Paying secured creditors inside your plan

[UpsideDownMI]

I am curious to what is the benefit to paying secured creditors (house and car) inside of your plan. I know some people choose this option, but I don't really understand the benefit as it seems like it would give less money to the creditors since trustees fee would greatly increase.

[walkthaplank]

Some districts require it, others only require that you pay the arrears inside the plan and the current payments outside of the plan.

[rrockinggramma]

being a michigan filer, I can attest to including the vehicles. Whether you include them or not, credit report will say "included in wage earner plan" anyway. In my case, I was paying HIGH interest. So by including them in the plan, the trustee paid 6 percent interest to the finance company. Better than my rate at 22 percent. ALso, they can only file the principal amount owed. No interest etc can be included.

Now as to your mortgage, if you are current, I would keep that outside the plan. If you are including arrears on the mortgage, then you might be better off including it. However your attorney can give you the best option for the mortgage. But if you are current and not behind I would prefer to have control over the payment. In Michigan, my trustee paid on certain days of the month and it was NEVER on the 1st.

Make sure your vehicles will last the length of your plan. The trustee will not think twice about you purchasing a newer vehicle prior to filing.

Michigan trustee's expenses are pretty fair and they allowed quite a bit and they allow you to incur up to 1000 in new debt after filing.

You can go the the trustee's website and on the links go to the local rules. That will give you a LOT of information along with the debtor's handbook to download.

You will have to send in tax refunds and tax returns every year. My trustee demanded 100 percent of refunds be turned over so if you have EIC that may bite some. Change your withholdings (after filing) so you will break even and not owe the trustee your refund. I ended up owing the IRS like 50 bucks a year. Well worth it for me.

State refunds are YOURS to KEEP.

http://www.det13.com/home.shtml

GL

[UpsideDownMI]

Thanks for the advice!

So in your opinion I am better off getting new vehicles that will last the length of my plan? I have one that will paid off in 8 months and another that is a lease that is due in 13 months. It was my plan to replace them both when needed during my plan.

I know that the trustee would have to approve obtaining credit to buy new cars while in my plan, but I was told in my consultation that this would not be a problem. I do like the idea of replacing the car loans with new ones that will last the length of my plan, but I don't think that I would be able to obtain financing right now as my credit is shot and my debt/income ratio is high.

[rrockinggramma]

the trustee would approve but I can assure you that no one will finance you while you are in a chapter 13. Get rid of the lease car before filing. The other one, if paid off in 8 months, then just pay it off and keep it if it is in good shape and will last without too much repair. Discharge adds about 5 months to your plan so although not paying, it takes that long to get your discharge in Michigan. So make sure your vehicle can make it. Mine lasted right up until the end and within a month after discharge I had to get a new one. LOL But it made it.

still worth a try. I bought just before filing using Drive Financial cause I had your issues also, high DTI and bad credit. That is why my interest rate was so high. But then I turned around and included the car in the plan. Although you won't be able to cram it down, you will end up only paying principal and the interest rate the trustee gives to the finance company. It is worth a shot. I can guarantee you that you will not be able to obtain financing from anyone while in your chapter 13. I tried.

[caj0524]

I am including my cars inside my plan. They are going from 12.65% and 29.90% respectively, down to 5.25%. Doing the calculation I still come out ahead by paying the trustee their 10% instead of the finance charge.

Also, the 29.9% car is a 30 month note, and we're having a hard time paying those payments (and they require a payment every 14 days). Not only is it going to go down to 5.25%, but I'll be spreading the payments out over 5 years instead of 2 1/2.

[UpsideDownMI]

So if you include your car payments in your plan you can spread the balance over the length of plan?

[indebt00]

we are including our car loan in the plan and I am benefiting from the % rate reduction.
our leased car can not be included and is being paid outside the plan

[rrockinggramma]

trustees pay differently. In Michigan, all secured debt is paid off first. (that includes any IRS balances ) Then the unsecured is paid. Now in other districts trustees may spread it out but not in Michigan