planning to cut out my internet which is $80 per month, and maybe quit my conceal carry USCCA insurance which is another $25 per month. Besides that, my monthly commission has been taking a hit because of much less retail traffic due to Covid. We'll see how this goes. There's not much else I can cut out, well, if I eat PB&J and maybe rice and beans I can save a bit.

I looked around, but there's not too many options, it seems like everywhere is going up in $$$ in Arizona, everyone is moving here. One apartment I looked at was $900 per month, but they had a $1000 deposit because my credit sucked even though they didn't run my credit, they just went based off my credit score I told them etc. SO it kinda makes me want to just stay put in my current spot and pay the increase in rent. The only savings grace is the fact that I live literally 1 mile from my job. If I got a cheaper apartment, it would be a small hike to work.

One thing to say though, this is making me look at every single dollar, penny pinch etc. For the past 2.5 years I had a 6% contribution to my 401K because of my companies match etc, do you think I should just make it 0% for the next 3 years? It would help a bit.

Thanks JB!

[despritfreya]

Franco

"my monthly commission has been taking a hit because of much less retail traffic due to Covid."

Talk to your attorney (not the Paralegal) about the provision in the CARES Act that allows one to increase an already confirmed Plan from 60 months to 84 months (or someplace in between) if there is a COVID related decrease in income or ability to pay. I do not know if your comment above (if proven) is sufficient. If you "qualify" the Plan can be extended but not beyond 84 months. Extending the duration would allow you to reduce the monthly amount while keeping the same overall funding.

Just did one of these for my client but I had verifiable proof that COVID impacted the ability to pay.

Des.

[flashoflight]

I think you need to take another look at your entire budget even if you get a COVID extension. You should be able to afford this rent level. Something is missing here that is not on schedule J. Here is a starting point:

Was the conceal carry insurance premiums an allowed expense on your schedule J? Is one of your hobbies guns?

Why are you paying for pest control when that is the landlord's responsibility besides the occasional can of Raid or Terro bait?

How much is the truck payment?

Are there any non-exempt assets you are trying to keep?

The schedule J numbers have to be your actual spend or the ch13 isn't going to work.

[justbroke]

For what it's worth, I had USSC insurance (platinum) and I dumped it a few years back.

[Franco]

despritfreya

Thanks Des, I know about the Cares act, but honestly I'd rather get this over in the next 3 years. It would be hard to convince that Covid is impacting my commission, the retail store I'm at is feast or famine, so it's a roller coaster ride with commission.

flashoflight

The carry insurance is just an add on, like paying for netflix etc. The pest control is built into my rent like water/trash etc. I need to check my food allowance on the expenses etc, I'm a bigger guy and eat more than I should, I really need to diet it would save a few bucks per month.

justbroke

Yeah I might cancel my carry insurance, the odds of getting into a shootout are pretty slim, but I just like that it's peace of mind.

BTW if anyone can tell me how to "multi-quote" and reply, much welcomed LOL.

[Franco]

I'm so freaking happy right now! I walked into the lease office because it's my day off, and inquired about possibly getting my lease renewal lowered. Turns out the leasing office made an error and sent out the Month-To-Month pricing to some residents, which is $200 higher than normal 12 month contract rent! I was so stressed over this, thank God it was a error.

[Carmella]

Great to hear it was an error!!!!!!!!!!!

[sophieanne]

That’s great news!!!

[VolFan]

Excellent news!

[justbroke]

I am happy that stressful issue was alleviated.