Attorney says we can pay extra each month to pay off early

[krielly]

Hmmmmmmm not sure I believe him........

Here's the scenario. I sent my attorney an email a while back. Because we have 6 mos to go until we are 36 mos into our 60 mos plan (old law). I asked if we could start paying any additional principal on our mortgage or camper which we pay outside the plan or if we could pay the plan off early once we got beyond the 3 years. This was his response:

"What controls this Plan is that you had non exempt assets of $15,000. In addition you are paying XXXX, and tax debt of $xxxx. In addition you are paying xxxx, xxxx and xxxxoutside of the Plan.
Your unsecured creditors are getting 40 cents on the dollar. This is why this is a 60 month Plan. If you had tried to do it in less than 60 months the 680 payment would have been a lot higher.
You currently owe the Trustee $20,925 , then you are done. Before paying more to your creditors outside of the Plan, I would concentrate on paying any extra monies to the Trustee. Once you pay that $20,925, you are done. Concentrate on paying that."

Well, I sent 2 more emails back for clarification. I told him I didn't want to send additional monies, just to have my percentage upped by the trustee. I said "so I don't have to wait until my 36 mos mark then??? I can send in extra $ with my payment each month to shorten the length of the plan without increasing my base amount" and he said "Yes".

Call me paranoid, but I might just wait until that 36 mos mark...........

What do you guys/gals think??????????

K

[HHM]

Well, if that is what your attorney said, that is what he said.

To be on the safe side, I would wait until month 37 to start paying extra. Under old law, once you get past the 36 month mark, the amount you are going to pay is pretty much locked, they are not going to change your plan at that point.

[lrprn]

I understand your concern, KR. Unless you are paying back your Ch 13 claims at 100%, it's been my understanding that any extra you pay above your regular payment each month just ups the % your creditors get. It doesn't shorten your plan.

Interesting that your lawyer is so certain about this given that we won't reach the three year mark the current law has been in effect until October 17, 2008. There's no Ch 13 case law around this issue yet that I'm aware of. Anyone else aware of a case regarding early Ch 13 payoff by increasing payments?

It could be that there have been discussions internally between local Ch 13 lawyers and your Ch 13 trustee about how the trustee is planning to handle early payoffs after the three year mark. Maybe that 's why your lawyer is so certain about this?

[diviaruba]

I understand your concern, KR. Unless you are paying back your Ch 13 claims at 100%, it's been my understanding that any extra you pay above your regular payment each month just ups the % your creditors get. It doesn't shorten your plan.

Interesting that your lawyer is so certain about this given that we won't reach the three year mark the current law has been in effect until October 17, 2008. There's no Ch 13 case law around this issue yet that I'm aware of. Anyone else aware of a case regarding early Ch 13 payoff by increasing payments?

It could be that there have been discussions internally between local Ch 13 lawyers and your Ch 13 trustee about how the trustee is planning to handle early payoffs after the three year mark. Maybe that 's why your lawyer is so certain about this?

OP is old law.

[Flamingo]

Ask your attorney for the section of the code from which he bases his comments prior to you hitting your 36 month mark or case law and look up that section (old law). We are old law and as things were explained to us because we were interested in buying out early as to our large house equity and much needed roof repairs that would not make it to the end of our 5 year plan, there is no way I would send in money for anything extra prior to the 36 month mark. The Trustee may also question what is up if you start sending in extra cash out of the blue and wonder where the funds are coming from if you are able to pay extra.

[helpless]

Is the 36th month counted as to when you filed or when you made your first payment. We filed 4/24/05, but our first payment was on 6/16. So when does the 36 month clock start?

[jgarton244]

Although you can pay extra each month to reduce the time period in the plan, it does not reduse your total amount paid for the plan. You are allowed to have savings account while in a BK 13 plan. Our trustee recommended this, for those unforseen expenses that are not normal motnly expenditures. I would put the extra into a savings account. Even though interest rates are about nil, it is better than nothing. If something jumps out that you did not plan on, hopefully, you will have saved enough to cover such expense. If you accumulate enough in savings to finally make ONE final payment early, after 36 months, then you could pay the plan off early, at that time.

I would not pay any extra debt payments outside the plan, as this could be considered favorable treatment to specific creditors, and result in a dismissal.

[krielly]

yes, we are Old law, not new law. I think perhaps I will wait until the 37th month to make extra payments. I have a feeling our trustee would probably not do anything if we did send extra, as we have pretty much stayed under the radar for the past 30 mos. He never asks for tax returns or refunds. Also, about 1.5 years ago, my husband let his truck (which we were paying outside of the plan) go back to the bank - payment of about $350/mo and the trustee was aware of this, but never upped our payment. THANK GOD! We now have another truck, with a payment of $335, but we were approx 1 year without that payment, and I never heard a peep about increasing our plan...........

I did some figuring over the weekend, and if we put aside an extra $170/mo towards our plan payment, we can be paid off in 24 mos instead of 30 mos....... That would be nice.......... Things would be a bit tight, but I think it will definitely be worth it to be done 6 mos early.

K

[krielly]

Ok, I think I am probably going to drive my attorney up the wall, but I just sent him this email:

"One more time. We have 30 scheduled payments left at $680/mo. If I send $170 extra per month, that would pay us off in 24 months. We would very much like to try and swing this to get out 6 mos early.

My concern comes in to play because as I understand it, we are required to pay all disposable income for the first 36 mos (Old law), so are you CERTAIN that if we begin sending in extra prior to the 36 mos mark, Jan won't see this as extra income which should be applied to increase the percentage of the plan (at least for that 6 mos period). Everything I read seems to indicate we can't pay any extra until we get to that 36 mos mark, without the possibility of the trustee increasing our plan amount."

Will see what his reply is............or if he just ignores me, cause he's getting tired of me second guessing him..........LOL

K

[krielly]

This is his response:

"I would just pay xxxx an extra $100/mo."

Make up my mind already..................

Geez......................

See, this is why I keep asking the question, cause I get different answers.

sigh...........

[$$only4ever]

I would be kind of cautious about paying any extra money to the trustee. I am old law, too and since the trustee really hasn't bothered me, I think I would rather stay under the radar and not bring any attentiion to myself.

[krielly]

So.......I responded to him asking if AFTER we reached the 36 mos mark, we could send as much extra as we wanted, and his response was:

"Yup"

[$$only4ever]

I think that I will pay extra $$ on my vehicle and pay that off a year early and bank the rest of the money and just chug, chug along as planned with the trustee.

[DebtSlave]

Be careful I started simply sending in payments early and my Trustee Percentage was upped from 7.0 % to 7.4 % and now it is at 10 %.
I will just pay on time from now on and keep any extra cash I may have on hand for emergencies.

[krielly]

Sounds like your trustee simply upped his percentage......Probably just coincidental, and not related to your early payments.
No impact on you.......just reduces the amount your unsecureds get.

In your case, I don't think you could pay off early, as you're only a 3 year plan. We are 5, and under old law, you were only required to pay ALL disposable income for the first 3 years.

I envy you for being so close to the end! Good job!!!!!!!!!!