Payment Calc for 13 with Lien Strip Help?

[pcn]

Can someone please explain how this works? For instance, is disposable income calculated including the 2nd mortgage payment as continuing to be made if you opt for a lien strip? Or is the amount you used to pay the 2nd mortgage moved over to your disposable income and it just increases what all the unsecured creditors divide up? I'm confused because it seems that some calculations, like the means test, use expenses for eligibility that can go away after filing, like a second mortgage, or auto loan that doesn't end up getting reaffirmed or payed after the plan is approved. I don't want to think the payment is going in one direction at "X" amount and later find out that yes it did, but it is now "X" + "lots more" because now that second mortgage payment amount goes to disposable income. Thanks!

[justbroke]

On Form B22C, you can only deduct payments that you'll continue to make in the future (line 47/48 I believe). So, if you are lien-stripping, that amount comes off.

However, that is contingent on the lien strip actually going through. So it could be argued both ways. However, if the lien strip does get granted, then you'll have to commit that extra money to the Plan, as required.

I would think that if you submit a Chapter 13 Plan that shows the lien strip, the Trustee would expect that Form B22C (calculation of Disposable Income), would not include the "future" payments.

The Means Test, while using the same data and being a little similar to the Form B22C CMI/DMI Calculation, considers different factors for determining only if you qualify to file a Chapter 7, or need to be in a Chapter 13.

[pcn]

Justbroke, did you do a lien strip, and if so, you used the 2nd payment amount as committed to the plan? Thanks!

[justbroke]

Justbroke, did you do a lien strip, and if so, you used the 2nd payment amount as committed to the plan? Thanks!

Yes, I did strip... I mean I did a lien strip. The amount towards the second mortgage (that was stripped off), is not included on Line 47 on Form B22C.

Remember, line 47 and 48 asks about FUTURE payments.

This means that the amount that would have gone to the 2nd ($1,115 or so) is committed to the Plan. In my particular case, I wouldn't be able to afford my Plan without the lien Strip. This is why, initially, I was giving up my primary residence and was keeping my rental (investment). When I discovered that I didn't have enough equity to even cover the first mortgage, I learned the magic of lien stripping (I was in Court one day and saw how easy it was to lien strip with that Judge, that I immediately had an appraisal scheduled 3 days later and found out my value). I had written the lien strip Motion even before I got the appraisal back.

[IBroke]

Yes, I did strip... I mean I did a lien strip.

Hahaha - priceless..

[freckleface]

This means that the amount that would have gone to the 2nd ($1,115 or so) is committed to the Plan.

Thanks for explaining that. I was wondering same thing. But here's something I can't get past. I would do a chapter 13 and have 2nd strip because I can't afford my bills, including the monthly payment for the 2nd. I am wondering how it helps me to have it stripped but then just added back in to the Chapter 13 payment (in addition to the rest of my payment based on disposable income)? I guess I just don't understand how a chapter 13 is supposed to free you up from bills you can't afford, but then they end up getting tacked onto the chapter 13 payments.

[justbroke]

Thanks for explaining that. I was wondering same thing. But here's something I can't get past. I would do a chapter 13 and have 2nd strip because I can't afford my bills, including the monthly payment for the 2nd. I am wondering how it helps me to have it stripped but then just added back in to the Chapter 13 payment (in addition to the rest of my payment based on disposable income)? I guess I just don't understand how a chapter 13 is supposed to free you up from bills you can't afford, but then they end up getting tacked onto the chapter 13 payments.

It is very complicated to figure out how it works for you. The kicker is, that the 2nd mortgage is added as unsecured debt to your unsecured debt total, meaning that you are probably going to pay part of the 2nd mortgage back.

In the end, I would say to never keep a house where you have more than 10% in negative equity. But, if you're in a 0% Plan, and by stripping the second, you're still in a 0% Plan or negligible plan payment, it is great! (I know it's confusing.)

The bottom line is, if you have more than 10% negative equity in the home, and freeing up the payment of the second, by stripping it, puts you in a 100% Plan, then you really haven't achieved anything... other than classifying the 2nd mortgage as unsecured.

That's just it. A chapter 13 doesn't free you up from bills! It just creates a court-backed plan of reorganization. All of your "disposable" income goes to the Plan! So if more money is freed up... it goes to the Plan (and by Plan I mean to unsecured creditors).

[IBroke]

Thanks for explaining that. I was wondering same thing. But here's something I can't get past. I would do a chapter 13 and have 2nd strip because I can't afford my bills, including the monthly payment for the 2nd. I am wondering how it helps me to have it stripped but then just added back in to the Chapter 13 payment (in addition to the rest of my payment based on disposable income)? I guess I just don't understand how a chapter 13 is supposed to free you up from bills you can't afford, but then they end up getting tacked onto the chapter 13 payments.

As far as I understand it, that amount for the 2nd mortgage would ONLY go into the plan IF your disposible income would allow it. If you are close to $0 or even below, you wouldn't have to make that payment.

What justbroke mentioned is always under the assumption that you COULD AFFORD the second mortgage although it will be stripped. If you can't afford it in the first place (don't have that disposible income), it WON'T go into the plan.

The formula clearly says how much you can pay each month - the only question is where it will go to. If you make less, you pay less. No matter if you strip or not..