Special Circumstance in a 100% Plan

[Poser90210]

Hi, everyone, I consulted with a BK attorney yesterday. We can repay 100% of our debt in 5 years. Also, I have no issue with the stringent budget, with one exception that’s hugely important. Our adult children have intellectual disabilities and are functionally toddlers, and they live 4 hours away. We try and visit with them and/or bring one home every couple of months, which usually involves spending one or two nights in a local hotel. The attorney said my trustee payment would be $3,600/months, and there’s no room for any cash to see our kids. All of the debt is unsecured, and a straight-up payment of 100% of our debt plus the trustee fee and the attorney fee should be around $2,600-$2800/month. Is it unreasonable to ask for an allowance of $600/month to see our kids? We would still be paying the trustee $3,000/month. But the attorney wouldn’t hear of it.

[justbroke]

If you must be in a 100% plan then you have to pay the total claims, plus the attorney and trustee fees, plus the priority debt, over the life of the plan. Even if your children lived with you then it appears you would still be in a 100% plan. This suggests to me that you are protecting equity in your Chapter 13 and also may have priority tax debt that must be paid over the 60 months.

Because your children live separately and I'm guessing that you do not claim them as dependents nor supply more than 50% of their living expenses annually, they are not considered dependents. As I wrote, even if they were truly dependents, there may be other issues which necessitated filing a 100% Chapter 13 Plan.

As one judge here in the Florida circuit wrote, a debtor would forced unsecured creditors to pay for something that is not the creditor's issue issue.

You can always ask.

What I did in my Chapter 13 was tighten my belt on other expense items and create a rainy day fund. I couldn't do all the things I wanted to do, but I did enough penny pinching to have a reserve and do some things. YMMV.

[Poser90210]

If you must be in a 100% plan then you have to pay the total claims, plus the attorney and trustee fees, plus the priority debt, over the life of the plan. Even if your children lived with you then it appears you would still be in a 100% plan. This suggests to me that you are protecting equity in your Chapter 13 and also may have priority tax debt that must be paid over the 60 months.

Because your children live separately and I'm guessing that you do not claim them as dependents nor supply more than 50% of their living expenses annually, they are not considered dependents. As I wrote, even if they were truly dependents, there may be other issues which necessitated filing a 100% Chapter 13 Plan.

As one judge here in the Florida circuit wrote, a debtor would forced unsecured creditors to pay for something that is not the creditor's issue issue.

You can always ask.

What I did in my Chapter 13 was tighten my belt on other expense items and create a rainy day fund. I couldn't do all the things I wanted to do, but I did enough penny pinching to have a reserve and do some things. YMMV.

Thanks. All of my debts are credit cards and unsecured signature loans. There are no priority debts. That’s one reason I thought it was odd the attorney wouldn’t even discuss the issue.

[justbroke]

The reasons may be simple. If you are single with high income, you would almost certainly be in a high percentage plan. Usually, a high percentage plan is caused by unprotected equity (such as homes and vehicles). I can't speculate but people are forced into a 100% plan because they make too much money (for their family size), they are protecting equity, or some other reason.

From the few things you have posted, you don't own a home, have no car payment, and make enough to pay out a whopping $3,600/month to unsecured creditors over 60 months. If your disposable income is that high, there's nothing you can do about it except maybe do some planning before filing. If you have an older vehicle (or vehicles) ask your attorney about buying new ones to survive a 5-year plan.

There's more going on here since we usually don't see a 100% plan often unless the person is protecting equity or they are a high-wage earner with a small or no family.

[Poser90210]

We do own a house, but it has very little equity because I used it all to kick the can down the road a few times. The one thing I can think is that the attorney was really hot for me to max out on Roth 401(k) contributions to lower our income by $30K per year and build up my retirement, which also is low thanks to me kicking the can down the road. Then only $1,200 of the $3,600 would go to creditors, which seems to me would make it a less-than-100% plan. Seems like cheating to do that right before filing, but I’m not a BK lawyer. I should’ve asked for a detailed breakdown of the $3,600, how long I would need to pay it to hit 100% without the 401(k) manipulation, and how much the payment could be decreased before upsetting the trustee.

[justbroke]

The bankruptcy rules, especially for a Chapter 13, allow a debtor to make the maximum contribution per year as allowed under the law. Many attorney suggest upping your 401(k) savings. Typically they say to contribute the max matching percentage.

So, to me, it appears that your attorney is looking at ways to save money and reduce the required payment. Keep working with them.

[Carmella]

This is just a thought and justbroke can chime in.

Since it's 100% plan you are paying everything back therefore the payment can't be higher.

Is it a possibility to pick up some extra work even a "menial" type job just to make a few extra bucks that can cover some visits with the kids? You say "we" so I assume you are married, between you and your spouse can you pick up some sort of work and stash the cash for stuff with the kids?

I know that's not easy as it sounds, but I think I would try that. Or focus on visiting them more often with long car rides for you and your wife.

This is just a thought I don't know the BK end of it except I do not "think" they could raise your payment if you make a small amount more per month. Maybe not $600 a month, you may need to cut back on the amount of overnights even if you can make a little more cash.

[justbroke]

As Carmella eludes, a good attorney that can fashion a plan that is feasible is worth their fee. For me, a plan is feasible if it has a chance to survive the 60 (or 36) months that it is active. This includes, at least for me, a chance for the debtor to create and maintain a rainy day fund. Nothing fanciful, but to deal with what life will through at the debtor.

To me it reads as though you have an attorney that is thinking about ways to reduce your disposable monthly income (DMI). As I mentioned, that could include getting reliable transportation (hint: a new car) before filing. Some attorneys will just mildly suggest obtaining reliable transportation and not use the words "buy a new car" aloud. There's a fine line.

[Carmella]

I guess what I was saying could be a fine line. If you pick up extra work prior to filing then they could possibly try to adjust the payment or length of the BK from 5 yrs to 3 yrs, but if it's picked up after you file everything is already in place and there's no need to adjust the payment.

I definitely agree with seeing more than 1 attorney to see if there can be arrangements. When we talked with the second attorney he was better.

My daughter was involved in sports and I had questioned the cost if she could continue since she was trying out for a professional position (ended up on file, but never was called up) and the paralegal was like no way...but then the attorney thought it was no problem and looking back in hindsight I think it was because our disposable income could cover it on a tight budget since we were already at 100% there was no need to include it as an expense. We procrastinated in filing so by the time we did she was already "on file," but also graduating college so the sport did not pan out, but we were still, partially, supporting her on our tight budget. But she was a legal adult and graduated college even though she wasn't making enough to support herself!