Our chapter 13 journey has started

[notreallyme]

Just realized I haven't updated in a while. Nothing major has changed. Mortgage company is being a pain. They put payments from the trustee in suspense for a month and then apply them. They are applying in increments of full payment only - rest stays in suspense. That is expected. Trustee is making three payments a month - one to arrears (two payments from before filing), one to fees the mortgage company added on for bankruptcy and one for on-going monthly payments from the time of filing. Mortgage company is applying all to the payments since filing. When they apply this months trustee payment should be caught up on current payments, so will see how they start paying down arrears and fees. If they didn't place payments in suspense for a month, would be caught up now. By them suspending payments, they are able to say each one is late and charge me a late fee each month.

Still cheaper than the interest I was paying on unsecured, so I am ahead of the game.

[Carmella]

It sounds like all is going well. Once the BK 13 is in process it's just waiting it out and juggling life on the income you have left!

[notreallyme]

December was slow so not much to report. New year started with a bang - furnace went out the first week of January. Luckily the house has two and we put in some space heaters. No-one will finance us (surprise surprise with the credit score hit from financing) so on top of payments, we are socking a little away each check since one of the items that died is the blower which is needed for the AC as well.

Then got a letter our mortgage company was closing their doors - they are under federal investigation and have some large fines for incorrectly managing reverse mortgages. Was a privately held company, so they decided it was just easier to sell off all their loans and close down. Unfortunately, they did not tell our trustee the mortgage was transferred. Asked our lawyer as soon as we received the letter mid-January (they gave the minimum legal notice of 15 days), but he said it should be fine - it is up to the mortgage company to tell the trustee. Waiting to see how bad the accounting goes - Trustee made the payment on 1/31 to the old company, which should be OK - transfer letter said payments after 2/1 are due to the new company. We'll see how that goes.

Extra disbursements in January - we pay every two weeks, but trustee is slow with recording payments. They actually received three payments in September, but they record them 4-17 days after they are withheld from our paycheck, so it took until now for the "extra" payment to be recorded.

Seeing some progress - all mortgage gap and arrears are caught up. (except for a small balance where the trustee appears to have forgotten to send out the check - balance is $89.81 and our case summary shows $89.81 on hand in our account). Now only secured remaining is a small state tax bill and the two on-going cars. Be interesting to see if now the trustee makes payments to unsecured or if they just pay off the cars quicker. Hoping they pay of the cars quicker since we pay interest (5.5% till rate) on those.

If you can, follow the advice people gave me of trying to set a little aside for emergencies. We were, but wife's car needs tires and brakes (luckily just pads, hasn't gotten down to the rotors) which we are prepared for but then the furnace issue hit.

Still ahead of the game from filing - wish I had done it quicker. We are in 100% plan, but just having interest frozen on unsecured is a big help. Each month when I download the trustee summary it is exciting to see secured balances decreasing (now pretty much at zero) while unsecured isn't growing. Soon will see unsecured going down. 8-9 months in - Filed in May but first payment to trustee in June. Hoping things get a little better each year as my wife and I get our annual increases. Also holding out hope for minor profit share bonus this year.

Listen to the experienced people here - they've been through it all and know what they are talking about.

[notreallyme]

11 months in and things are going as planned. Mortgage arrears and gap is all caught up. Last few payment have been 100% on cars. Looks like trustee will totally pay off cars before going to unsecured (cars and small tax item only secured or priority claims). Cars should be totally paid off according to trustee on the 8/31 payment. Lender's websites show different amount, but not far off - only off by $50 on one car after 11 payments and less than $100 on the other car.

Mortgage statement looks messed up - our original lender went out of business and sold off our loan. New lender put the first 4 payments in "suspense" so over 10,000 is just setting out there in limbo, but at least they recorded them. Next couple of payments they actually applied the payments to our balance and escrow accounts. I am a spread sheet monkey so I am calculating how much interest should be accruing versus what they are accruing by ignoring four payments. If it becomes an issue at the end of our plan, I will have documentation to fight them. I download the ledger and claims summary every month from NDC and also download our mortgage and car statements so that I can reconcile payments.

Might not update again until all of secured is paid off in August.

[Carmella]

notreallyme sounds like you have it all under control and moving right along!

[notreallyme]

So, my August 31 update. As expected according to the trustee NDC site, all secured claims are paid (more on this below). Part of the 8/31 trustee disbursement has started going to unsecured. I thought they paid all creditors at the same time (same percentage to each). However, they only sent payments to about a third of unsecured. I am guessing that is because they didn't want to split it further and issue a lot of $10 or less checks.

No the concerning part. For the first 11 months, I tracked trustee payments to what the creditors were recording (for those where I could still see the accounts). Everything was matching to the penny, so I got lazy and stopped checking. Big mistake on my part, I would recommend that, if you can, reconcile the trustee ledger to what your accounts say was recorded. I stopped checking and two semi-big items have occurred.

First, my primary mortgage was sold off when the company went out of business. During this, $5,500 disappeared - basically the arrears amount. Trustee shows arrears paid, new company says still owed. Once this entered bankruptcy, I wasn't able to track the original mortgage holder. Luckily I can track on the new mortgage. I know that the trustee does an audit before discharge, so they will catch this when they ask for confirmation from the mortgage holder that everything is current.

Other issue, one of our car loans and our HELOC are through the same bank. The HELOC is on an adjustable rate. Since interest rates have gone up, the payment should have gone up. When payments first started, the bank submitted a monthly payment that was $100 to high, but lawyer said nt worth fighting about since interest rates were rising. However, now 14 months later, interest rates are much higher and the bank never asked for an increase, so the payment is too low. Instead of asking for an increase, they have been applying part of what the trustee has been sending for the car to the HELOC. So, trustee says car is paid off, bank says we still owe almost $800. Also, they "lost" $100 - I add up their recorded payments for both accounts versus what the trustee has actually paid and $100 disappeared in May.

I have sent an email to our lawyer explaining this, including a spread sheet that shows for every month what the trustee sent in and how the bank applied this to the accounts. If we have to send a payment to the bank to pay off the car, we will start saving up for this. Bigger concern is if the bank doesn't raise the HELOC payment, we will be getting further behind every month.

Overall, about a year in and things are going as expected. If you can, follow the advice of the senior members here and try to set up an emergency fund. We were doing OK, then our furnace broke in December and then my wife's car needed major repairs in March. Our monthly payment is pretty steep compared to our income. However, we thought we would gain some breathing room this year as salary would increase but payments wouldn't. Then, my company had a bad year so annual profit share was 50% of prior years and my wife's hours go cut. Still able to keep up with bankruptcy payment and bills, but can't put a lot into replenishing the emergency fund. On the plus side, based on the trustee ledger balance on our unsecured claims (which match my records) and the amount they will be paying monthly, the unsecured should be paid off in 30 more months, so the whole process will be around 44 payments rather than 60. (100% plan, but a lot of creditors didn't submit claims, so our initial plan payments are higher than what would be needed to pay 100% of submitted claims in 60 months)

[flashoflight]

That HELOC is going to burn you and it needs to be dealt with in the next few months in case the bank wants relief from stay. You need to calculate the payment yourself according to the terms of the note for calculating the adjustable interest and pay the much higher monthly payment amount to the bank. So I would have calculated what the trustee would pay to the HELOC and you make up the difference every month. Yes I know the new payment is probably much bigger and probably unaffordable. Now you have new HELOC arrears and need to catch those up too. I think you need a plan mod to refinance the 1st and 2nd to a new 30 year FHA manual underwrite mortgage to rid yourself of the arrears. Even though the interest today is much higher than the original 1st mortgage, you cannot lose the discharge by having mortgage arrears at the end due to not paying enough to the HELOC. I think if you're going this route, you should pay off your bankruptcy with the refi since you have to go 100% anyway. If you don't pay off the bankruptcy with the refi, get a limited cashout refi to pay off the HELOC completely and the car arrears. Then direct escrow to pay any refunds to the car loan rather than you.

[notreallyme]

Thanks for your comments. That is what we are worried about is a new arrears developing that would end the stay or cause problems with the discharge. Luckily there are no arrears yet based on the banks accounting (per the monthly statements). I asked my attorney if we should contact the trustee on the banks behalf or contact the bank to increase the monthly payment the trustee sends out. For eight months the payment the trustee sent was over 100 too high. Then for about three months it was close to correct as interest rates went up. Then for five months they have been misapplying the car payment to the heloc. So on their end it shows us exceeding the monthly minimum payments.

Once the trustee stops making car payments, current plan is to make manual payments of 100 each month on top of the trustee payment until the correct payment amount is communicated to the trustee. Will also keep an eye on interest rates incase the feds raise it again. Definitely don't want a new arrears developing. Also want to find out if I should send in monthly payments on the car. The monthly payment in the plan was only 85 but the trustee was sending in about 150 a month. Then once the first mortgage arrears and fees were paid off they started sending 450 a month which is why the trustee shows the balance of 0. In April is when they bank started applying part of the car payment to the heloc. Luckily was not behind on the heloc when we filed, so there was no original arrears.


Figure depending on how the bank wants to handle it I need to send them 750 - they can either use it to finish paying off the car or go back and properly apply the payments then use the 750 to pay off the new arrears that proper accounting would have created. Biggest issue is going forward. I would like the trustee to make the correct payment. However the banks attorney and accounting department aren't real bright. We tried to get the correct payment at the beginning but they couldn't figure out simple math. Finally our lawyer and us agreed to just leave the payment too high. The rest of our trustee payments would still pay everyone off in less than 60 months. And we knew interest rates would go up, but in the meantime the higher payments would lower our balance - which they did when I look at the statements.

Basically just want our lawyer and trustee to get all payments correct now so there aren't any issues in three or four years when it is time for our discharge. Don't even mind paying a little extra if we have to - that would just have our plan end even earlier. Heard too many stories of people getting to the end and either owing a lot or getting a dismissal rather than a discharge. I would rather over pay and either end early or get a refund.

Unfortunately shot my credit score to **** before we filed. Otherwise I would have done a cash out last year and paid everything off rather than file but couldn't find a lender who would touch us. When we filed we had about 35% equity in the house. Due to inflation the house is worth much more now, but don't think anyone would lend to us and the house is above the regional cap for fha if we combined the first mortgage and the heloc.

This all my fault for not reconciling the payments the last few months. Everything looked good for a year so I got lazy. Also trying to find out how to talk with the lender on the other car. As soon as we filed they transferred the account to their bankruptcy department and took away access to statements and online account, so i don't know if they balance to the trustee either. Might have to have our lawyer tell with them since they don't want to talk with us. Have been trying to avoid contacting our lawyer too much as I don't know what was included in our flat fee besides the initial filing, plan development and 341 hearing.

Sorry for the rambling post. I appreciate all of the advice I her on this forum.

[notreallyme]

Heard back from our attorney. Basically it us on us, not him, to reach out to our bank. Flashoflight was pretty much on target. We can't ask the trustee to increase the heloc payment - the request has to come from the bank. Side note, our primary mortgage company is pretty good about this - they do an escrow analysis twice a year and also make as needed adjustments. For example when our insurance increased, they asked for a small increase in the monthly payment. Then in June when our county raised our assessed value ==> property taxes increased, they requested another small increase.

So from our attorney:

1. Talk with our bank and ask them to increase the payment
   1. Based on their past rate of response it will take them months to ask for the increase
   2. Until they do, monitor our payments - our due date is the 10th, so look at the statement for the total due and then subtract the trustee payment and make sure we submit this before the 10th - either on-line or walk into the bank to make sure no arrears ever develop. (There is no arrears right now as they have been taking what is on the statement due amount using the Trustee HELOC payment plus grabbing some from the car).
2. On the car versus HELOC accounting
   1. We can ask them to fix their accounting using the trustee ledger numbers
      1. This would cause an arrears on the HELOC of 800 which we would need to pay off ASAP
      2. Car would then be paid off
   2. Leave this alone and make monthly payments
      1. Scheduled payment is 85 month - so pay at least this - more if we want the car paid off sooner
      2. HELOC will be OK based on their accounting
      3. TIll rate is 5.5%, so a little interest each month, but roughly 10 payments of $85 should pay off the $800 balance.

Our state is a little ambiguous on car titles. In some cases, you get the title as soon as the balance is $0. Other lenders interpret it as you get the title at discharge. Only reason to pay off early would be to attempt to get the title back if we were going to trade-in the car. However, since it is paid off and in very good shape after the repairs in the spring, we can drive it for quite a while with only normal maintenance expenses. ( a 2017 model year with 88,000 miles).

We can swing the extra payments - it will just back up even further rebuilding our emergency fund and make for less presents at Christmas. All of our kids are grown and either out of the house or in college, so they understand our situation and are fine with smaller Christmas celebrations for the next couple of years.

[notreallyme]

Been a long time since I updated. Just hit our 2 year anniversary - filed 5/17/2022 and trustee made the first payment on 6/30/2022. So 24 payments down. Nothing has really changed - budget is still tight and unexpected expenses have kept our attempts to rebuild savings behind schedule. We were warned to expect "unexpected" expenses - glad we listened and have set a little aside in months were we get ahead of current expenses.

Secured including arrears were paid off last year, so payments go towards trustee fee, mortgage and HELOC and then to unsecured. I am paid bi-weekly, so trustee gets two payments most months and three every sixth month. On average about 3.3% of the original unsecured is paid down each month. This puts us still on track to end after 48 payments rather than the full 60 months in our plan. Will take a couple of months longer than I first thought - when we started the trustee fee was 6%, it is now at 9%. Still lower than the max allowable of 10%, but does send a couple hundred more a month to the trustee instead of to the creditors.

Not looking for credit, but it is nice to see our scores slowly climb each month as the average age of our accounts increase and the time since last delinquency gets older. Went from low 520's to just over 600. Will follow the tips in rebuilding your credit score post once we are discharged. We are a little ahead on that as the trustee approved getting a small credit card for business travel.

Wish we had bit the bullet earlier and filed bankruptcy sooner before we got so far behind. Live and Learn I guess, but hoping to not go through this again and we plan to continue to live on a budget like we have been forced to during this process.

[Carmella]

Sounds like you are right on track and it's going according to plan. I also regret not filing for BK sooner than we did as I procrastinated a long time maybe a year or so after we saw the first attorney. Not to mention the time when we wouldn't even consider BK an option. But the good thing is in the here and now we DID IT and even if we regret waiting we are still coming out of it and able to make a new start!