what happens to arrears in a 13 when

[sandhall]

you surrender the house while in 13. The lender sent us a letter saying they would not seek a deficeny balance and that house sold for payoff plus attorney fees. But the arrears on payment plan shows we owe 0 to it but a balance is still included in the payoff example payoff is 18,098 (13) but if I minus the arrears it would be 9032 my atty doesn't seem to know where the extra 9,000 will go when our plan is finished our other creditors were already getting 100% my atty's paralegal said that we should just wait till end of plan and see what it does. we have 23 months left and believe me I could use a lower payment.

[HHM]

Did these arrears arrise before or after you filed you chapter 13?

Regardless, you have some options. If you are already paying 100% to your unsecured creditors, you could amend your plan, which, at the very least, will shorten the amount of time you are in the plan...(you don't get to lower your payment as the BK law requires you to devote ALL your disposable income to your plan, unless, of course, the amount of your disposible income has changed).

If the goal of the BK 13 was to save your house and pay pre-existing arrears, but you let your house go anyway, you may consider converting to a chapter 7 (assuming you qualify).

On a side note, paying attorney's fees from the proceeds of the sale of the house could give rise to a number of violations (you are still entitled to your equity exemption and attorney's fees are not principal). You may want to contact a NACA (National Association of Consumer Attorneys) to discuss, what, if any rights you may have.

[sandhall]

before(13) chapter 13 we are in a 36 month plan. We have ask abt converting to a 7 but our attorney says the trustee will object even though our income is below the median for SC when I say below I mean abt 15000 below and my spouse just retired from military and we might have to move to another state for a job so I ask atty again abt chapt 7 and he said it would not be a wise move since we have only been in chapter 13 for 14 mnths and hubby retired while in plan duh hubby was told to retire due to no security clearance (due to debt) to do his job. so I wonder what we will do if we move abt housing when they see we are in a chapter 13 in SC atty told us we do not have to change the state. But would we need a attorney in the state we are moving to? Is 36 mnths the shortest time for a 13? Yes I did ask my atty abt them paying their atty out of the sale he said he would inquire since I have a letter from trustee saying lender must turn over any overage to him. maybe it is time for a new atty

[HHM]

Honestly, sounds like you need a new attorney, if you are below the the median, regardless of reason (or, at least if its for a legitimate reason like retirement), no presumption of abuse exists, and therefore the issue comes down to your schedules I and J.

As for the shortest amount of time for a 13, the default amount of time is 60 months, the only way to get under 60 months is to pay 100% to your unsecured creditors.

Granted, I don't have all the background, but it sounds like to me you should convert to a chapter 7. Your attorney is right about 1 thing, you would still file where your current BK is pending.

[sandhall]

I looked at my schedules I and J and went over what we make now to what our expenses are and thursday will be consulting with a new atty. our atty now that I am looking at all these papers did not include full insurance prem for car wrote it was to high and that my minor teens would have to pay their own also told my spouse that trustee and judge would not allow us to pay for our youngest who is 16 and finished high school this yr to go to local tech college in our budget so I am now wondering if his fee that was paid in plan of 3385 was his bottom line not to mention when I call to ask a question they tell me what time the call is started and when it finishes and then tell me I have so many left before they start billing me. all this questioning started when I realized how stupid it is to be in a 13 when house is no longer in picture.

[HHM]

Actually, the fee that you are being charged sounds about right, and depending on where you are those issues about car insurance and education expenses might be right. It's not uncommon for attorney's to give you only so many minutes/hours of "phone" time.

Your attorney actually sounds knowledgeable, but what I think is happening is that your attorney does not want to go to the hassle of handling additional items for you because then he/she would have to go to court to get authorization to charge additional fees. The dirty secret of Chapter 13 fees is that the fee is "essentially" set by the court, district by district. There is a certain amount the court will allow an attorney to charge without seeking permission of the court. (strictly speaking, under the BK Code, an attorney must make a motion to the court to get a fee authorization, but for the sake of judicial economy, pretty much each judicial district has set a fee amount that they will not scrutinize). The $3385 you were charged is an average fee for a chapter 13 (i.e. where I am the avg. fee is $4,650).

As for expenses, you do get capped by your regional averages (set by the IRS), for things like transportation expense, etc. And certain items like "excessive" educational expenses may be seen as "luxury" items.

However, you should still consult with a couple of different attorney's for their advice.

[CindyLou]

If you look at your plan it will show that your attorney is paid FIRST. Probably your first 3-4 payment went directly to your attorney, so his fee is probably paid in full by now.

[tofargone]

Time to look into another attorney. I am assuming the reason you did a 13 is to save your house. With that gone you might as well as get into a 7 and be done with it all.


Good luck

[tofargone]

I just reread your post, another possibility is that you already paid the arrears. You may want to look at your trustee's schedule. Since the arears is a secured debt it will be paid before the unsecured will on your schedule so even though you have 23 months left the payments you have made have probably paid off your attorney, your arrears and then the rest went to the trustee or some unsecured.

Let us know.

Thanks

[sandhall]

The attorney is paid in full but the arrears was not paid in full but my balance owing says zero but there is a balance. it is crazy to stay in a 13 when we no longer have the house we were informed by letter that we have used our phone time was allotted 30 minutes and have 15 minutes left on appointment time now after that is used I must pay for a 30 minute meeting $125 this to me is crazy I have only been in his office for first free consult and the signing and spoke on the phone three times once to give new address so left that with office help and two calls. so I guess what I paid 3385 was for him to file and really nothing else if I want more phone time it is 25 dollars for 10 minutes. If i want him to convert the letter states it is a additional $1500 dollars up front which I understand but basically the 3385 hires him to be our attorney thru the whole 13 plan right? and if we convert then he makes more. His charge for a chapter 7 is 1000 why the extra 500 to convert. I am so confused

[HHM]

From my experience, the fee structure and amounts you are being charged are typical, so in that sense, maybe you can put your mind at ease on that issue to some degree (it would take to long to explain the behind-the-scenes stuff in this forum). Moreover, in nearly every jurisdiction, the fee paid at the beginning of a chapter 13 DOES NOT cover the entire plan length. However, you are correct, if the reason for you to file chapter 13 was to save a house, and you let the house go, then there really is no need for you to stay in a chapter 13.

[TiredandWeary]

Dear HHM (post reply #4 above), I am a new member. I am slightly confused about something you mentioned above...my hubby & I are currently in Chap. 13 (month 12) BK and I was under the impression that you can exit the Chap. 13 as early as 37 months if you pay back the amount to unsecured creditors that you would have payed under the plan had you remained in it for the entire 60 months. Am I incorrect in this? So, does this really mean that the only way to get out of Chap. 13 plan after 37 mos. is to be able to pay off 100% back to the creditors? All this time I was thinking we might be able to refinance after month 37 and simply pay off the remainder of the plan, NOT the entire 100% owed to creditors. Please let me know what I may have misunderstood! I am now very depressed, tired & weary if this means we will have to endure the full 60 mos. under the "thumb" of the BK trustee!

~Thank you,

Tired & Weary in Florida

[lrprn]

...my hubby & I are currently in Chap. 13 (month 12) BK and I was under the impression that you can exit the Chap. 13 as early as 37 months if you pay back the amount to unsecured creditors that you would have payed under the plan had you remained in it for the entire 60 months. Am I incorrect in this?

I'm very sorry to be the one to tell you, but to exit a Ch 13 earlier than the number of specified months in your plan, you typically have to pay your creditors that filed claims back 100% of what they are owed.

Most trustees won't consider an early payback before three full years of Ch 13 payments have been made. Also your lawyer has to ask your trustee to calculate what the early payoff amount is - it's not as simple as paying the amounts listed on 13network and PACER.

Hang in there - think of the awful alternatives if you hadn't filed bankruptcy. This too shall pass. At least now you know the truth and can plan accordingly.

[TiredandWeary]

Thanks for the clarification everyone! Wow! That totally sucks and I guess I had the wrong idea all along...what a downer. But, you are right, the alternatives could have been much worse I suppose. With the housing market as it is, I'd be surprised if after 37 mos. we could pay off 100% of all our debts, supposing, of course, that we would use the equity in our home to do so at that time. Oh, well...at least I have a place such as this forum to commisserate...as they say, "misery loves company"!