Trustee Permission to sell house

[brit929]

Hello again 😁 I have another question I hope you can help with. My brother and I have a contract on the house. The buyer will be giving us $60000 cash. I told my bankruptcy attorney and forwarded her the contract and she said I would end up with $3100.00 and the rest of my portion will be sent directly to the trustee. I told my bankruptcy attorney that I have been paying the utilities since my Dad passed in June and the estate attorney said I would be reimbursed from the proceeds of the sale. The bankruptcy attorney said no I will not get my out of pocket expenses back and they will go to the trustee as well??? It is less than $1000 but that was an expense I had to absorb.So now I have 18 months left in my bankruptcy. I am at 48% plan. Let’s say I have $40000.00 left to pay 100% my part of the house sale will be around $25000.00 but obviously that won’t pay off the 100% to get finished with the chapter 13 early so from what my attorney said it would be used to pay more to my creditors. My question is could I withdraw from my 401 k to pay off the creditors and get out of the chapter 13 early and also keep my full proceeds from the house? Sorry it is such a lengthy post

[despritfreya]

If your intention is to pay 100% of all allowed claims so that you can end your case before month 60 (and not lose your interest in a non-exempt asset), I see no impediment to using your otherwise exempt asset to accomplish this. Discuss with your attny and make sure you understand the tax consequences, if any.

Des.

[justbroke]

I'm not saying that getting out from a Chapter 13 early is worth draining a 401(k), but I will say to do so with caution. It's usually not a good idea to rob from your future to pay for the present. In certain circumstances, after you run the numbers, it could be a good deal, but it should be done with all due diligence.

[brit929]

Thanks Justbroke I came to my senses and realized that would be last resort and not a smart thing to do. Finances have been really tight lately. Before the pandemic I had overtime and mileage. Now we have no overtime and my mileage is cut in half. I am blessed to have a job so forgive me if it sounds like I am complaining.I looked at my YTD today and it is $30000 less than what I had at this point last year. My monthly payment is $900.I spoke with the attorney today and asked if we could file a modification and she said she would run the numbers and said something about 16% to work with?? She said reducing the payment by a $100 ?? That would be helpful but I am not sure where else I can cut corners. I know this is probably difficult to answer but how long does it take for a modification to be approved once it has been submitted?

[justbroke]

The nice thing about plan modifications, is that as soon as your attorney submits it, you can start paying the modified values. At least that's what I did. Then, hopefully, the plan gets approved at the new modified value and you are all set. It would make no sense, to me, why the Trustee would still be expecting $Y for the next payment when the plan modification shows a value of $Y - $X (less money) as the debtor simply can't afford the payment.

As for the length of time, a modification can usually be done in about 45 days. Modifications require notification to all creditors (or at least all affected creditors). The creditors, at least in my district, are served with negative noticing and have 30 days to object to the modification or the court would then consider their silence as acceptance. Other districts have similar practices and it may use the name "judicial notice" in other courts.

[brit929]

Do you know what she possibly meant by “16 % to work with”

[justbroke]

Do you know what she possibly meant by “16 % to work with”

That may be what is known as your percentage to the unsecured creditors. But I don't know exactly because it is out of context. However, if it is your unsecured percentage, then you don't have a lot to work with unless your total allowed unsecured claims is significant.

Example, if your total claims are $50,000 and your DMI (disposable monthly income) would only pay 16%, then that means the unsecured would receive $8,000 (16% of %50K). If you are in a 60 month plan and have 2 years left, then there is technically only $3,200 left to be paid in the plan to the unsecured creditors ($8,000 * 2/5 = $3,200). That comes out to about $133/month.

Doing some math, that means there is only $133.33 a month going ton unsecured creditors which is also known as your DMI. Since you don't have much DMI in my example, the $100 would make sense as the Trustee "may" still want "something" to go to the unsecured creditors.

(Or, I'm completely wrong and the 16% has nothing to do with the DMI/unsecured creditors.)

[NoMoney30]

I didn't read the whole thread but is it not beneficial to not sell the house until after your bankruptcy is over? Maybe have the house in your brother's name only and then once you're in the clear sell it and keep all the money instead of it going to your creditors?

[shipo]

NoMoney30, I don't believe keeping the house until the Chapter 13 has been discharged is an option. Why? brit929 came into joint ownership of the house during the bankruptcy and it is the Trustee's job to mine that asset in favor of the creditors, which in this case means the Trustee can force the sale of the house.

[justbroke]

NoMoney30 it was an inheritance, so there is no "messing" around with the title. You never want that to come back and bite you in the gluteus maximus when the Trustee finds out. brit929 is proceeding as they should in any bankruptcy case where there is an inheritance and it's within the window to disclose (180 days for Chapter 7... but anytime during the pendency of a Chapter 13).

This may just be the best plan for brit929 since they would have needed to pay the value of that asset during the remainder of the Chapter 13. When it's a large amount, it's like buying the asset back at market value. This is something that really is not worth it, in the end, for the debtor.

[brit929]

Ok back again with another question 😁 My attorney hasn’t got back to me yet with the amount that modification might help with reducing my payment. Without the overtime this year because of the pandemic my monthly income has gone down by $2500 a month. Luckily I had a bit in savings at the beginning of the year but it is now gone. I think if like she said my payment could go down maybe a $100 per month but I don’t think that is going to help a lot. When she does contact me I want to ask about converting my chapter 13 to chapter 7. With my income reduction I am now below the state max for chapter 7.My car is 2005 and has been paid off for years and the only thing I am worried about is my house. I have been in it for 18 years and never missed a payment or been late. Tax assessment is $153,000 and the mortgage balance is $127000. Does a conversion sound possible ?

[justbroke]

Whether or not a conversion is possible will be for your attorney to decide. You can ask about converting and see if you would be good for the conversion. A serious loss in income could be a reason to convert. I converted when I no longer felt it worth it to attempt to keep investment property. The conversion was relatively easy for me since I already qualified for a Chapter 7 at the time of filing. Whether your State/district has any rules for conversion will come into play. For Florida we don't necessarily need to do a new Means Test, but I did in my case, along with a new Schedule I/J. The process-specific steps would be followed which may include going into a temporary abatement, to see if things come back to normal, or just a straight brute-force notice of conversion (as I did).

[brit929]

Thanks justbroke hopefully I can speak with her tomorrow and see if I could qualify. Thank you for easing my mind once again