Interest on my Chapter 13

[simon2020]

I met with an attorney today and he mentioned that I will have to add 11 percent to my total balance that will go to the Trustee. (I'm in California).

Question: Does anyone know if my plan will have a charge of 6 percent for "interest" during the life of the plan.

I've never heard of this so I was wondering if you are paying interest opr even heard of this other fee.

[liz417]

The 11% is the Trustee's take. Don't worry, it will be included in your monthly payments (it won't increase your payment amount) and the unsecured creditors will get what ever (if any) that is left over.
I'm in California too, our Trustee gets 10%.

[simon2020]

Thanks Liz.

Yes I realize the trustee's fees are built into the plan.

My main question was about the "interest" that is charged on top of the trustee's fee. My attorney was checking on the code for California but was not sure on the percentage.

Did you get charged an interest fee???

Thx

[wealth2009]

Trustee fee

It's my understanding the trustee fee is added back into the overall payment and divided by 60 months.

So, for example, total secured debt ($50,000), trustee fee (10%/$5,000), attorney fees ($1,500/60 months) then the your total cost of the 5 year plan would be ($56,500). Now, to arrive at your payments you would need to take: $56,000 divided by 60 = $933.33 per month. The trustee would receive (10%) = $93.33 per month and your attorney will request his/her fee per month, let's say $150.00. Then the remaining balance would go toward the secure debts = $690.00 until the attorney fees our paid in full and no other motions, pleadings, summons, etc are not enter, which would likely add to your legal fees. Otherwise, you would continue to pay the $93.33 to your trustee and $840.00 of your $933.33 payment toward your secured debts.

Wow!!! that was interesting.... Now, it may not work this way for you in CA., but, in WA. this is how the BK system works!!!! Shalom!!!

[woeisme]

How much interest the trustee allows creditors is up to his discretion I think. With the exception of home mortgages, they can change the terms of any loan, whether it is secured or unsecured. All my debt is unsecured (well, at least all that is being paid through the plan) and my trustee allows 0%, probably to be fair to all creditors so they all get the same share. But say I had a car loan at an outrageous interest rate like 16.9%, the trustee could decide to change that to 6% if he wanted to.

[wealth2009]

Trustee fee

Hello W, it's my understanding the trustee fee is regulated by the court, not at the trustee's discretion. Trustee's in every state are allocated a monthly fee based on a % of the total cost of the plan (i.e, 36/60) to manage the case for its entirety. But, allow me to say again in WA. the monthly fee for the trustee is include in the total cost of the plan. Therefore, for secured debts (i.e, mortgages and vehicles) we are strongly encouraged to pay the monthly payments outside the plan. We are required to keep the arrearages on any mortgages/vehicles in the plan to protect from foreclosure and repossession. For example, can you imagine how much you would end up paying the trustee (incl. attorney fees) for including your let's say, $350,000 mortgage, plus $20,000 arrearages. In addition to let's say, $25,000 vehicle (secured and unsecured portions), plus $5,000 arrearages.

You would end up with a secured balance of $400,000 just in secured debt alone in your plan payments. Let's say the trustee fee is 10% of the plan, incl. $2,000 for attorney fees, now you have (in WA.) $400,000 + $40,000 + 2,000 = $440,000 total cost of a plan. Now, take 440,000 divided by 60 = $7,333.33 monthly toward your plan payments. Who has that type of $$$, you might as well file a chp 7 and get rid of the house and vehicle....... Again, this is why our attorney's strongly discourage placing any secured debt inside the plan. Their attitude is why should give the trustee $$$ you can put into your own pocket????? Makes sense huh!!!

However, if the debtor's case is dismissed he/she no longer has the veil of protection, which is the automatic stay to protect them from any action of the lender(s).