WARNING: DON'T try to pay it off early!!!

[smaring]

I passed the means test down here in the middle district of Florida and was approved for a CH13 plan that had me paying back about 30% of my revolving credit card debt balances over 5 years.

When I went into the CH13, the laws suggested that it was acceptable to pay off the balance of the CH13 early if your financial position improved. I got into a situation with my personal business where I opted to try to pay off the BK early instead of paying what I owed to the IRS. The motivation there being that from a credit standpoint, it is better to owe the IRS than to have a recent BK. So, I paid it off early. BAD MOVE!!!!!

I was brought before the BK judge for a hearing regarding the matter. He said that the laws had changed and that a CH13 plan is now regarded to be, first and foremost, TEMPORAL in nature! Therefore, withholding $10K from the IRS and giving it to the trustee instead, was like BURNING MONEY!!!!!! I was two years into the plan, and have been ordered to CONTINUE the monthly payments for the rest of the five year plan!!!!! and now I owe the IRS the money that the trustee gleefully handed onto the creditors.

Understand that the trustee is NOT impartial in the BK. The trustee is there for the creditors! Not you! If the trustee thinks you have more money or income, they will try to go after it all the way to 100% of the balance owed the creditors.

Hand I understood more of this, I would NOT have done a CH13.

I got screwed!

-Steve

[falken]

Did he say his ruling was based upon the fact that the laws changed since you filed? If so, you have great grounds for an appeal. The laws governing your bankruptcy are suppose to be the laws in effect at the time you filed.

[13inIN]

Since he refers to the means test, it appears that his BK is from post Oct 2005.
Sounds like new law to me. I was hoping for an early payoff loophole myself in the new law, but asking around and researching I have found no such way to do so under the new law, without paying 100% to unsecured.

[justbroke]

Well the key is, as a fellow Chapter 13 filer... when was your Chapter 13 Plan confirmed.

If your attorney told you to pay it off, he was surely mistaken. If you filed pro se and did this yourself, you just learned a lesson that even some Attorneys have got wrong since October, 2005!

[Flamingo]

I passed the means test down here in the middle district of Florida and was approved for a CH13 plan that had me paying back about 30% of my revolving credit card debt balances over 5 years.

When I went into the CH13, the laws suggested that it was acceptable to pay off the balance of the CH13 early if your financial position improved. I got into a situation with my personal business where I opted to try to pay off the BK early instead of paying what I owed to the IRS. The motivation there being that from a credit standpoint, it is better to owe the IRS than to have a recent BK. So, I paid it off early. BAD MOVE!!!!!

I am a bit confused...when did you file Chapter 13; I believe from your posting it was after the passing of the new BK laws in October 2005. Secondly, did you do this on the advice of your attorney and was your attorney aware of the IRS debt which I am assuming is an IRS bill that came into being after you filed, otherwise you would have included it in your Chapter 13. You also just cannot buy out of a Chapter 13 Plan without Trustee approval. I am curious as to what exactly happened in your situation.

I was brought before the BK judge for a hearing regarding the matter. He said that the laws had changed and that a CH13 plan is now regarded to be, first and foremost, TEMPORAL in nature! Therefore, withholding $10K from the IRS and giving it to the trustee instead, was like BURNING MONEY!!!!!! I was two years into the plan, and have been ordered to CONTINUE the monthly payments for the rest of the five year plan!!!!! and now I owe the IRS the money that the trustee gleefully handed onto the creditors.

Again, where was your attorney in all this. When did the IRS debt occur and did you contact the IRS that you were in Chapter 13?

Understand that the trustee is NOT impartial in the BK. The trustee is there for the creditors! Not you! If the trustee thinks you have more money or income, they will try to go after it all the way to 100% of the balance owed the creditors.

It's the trustee's job to ensure the creditors get what they can from the debtors. Most trustees are fair and square and go by the law but if something like what happened here occurs, especially with the IRS, it can be a big problem.

Hand I understood more of this, I would NOT have done a CH13.

I got screwed!

-Steve

See my comments as to your posting above. You need to post more of exactly what went down in your situation because some of it is a bit confusing.

[falken]

That all being said... my district does allow you to pay off your 13 early (not in a 100%).

The trustee even passes out a handbook to every debtor at the 341 with that in writing. We do seem to be the only one. Even my lawyer said we were a one-off from everyone else, but the trustees and judges interpretation of the new law allows it and no one has tried to fight it yet.

My guess is that no creditor wants to loose and have every district start doing it.

[justbroke]

That all being said... my district does allow you to pay off your 13 early (not in a 100%).

Has anyone actually done it, and if so, please cite the case(s). I only ask this, because if I ever want to pay off early, I want to know the District's basis for it.

[oldhack]

I'm not sure you can blame anyone but yourself if you didn't realize the trustee essentially is dedicated to distributing the maximum amount possible to creditors. He's the court's -- and the creditors' -- attorney, so to speak (and, almost universally, trustees ARE attorneys). They have theirs (the trustee), which is why you have yours.

[13inIN]

Has anyone actually done it, and if so, please cite the case(s). I only ask this, because if I ever want to pay off early, I want to know the District's basis for it.

I second that. I would love to cut a chunk of time off my plan with a lump payout.

[knotholeone]

GOD FORBID, but what if your spouse passes away and you get a life ins settlement. Can you pay your 13 off early. What would one do in this situation?

[Flamingo]

GOD FORBID, but what if your spouse passes away and you get a life ins settlement. Can you pay your 13 off early. What would one do in this situation?

Yes, pay it off at 100%. What you already paid into it to that point would be subtracted..

[woeisme]

GOD FORBID, but what if your spouse passes away and you get a life ins settlement. Can you pay your 13 off early. What would one do in this situation?

In my state proceeds from life insurance policies from spouses and children are 100% exempt. So if my hubby died, I'd get to keep his life insurance policy. It's a different question as to whether or not I could use it to buy out. I think in that case I'd have to pay my plan at 100%, so if something happened to a spouse in a state where life insurance proceeds are exempt (here it's just exempt for spouses and children, not if your parents or someone else died and named you a beneficiary) you would just change your CH 13 plan to reflect your change in circumstance (reduced income, etc) and continue on in the plan I guess, or throw away your life insurance $ on buying out the 13 at 100%.

[aa06a47]

My attorney gave me some bad information after my 341 meeting in 2006 concerning early buy off. In fact, she stated if I had a little extra each month I could pay it and it would reduce my time. After I hit the 3 year mark, I asked if I could pay off early and she wrote back and said, no, the judge has ruled that no early payoffs, unless 100%. So, the little extra I put in just increased the % to unsecured. Glad I had not sent in much extra!! :-)