% Payback (it doesn't matter)

[tigergem]

Oh, I think a lot of people, including myself, were under the misconception that you have to pay in 100% of DMI. But I also think that a lot of plans probably wouldn't work without it. Thanks for clearing that up JB.

[justbroke]

Oh, I think a lot of people, including myself, were under the misconception that you have to pay in 100% of DMI. But I also think that a lot of plans probably wouldn't work without it. Thanks for clearing that up JB.

The truth is that many Trustees, and even attorneys, read the BAPCPA bankruptcy and decided, somehow, that if you're in less than a 100% plan, then you must commit all of your disposable monthly income (DMI). It actually reads as follows;

11 USC 1325 (b)
(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan—

(A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or

(B) the plan provides that all of the debtor’s projected disposable income to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments to unsecured creditors under the plan.

The problem is that everyone skips 1325(b)(1)(A) and go right to paragraph B and think that you can't confirm a 100% plan, unless the entire DMI is paid.

However, reread paragraph (A) and it reads that if you're paying 100% of the allow unsecured claim, then the court can confirm the plan!

[tigergem]

Well. It is not very well written, and confuzzles my brain to ponder the verbage as written, although I grasp the idea thanks to your explanation. I thought it just worked out perfectly that 100% of my DMI just happens to = my secured and the only reason my unsecured are getting >0 but <1% was for my convenience of keeping my payment an even dollar amount that is easy for me to remember every month. If I had rounded down to the next even dollar, my plan would have been underfunded, so I had to round up lol - - I'm good with that!

[alli]

How does this affect my situation? I am 25 mths into a chap 13. I was ordered to surrender my tax returns but only about half of our unsecured creditors filed for their share consequently, the ones who did are ending up gettin paid 100% Why do I still have to surrender my tax return if I'm paying 100%???

[LadyInTheRed]

How does this affect my situation? I am 25 mths into a chap 13. I was ordered to surrender my tax returns but only about half of our unsecured creditors filed for their share consequently, the ones who did are ending up gettin paid 100% Why do I still have to surrender my tax return if I'm paying 100%???

Because your tax refund is disposable income and you have to pay all of your disposable income to the plan. Once all secured claims are paid, your plan will end. So, depending on the size of your refunds, your plan could end several months early.

[bklawn]

Because your tax refund is disposable income and you have to pay all of your disposable income to the plan. Once all secured claims are paid, your plan will end. So, depending on the size of your refunds, your plan could end several months early.

Just change your deductible to get more money doing the year so you don't get a refund. Pay back $100 or so. Get your money doing the year.

[alli]

Interesting...change my deductions??? But I am married with no children and I claim 1 deduction already. Should I make it 0 (zero)? I'm really stupid about things like this...sorry

[bklawn]

No, if you are getting money back on your taxes at the end of the year, you raise it up so you get a bigger check. You will pay less taxes for that year, which means you will not get as big of a refund. I'm not a tax person, but that is what I do sense I'm in a chapter 13. Any tax return you get, goes to the trustee. Just remember that if they see that now they are not getting tax refunds from you, they might ask to see you pay Stubbs again. They will see that your taxes are less now on your paycheck because of the deduction change. That will change your payback a little. I would change it a little at a time. Raise it to 3 or 4. Try to break even at the end of the year with your taxes. How much are you getting back? Adjust enough not to get any refund back. They have programs out on the Internet to predict your Taxes for the year. I would adjust enough to not get a red flag.

[alli]

Well last year We got a very small refund of $24.00 and that was not too painful to give up. Also it was the first year of our Bankruptcy so I hadn't noticed that we were paying 100% yet so I surrendered that refund. However this year or 2011 tax year, we got 300.00 back and had some emergency roof repairs to do so we used the money plus in reviewing our statement I noted we were paying the credit card co. 100%. So I guess I felt a little indignant because we needed the money so bad and if they were getting paid that rate why did they need my additional money. I wrote a nice letter to the trustee explaining our roof expense and he wrote back a very cold letter not addressing my letter at all other then to say " your plan requires you to turn over your tax refunds to the trustee"....how cold hearted can he be!!!

[bklawn]

I would raise your deductible up to 2 on fed, because all they won't is the fed returns. At the end of the year, do your taxes to break even or pay back $10 dollars. Just do not get anything back. That is a small amount to get back anyway. They will not look at that to much. I have too pay back 4000 a year cause they have my plan including the taxes I was paying at the time of filing because of the houses we had as a write off. So If I claim what 0, I will not have enough to make my payments. We pay 3400 a month back, for five years. We are in the third year, and counting. Never missed a payment yet. What ever you do, do not include any taxes you owe at the end of the year into the plan, the will pull new pay Stubbs and you will get the shaft. That is what we did one year. We owed like 4500 in taxes, so I included in to my payment plan. Guess what, they did the who plan back over again, and we are now paying double what we was paying, cause they said we was not paying enough into the plan from the beginning. We was paying 1600 a month. Just try to stay under the radar.. I would not make any changes if your pay has changed any, I mean increased. Now if your pay has decreased, go for it. They still going to get the money anyway. The plus to all this is we will strip our second, no more rental houses, no more debt. We had 400,000 in debt. No payments with 2009 cars. A house that will have equity in it instead of being 100,000 under water. So we have a lot to look forward too, we just have to make two more years!!!!!!!!!!!!!!!

[alli]

WOW God bless you. 3400 is a whole lot of money monthly. I thought we had it bad at 698. Our debt started out with 60 thousand in unsecured cc debt but only about half of the creditors put in for the money so that is how we ended up paying at a 100% rate. Thanks for helping we have 3 more years unless we can pay it off early which I am praying for.

[LadyInTheRed]

Wait! Do not change your deductions without first asking your attorney if it's okay. Your plan payment was probably based on your withholdings as they existed at the date you filed. That is why you have to give all refunds to the trustee. If you want to keep a refund to pay for unexpected expenses that aren't covered in the budget, you should ask your attorney. You should not be contacting the trustee directly.

Also, it doesn't sound like your refunds are very large. Even if your attorney says it's okay, I'd be very careful about changing your deductions. You don't want to end up owing tax and not having the cash available to pay.

[alli]

I know my refunds aren't very large. Husband is self employed. As it turns out its a good thing I opened this can of worms because it got us looking at our account on ,line and basically it looks to us and our attny like their math is way off. we have a 5 yr plan and are supposed to pay back $32,000 to unsecured debt. we were ordered to pay 698.00 a month and have been doing so for 25 months so far which would mean we have a little less then three yrs to go. Problem is we've paid in over 17,000 so far so that would only leave 15,000 more to pay. Well if we do the math 36 mths remaining x $698 = another 25,128$...so that would put us at paying back $42,128. Also like I had mentioned before we are already paying back at 100%. This is why it's so hard to swallow as to why they want to keep our tax refunds in addition.

[LadyInTheRed]

This is why it's so hard to swallow as to why they want to keep our tax refunds in addition.

Apparently, that is the way your plan was confirmed. The time to fight that would have been before confirmation. I suppose you could petition to amend the plan, but that will probably increase your attorney fees. As it is, your plan will end when all of your unsecured claims have been paid. If there is only $32,000 in unsecured claims, that is all that will be paid. Remember that the trustee gets a fee too. So your total amount paid to the plan will need to be more than $32k to pay 100%.

[wobbly]

Correct, there is no liquidation of assets in a chapter 13, (unless "you" want to give up the asset). For all-intents-and-purposes, the only asset of a chapter 13 is your NDI.

They made me give up a motorcycle and I really wanted to keep it. I drive an old car and the bike was my backup get to work deal. Kind of a necessity. It was really not an expensive bike. I think I owed like 3K on it and it was maybe worth 4K. They said it was a luxury.