If the plan stops mid-way what happens to the money?

[Mark80]

Lets say you are in a 100% payback plan, and you pay for 4 out of the 5 years. Then something happens, I don't know, anything. And you are kicked out or drop out. What happens to the thousands that have been paid back over those years? Does it just vanish and you start over, or do you drop out with some of the balances paid down? I can't see how it would be legal for creditors to take 4 years worth of paybacks and not apply it to the principle.

And I understand that any tax refund is completely lost, but does that not help payback your plan on any level? And what happens if you get small bonuses, we usually will get a few little ones (300 bucks) each year. Can I just get my mouth shut and pay my plan as usual or do you lose this also? It would be a great way to build up an emergency fund!

Thank you!

[HHM]

2 things happen.

1. Yes, the payments the trustee made to your creditors do get applied to your balances.

2. However, upon dismissal of your case, the creditors can go back to the date of filing and add-back interest, fees, and penalties for the time you were in your chapter 13 plan.

If you are near the end of your plan and something happens, your best move is to seek a hardship discharge instead of simply letting the case get dismissed.

[Mark80]

2 things happen.

1. Yes, the payments the trustee made to your creditors do get applied to your balances.

2. However, upon dismissal of your case, the creditors can go back to the date of filing and add-back interest, fees, and penalties for the time you were in your chapter 13 plan.

If you are near the end of your plan and something happens, your best move is to seek a hardship discharge instead of simply letting the case get dismissed.

I am not really worried about this happening but it was kind of a worse case scenario deal. I was really afraid that it all would go up in smoke.

Do you know what happens to your tax refunds and any extra money that comes your way during the plan? Does that get taken and applied to your balances also?

[qwertysue]

Do you know what happens to your tax refunds and any extra money that comes your way during the plan? Does that get taken and applied to your balances also?

Totally dependent on your local district and trustees, and, I would think the % of your payback through out the course of the plan.
.

[rrockinggramma]

the trustee used my tax refunds and paid it out to the creditors. It helped lower my balance etc. If you are 100 percent payback, it would simply pay off your plan sooner. Creditors can not get more than 100 percent owed or 100 percent more of claim filed.

[Mark80]

the trustee used my tax refunds and paid it out to the creditors. It helped lower my balance etc. If you are 100 percent payback, it would simply pay off your plan sooner. Creditors can not get more than 100 percent owed or 100 percent more of claim filed.

Thats good to hear, I figured it would be taken and just given to them as a "bonus". But I kept thinking about it being a 100% payback and how they could justify that. But then again I have been told on here that paying your Chap 13 off early isnt allowed anymore.

[rrockinggramma]

well the new law did change a lot but I believe if you do buy out early, then it would be at 100 percent and not before the 36 month mark. But if you are in 100 percent, and at 36 months you can refinance your mortgage for cash out or something like that and can pay it off early, then I would do that if I could. Flamingo bought hers out early but I don't think it was new law but not sure about that.

[jgarton244]

I disagree with buying out early, just to complete the plan in less time with a mortgage refinance. You are borrowing money that is secured debt, and unless you continue to make the same payments each month you made to the trustee against the refinance, you end up paying a lot more interest on your refinance loan then if you simply paid each month the allotted amount against your plan. The extra's like tax refunds will shorten the plan if at a 100% payback. If you need to get out of the plan early because you have some major home repairs, or major expenses that cannot be covered with your current disposable income, then a refinance would make sense.

[HHM]

I disagree with buying out early, just to complete the plan in less time with a mortgage refinance. You are borrowing money that is secured debt, and unless you continue to make the same payments each month you made to the trustee against the refinance, you end up paying a lot more interest on your refinance loan then if you simply paid each month the allotted amount against your plan. The extra's like tax refunds will shorten the plan if at a 100% payback. If you need to get out of the plan early because you have some major home repairs, or major expenses that cannot be covered with your current disposable income, then a refinance would make sense.

I concur, "borrowing" to buy-out a plan rarely makes sense. I would go so far as to say that doing so represents the same type of bad decision making that gets most people into bk.

[tbon]

Well, it's possible that we are looking at a dismissal too, but we are current on our home and car that is outside our 100% payback plan.
SOOOO, my question is, if we get dismissed, both my husband and I quit our second jobs, we still are over the median, but can we refile immediately and with another attorney FOR SURE!, but what happens to the money already paid to the creditors? Will we be in another 13? Our mortgage and our car is outside the payment plan, we pay that on our own...
Also, what if we could do a 7, would we then lose our home? Even though we have always been current on our mortgage? We're not behind on anything other than the 100% payback to the Trustee...a few months, but have heard nothing yet- just probably getting prepared. I am sending our attorney an explaination, hopefully she will try to get our plan ammended...but what if she doesn't??
I'm confused?

[woeisme]

the way you lose a home in CH 7 is if you have so much equity that you can't cover, then the trustee will sell the house to pay the creditors. If there isn't any equity (well, none that isn't covered by homestead exemptions) and you are paid up to date, you don't have to worry about losing your home in a CH 7.

[Flamingo]

I disagree with buying out early, just to complete the plan in less time with a mortgage refinance. You are borrowing money that is secured debt, and unless you continue to make the same payments each month you made to the trustee against the refinance, you end up paying a lot more interest on your refinance loan then if you simply paid each month the allotted amount against your plan. The extra's like tax refunds will shorten the plan if at a 100% payback. If you need to get out of the plan early because you have some major home repairs, or major expenses that cannot be covered with your current disposable income, then a refinance would make sense.

That is why we bought out early out of our 5 year Plan (bought out at year 4, started process 6 months prior - yes, Motions and paperwork took that long). We needed a new roof badly as it would not have made it to the end of the Plan and we had to prove all that (submit estimates) and prove we had the equity to buy out and refinance. We had a lot of equity going into the Plan and a fantastic lawyer. However, had we not had the major house repairs to do, we would not have bought out early. Note we were under old law when this occurred and since we were past the 36 month mark, we were able to buy out at our confirmed Plan percentage instead of 100%.

[catleg]

Just out of curiousity, let's say you have both secured debt (car loans) and unsecured debt in your chapter 13 plan and you fail to complete it.
Do all the payments made go to the secured creditors first before anything goes to the unsecured creditors?

[tbon]

do not have anymore secured's in my plan...
mortgage and 1 vehicle OUTSIDE plan, still paying on and CURRENT!
CATLEG~ my trustee paid all my secured's FIRST, they are all paid at this point.

[filingin08]

Similar question

What if your plan is never confirmed and is dismissed? Right now, our trustee is sitting on 6 months worth of payments. The only things paid have been the trustee's % and car payments. The rest is sitting there, I'm assuming until confirmation, but not sure.