Increased equity results in increased payments to unsecured creditors?

[womanonfire]

Let's say that you're in a chapter 13 and you file objections to your mortgage claim. If these objections/defenses result in reducing the amount of debt that you owe, therefore increasing your equity, how is this handled after a plan is confirmed? Because sometimes this kind of litigation can take years to workout. Would the plan have to be modified to increase payments to creditors if nothing else has changed, including DMI?

After all, property values will likely increase during the pendency of a chapter 13 and we can't expect to modify the plan for this reason.

[despritfreya]

In general, property is valued as of the date of Confirmation. The litigation against your lender will most likely have to be completed before your Plan is Confirmed. If such increases the equity to a point that you have a non-exempt asset, my guess is that you will have to account for that to your unsecured creditors.

Des.

[womanonfire]

In general, property is valued as of the date of Confirmation. The litigation against your lender will most likely have to be completed before your Plan is Confirmed. If such increases the equity to a point that you have a non-exempt asset, my guess is that you will have to account for that to your unsecured creditors.

Des.

Sounds like it would be in my best interest then to negotiate a settlement whereby the mortgage gets modified instead. I have a relatively high interest rate now at 5%. Reducing it to 3% would save me about 30,000 over the remaining life of the loan.

In this case, it looks like a plan was confirmed while the adversarial proceeding was ongoing. Sweet deal for the attorney because all mortgage payments were paid into escrow pending the outcome and he got to keep them as part of the settlement after the loan was modified. https://www.govinfo.gov/content/pkg/...ap-00101-0.pdf

[despritfreya]

Yup, you are correct in that case. Case was filed 1/5/10 and the Amended Plan was confirmed 9/14/10. The Amended Plan specifically provided for:

C. Debtors shall pay into an attorney escrow account held by their counsel XXXXX an amount equal to their regular monthly first mortgage payment without prejudice to their mortgage rescission and other claims and in lieu of making any mortgage payments pending resolution of those claims. The Debtors have rescinded their mortgages pursuant to the Truth in Lending Act and filed AP XXXXX to enforce those rights and for damages regarding their first mortgage (Claim #13). Debtors will file an AP against their second mortgage holder (Claim #4) objecting to that claim, for rescision and for damages once they successfully conclude AP # XXX or November 19, 2010. Plan confirmation shall be without prejudice to the rights of the parties in the said filed and contemplated mortgage litigation.

All but one count of the AP complaint was dismissed by the court. In the end, the AP ended up being dismissed by stipulation after the parties entered into a loan mod under HAMP in 2013. I also note that the second AP was never filed, probably because the debtors could not "win" the first AP. Don't know what happened to the 2nd. Maybe it was released under the National Settlement as was typical with the modification under HAMP.

The debtors got their discharge on 10/8/13.

Des.