Possible lower than 100% with Equity in House

[simon2020]

My attorney told me my plan is 100 percent over five years because I want to keep my home and other property.

He did however say he will go to bat for me to get me a lower percentage to my unsecured of $50k.

I have about $75 k in a second home out of state.

He recommends I pay the mortgage outside of the plan. (I don't want to pay anymore to the trustee in fees than I have to.)

Is it possible my attorney -- working with the trustee could get me a lower monthly payment? Even if it was only $50 less than the original proposal, I would be happy with that.

[simon2020]

Anyone please help with my question.

Thanks.

[UpsideDown]

Don't know, but I'd say it depends on the trustee. Hang in there, I'm sure someone will have a better answer for you tomorrow.

[justbroke]

Is it possible my attorney -- working with the trustee could get me a lower monthly payment? Even if it was only $50 less than the original proposal, I would be happy with that.

Don't understand your question. It's your lawyer's job to get your the best plan (with the lowest payment).

The more things you pay outside the plan, the less you pay the Trustee's "fee"... which is always a good thing. I pay over $500/month to the Trustee so they can pay my bills. Seems like overkill.

Are you saying that your home out of State has $75K in Equity? If so, then there's no way you're getting out of a 100% plan on $50K of unsecured debt. Even if the unsecured creditors only file on $40K of it, you'll be paying 100% of $40K.

I guess, technically, the lawyer could object to all the unsecured claims and fight them off so that you pay less than $50K back.

[simon2020]

Don't understand your question. It's your lawyer's job to get your the best plan (with the lowest payment).

The more things you pay outside the plan, the less you pay the Trustee's "fee"... which is always a good thing. I pay over $500/month to the Trustee so they can pay my bills. Seems like overkill.

Are you saying that your home out of State has $75K in Equity? If so, then there's no way you're getting out of a 100% plan on $50K of unsecured debt. Even if the unsecured creditors only file on $40K of it, you'll be paying 100% of $40K.

I guess, technically, the lawyer could object to all the unsecured claims and fight them off so that you pay less than $50K back.

YEs, I know I have to pay 100% of my unsecured debt if I want to keep the house, but I was just curious to see if you and anyone else heard of ch 13 candidates having their 100% reduced a little EVEN while keeping property. But as noted, it depends how my lawyer works with my numbers and presents it to the trustee.

Thanks for your comments.

[justbroke]

YEs, I know I have to pay 100% of my unsecured debt if I want to keep the house, but I was just curious to see if you and anyone else heard of ch 13 candidates having their 100% reduced a little EVEN while keeping property. But as noted, it depends how my lawyer works with my numbers and presents it to the trustee.

Thanks for your comments.

Absolutely not. This is a function of the Bankruptcy Code.

The only way to reduce the percentage payment is to pay the house outside the Plan... however, you'll still need to pay (a minimum) of $1,250/month for 60 months ($75K) to keep that house. Nothing can lower that payment. Then, on top of that $1,250, you'll have to pay up to 10% to the Trustee to handle that, so add on another $125.

Okay, so I'm not being 100% accurate. The only thing that would reduce the 100% payout to unsecured creditors, would be if the equity in that property were lower than the total of the allowed secured claims... and that your projected disposable monthly income isn't already such that you would have paid a higher percentage up to 100% anyhow.

Again, I believe the only thing your lawyer can do to lower the total amount paid, is to challenge unsecured claims. This will lower the total amount of money you pay, but not the percentage.

Example, say you owe $50K in unsecured credit. Because you have $75K in equity, you must pay back 100% (or $50K), minimally. (Remember, that's a minimum and there are other factors which I won't get into as they'll just confuse this example.)

If your lawyer and you object to many claims, and they are not allowed, then you would pay back less than $50K. So, say you object and are sustained on $6K worth of objections. Your total "allowed" unsecured claims are now at $44K. You would pay $44K over five years instead of $50K. That's a savings of $100/month. It's still 100% of the $44K, but at least the payment is lower.

[simon2020]

If your lawyer and you object to many claims, and they are not allowed, then you would pay back less than $50K. So, say you object and are sustained on $6K worth of objections. Your total "allowed" unsecured claims are now at $44K. You would pay $44K over five years instead of $50K. That's a savings of $100/month. It's still 100% of the $44K, but at least the payment is lower.

Well, that is very interesting regarding objecting to certain creditors. I guess it sounds like there must be a good and valid reason to object to help lower the %.

Here's my scenario:

1. Currently renting with a friend - California
2. Work in California/Domiciled here as well for over 5 years
3. 2nd Home out of state $405k (estimate worth) $296k mortgage - I pay $2,500/month which includes principal and interest ***I am requesting my attorney to help work out a deal with the mortgage company to help lower the per monthly payment - maybe freeing up some additional DMI.
4. $50k unsecured debt (credit cards, loans)
5. Back property taxes $3600
6. (1) car paid free and clear worth about $6k
7. $20k 401-k
8. Tiny savings not worth to mention here
9. Some furniture/computer(s) $4k

He did mention that it is best to keep the mortgage outside the plan to avoid more trustee fees. In regards to your comment about paying $1,225/month, is that written somewhere in the BK code?? I'm already paying more than that so do I qualify?

My goals for my Ch 13 Plan:

1. Pay as little in the plan - but 100% is accepted by me if these "objections" route don't work.

2. Lower my mortgage payment on the 2nd home - I called Countrywide and they said the same comments like I have read here... you must be 60-90 days behind for them to help. (BS) I'm also curent with all my payments since 3/06. 6/09 my payment goes up around $250 based on current Libor rates and resets every 6 months so hopefully CW will work with us to lower the monthly payment and avoid adding my property to their foreclosure list.

[HHM]

As to

1. That is probably hurting you becuase I would suppose that payment is less than you would probably normally pay.
2. Ok, fine.
3. Not going to happen. The lender has no incentive to deal. They have a lien and it is fully secured.
4. You already know you are going to pay 100% to these guys.
5. Ok, more you pay into the plan.
6. Factors into the minimum amount you must pay to unsecureds in your chap 13.
7. Ok
8. ok

Honestly, I am not sure I would have recomended a chapter 13. You would have been better off selling the house and using the equity to pay off your debt. You are NOT going to get a mod on the second home because it is not your primary residence and since the lien is oversecured, you cannot modify it in a chapter 13.

[justbroke]

Thank you HHM. I didn't even know about the $6K car, also owned free and clear. This is raising your payment as well.

As for the part of the Bankruptcy Code which forces you to pay "at least as much to unsecured creditors as they would have received in a Chapter 7 liquidation"... 11 USC 1325(4)

(4) the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date;

I don't know if your lawyer used some of your "unused" homestead exemption to offset all that equity, but it is still not enough to keep you from paying 100%.

My comment on the $1,250/month was just a minimum payment based on $75K in equity on the non-homestead property. You have many other factors affecting your Plan payment, including, but not limited to, arrearages, back taxes, 11 USC 1325(a)(4) equity, and Trustee fees.

Also, as HHM wrote, I don't think CountryWide or any lender is going to really work with someone who is THAT oversecured. They are better off foreclosing. They are in a great position.