Atty advice...is this correct about ch 13 filing?

[lalap123]

Hi,
I was told that if I am over the median in GA and want to file ch 13 that I will have to have a 5-yr plan...no way will it go any lower. Is this correct? Also, what if I file 13 to save my home's equity but none of my creditors file claims...does this mean that I don't have any payment plan? I plan on paying my atty's fees upfront so that wouldn't be an issue.

Lastly, the atty I consulted was a jerk and said that even if I get a job that I would not be able to pay the plan off early unless I could pay all of the creditors in full what i owed them prior to the ch. 13 was filed? In other words, say according to my plan I am going to pay them 25 percent of my total balances, well, if I want to pay it off early I'd have to pay them the 100 percent that I owed prior to filing? That just doesn't sound right to me.

[optimistic1]

Yes, that is correct, if your income from the last 6 months calculates into an annual income that exceeds the state median for your household size, then, your plan is 5 years long, no less.

I doubt that the creditors will just simply not file a claim, they will want to get paid, you can put money on it.

From what I understand, he is correct on the notion that to do a early pay off, you would need to payback 100%.

[EricaCallaha]

It depends on the state. We live and filed in Utah and while we cannot "buy out" our plan, we can take months off the back end of the plan. Our tax refunds are applied to the back end of the plan to lessen the length. If we choose to send additional monies, that is applied to the back end as well. We will still be paying about 25-30%. Our attorney told us that while we are in a 60 month plan, we will probably only be paying for about 42 months. We asked the trustee's office if this is correct and they confirmed what the attorney said. I guess we will wait and see what happens.

It sure would be nice if all of the laws in all of the states could be consistent or rather applied consistently.

[anne1975]

It depends on the state. We live and filed in Utah and while we cannot "buy out" our plan, we can take months off the back end of the plan. Our tax refunds are applied to the back end of the plan to lessen the length. If we choose to send additional monies, that is applied to the back end as well. We will still be paying about 25-30%. Our attorney told us that while we are in a 60 month plan, we will probably only be paying for about 42 months. We asked the trustee's office if this is correct and they confirmed what the attorney said. I guess we will wait and see what happens.

It sure would be nice if all of the laws in all of the states could be consistent or rather applied consistently.

I was told that although my DH and myself could not pay off or ahead...If say one of our family members decided to help us get out of mess and give us money or pay it for us, then that could be done...Lawyer also mentioned something about if closer to end of period there may be a way to pay ahead- Didn't ask too many questions- But ask your attorney, ya never know!

[BnkrptcyLwyr]

Lastly, the atty I consulted was a jerk and said that even if I get a job that I would not be able to pay the plan off early unless I could pay all of the creditors in full what i owed them prior to the ch. 13 was filed? In other words, say according to my plan I am going to pay them 25 percent of my total balances, well, if I want to pay it off early I'd have to pay them the 100 percent that I owed prior to filing? That just doesn't sound right to me.

That is true ... if you pay off early, you must pay 100% ... the reasoning is that you have disposable income to pay it off, and therefore you would have to turn it all over.

But my question is this ... make 5 years of payments, stay in the 13, and pay 25% to unsecured creditors, and discharge the rest at the end ... or pay off early, and pay 100%.

Now ... why would you want to pay off early if the penalty is you pay more?

And please, please, please ... NEVER take out 401k money, or refinance your home to pay off the Ch 13 early. You are substituting new debt for dischargeable debt.

I had a client who refinanced their home to pay off a prior chapter 13 early (different atty) ... they went from a 90k mortgage to 140k ... now their payment got ramped up, they fell behind, and now they're in deep doo-doo and simply "must" keep their house. I could scream.

[anne1975]

The original post mentioned paying attorney fees up front- I thought I had paid up front but somewhere along the line I must have misunderstood- See, started off looking at 7 and started that way- once lawyer looked thru all info, docs, ect we talked and then decided 13 was better. I had already paid close to 1000$ as due with 7, now in 13, that payment in addition to 16$ (balance atty said) is all I have paid BUT attorney gets % of my monthly paymt to trustee...is this the norm? Pay some cash up front and then monthly??

[lalap123]

Okay, let me re-think this...

Thanks so all who answered. What I don't understand is, let's say out of my $68K in debt only $50K file claims for their money (I've heard that's very possible...but maybe I'm dreaming). The ch 13 plan states that I need to pay 50 percent back over five years, which is of course $25K or about $417/month.

When I file I'm not working at all, but then six months later I get a decent part-time job which would allow me to double my payments every month. Why wouldn't they let me do this? And when they say you would have to pay back 100 percent of what you owe if you choose to pay it off early, is this the original $68K even though all creditors did not file claims, the $50K, or the $25K?? I mean, you would basically have to either win the lottery or be given an inheritance to be able to do this!

[SVBroke]

lalap123 -

It is my understanding that in order to pay off early, you would have to pay back 100% of the claims filed, or in your expample - $50,000. But, also in your example, if you were to get a new job with an increase of income of more than 10%, you would have to report that to the trustee and they would most likely raise your monthly payment amount, thus, increasing your % of payback of claims filed anyway.

In my opinion, the best would option would be to make you monthly payments as indicated in the plan and stay off the trustees' radar.

[HHM]

Jerk or not, the attorney is 100% correct in what he told you.

Side note, the odds of NONE of your creditors filing claim is minuscule.

As for attorneys fees up front vs in the plan, that is up to the business practices of the attorney. I prefer attorneys who charge up front, the fee is transparent to you; and avoids any conflict of interest (i.e. a counter incentive to put you into a 13 when you might be a 7, and also, if you are a high risk 13, you don't run the risk of having to owe your attorney money if you are unable to make enough payments into the plan to pay the attorney).

[Flamingo]

And please, please, please ... NEVER take out 401k money, or refinance your home to pay off the Ch 13 early. You are substituting new debt for dischargeable debt.

I had a client who refinanced their home to pay off a prior chapter 13 early (different atty) ... they went from a 90k mortgage to 140k ... now their payment got ramped up, they fell behind, and now they're in deep doo-doo and simply "must" keep their house. I could scream.

We bought out early under the old law due to extenuating circumstances requiring us to do so but as we were beyond 36 months into our plan, we bought out at the confirmed percentage of 54%. Our roof just would not last another 1 1/2 years until the end of the plan so it worked well for us in that we bought out at the lower percentage and were able to get the funds to replace the roof and other work that needed to be done. And we still refinanced for less than half of what our house was worth at that time so we are still in good shape. The new law apparently has eliminated the opportunity to be able to buy out at the confirmed percentage rate of one's plan after 36 months and is now 100% to buy out at any time. Your comments are right on target as to what can occur now under those circumstances. This is a major change for those filing Chapter 13.