Question about plan approval

[Jengo]

I have a quick question about the chances of getting a payment plan denied. This is kinda the situation. It is not for me personally. I'm just trying to get an idea for my significant other who will be filing a Chp 13 soon.

It's been estimated by the BK atty at consul that there will be an additional 1200 a month after his monthly expenses. I know that secured debt has to be paid in full. Lucky him that he does not own any property and his cars are paid off. A majority of the debts are this:

45,000 taxes
75,000 CCs unsecured

Payment plan would be over 60 months. I know that priority or secured debt has to be paid back. The taxes would be paid back in full and would leave about 27,000 left over for unsecured debt over that 60 month period.

What are the reasons that a payment plan would be denied? Or that a Chp 13 would be dismissed or converted to a Chp 7? Is it primarily because the payment plan is not feasible and would hinder the full payment of secured debts and not leaving much left over for living expenses, etc.?

I filed Chp 7 and more familiar with this Chp than 13. I'm reading up more on Chp 13 but quite honestly it seems really complicated.

I've read stories on here how hard it is to get the payment plan confirmed or what have you. I'm hoping this will not be the case with my significant other. I've also read to increase the success rate of a Chp 13 is to authorize the payment every month to be taken directly from your paycheck. I think this would be a much better option for my significant other and ensuring it is paid every month.

My biggest fear is that if he misses a payment or that it gets dismissed or what have you that ALL of his creditors will be after him like white on rice and lawsuits flying everywhere to garnish wages, taking money from his accounts, etc. This in and of itself and knowing that this may happen is incentive enough to make sure you follow through on the monthly payments.

Any responses are most appreciated and thank you!!!

[Jengo]

Another question that I have is typically every year he owes taxes to the IRS; hence, the reason he owes so much.

During his BK payment plan and as he continues to owe every year as each year passes throughout his BK, he is still to file this with the court? I'm assuming since there will continue to be taxes owed during his Chp 13, will adjustments be made to his living expenses and that these additional taxes owed will be included in his BK filing?

I've read that it does and you are required to continue to file your taxes on time every year and giving it to the court. Since he typically owes every year, will this be included throughout the course of his plan? I'm also assuming that if he moves or gets an increase in his monthly income, etc., that this also needs to be reported, etc.????

I hope that made sense. I know the first paragraph is a bit convoluted but hopefully someone will understand what I'm trying to get across.

[momofthree]

As far as taxes, he needs to adjust his withholdings so that he breaks even at tax time. Owing taxes during a ch. 13 repayment plan is a big no-no.

[Jengo]

As far as taxes, he needs to adjust his withholdings so that he breaks even at tax time. Owing taxes during a ch. 13 repayment plan is a big no-no.

Hi Momofthree,

I was reading some of your posts that you had replied on. I've been going through the Chp 13 section and learning a lot. It seems Chp 13 is very complicated and is a pain in the butt. Anywya, I have a few other questions hoping you may be able to answer or another poster may be able to answer.

I got the tax issues and he will have to adjust them every year which he needs to do this anyway and getting him in compliance during his Chp 13.

We are separated. I have yet to ask for child support. If I ask for child support in a few months or next year or two years from now, I'm assuming this has to be factored into his Chp 13 lowering his monthly income when and if it does happen.

Also, I have serious health issues. What happens if I can no longer support my son and he has to take custody of our son. Instead of being a household of one, there is now a household of two thereby bringing down his disposable income. I'm assuming amendments can be made, etc. Since his secured debt will be paid back 100 percent anyway and then 27,000 of it will go to unsecured, the way I look at it, screw them, family first type thing either child support or if he takes our son full time and claims him as a dependent on his taxes.

Our son is disabled. Since I have full custody of our son now and is with me a majority of the time, can he put this into his Chp 13 that he has our son part time thereby decreasing his disposable income. He has to factor in that when he does have his son he will have a higher food bill, clothing bill, etc.

If he moves and gets into a cheaper place, I'm assuming this also has to be reported to the trustee.

We're in CA by the way. I know it may be different in different states, etc.

Thank you for responding

[Flamingo]

You are asking questions that you should be asking to a family law attorney. I would suggest if you do not have an attorney as to your child support situation, that you consult with one as soon as you can.

[mikemc411]

Child Support

I would make sure you have your child support set BEFORE he files Ch13,,,, Child Support will get paid before Unsecured creditors in the plan.... Make sure you get your part to support your son...

[SMinGA]

For a basic answer to a group of questions - if income OR expenses change during a 13 the plan can be modified.

For feasibility, the plan has to be able to pay off the secured/priority debts within 60 months leaving enough money to reasonably live on. There was a post the other day where someone said his case was dismissed due to lack of feasibility. By the #s he posted, his plan payment (to cover mortgage arrears) and mortgage payment left only a couple hundred dollars for ALL other expenses.

For your SO, the amount that will need to be paid will depend on which part of the taxes is priority and which part is general unsecured. I don't think all the interest and penalties are priority but I'm no expert on taxes. And of course, part of the plan payment goes to a trustee fee (5-10% depending on the district).

Getting the net pay corrected - by resolving child support and/or tax withholding levels - before filing would be a wise idea.

[Jengo]

Thank you for the replies.

Unfortunately, his Chp 13 will have to be filed on an emergency basis. He's been working on it now and will have to be filed by April 13. Long story. His income as compared to his debt, over that 60 month plan, 27,000 of it will go towards unsecured debt. He'll have an additional 4 or 500 a month after priority debt is taken care of and living expenses are taken care of so I'm sure there won't be too many issues with feasibility. I'm also assuming that his living expenses may be adjusted when filing. To my understanding when going to meet with the attorney, his living expenses were at 3,000 a month or 3200 a month for him, no dependents, only him pretty much in the home with the exception of our son being at home about 3 days a week. This may be considered excessive for one person and unsure as to whether the Trustee will adjust these expenses and stating, You can cut back more in this area and this area, etc. For instance, clothing allowance. He's a professional. In his job, you have to keep up a professional appearance so the amount he spends for clothing and upkeep because of his job may come into issue.

As for the child support and/or his taking custody of our son, this will have to be done in the future and any amendments to his petition. Although we are separated, the relationship is amicable, although do have ups and downs as is expected anyway in any relationship. But it also may benefit him if he is able to claim his son as a dependent helping him have a bit more money every month because of the increase in living expenses with a dependent now there.

[SMinGA]

Even though time is short for him - at least adjusting his withholding before filing is significantly important. If his plan gets confirmed based on income of $X but he needs to increase tax withholdings by 5-10% of X to avoid owing taxes next April, he could end up unable to meet his plan payment. And it sounds like he has a little 'wiggle room' on his plan payment yet still able to meet the priority debt payment.

Once the ch. 13 is filed, automatic stay is just as it sounds: automatic. He would need to file a plan within 14 days. It could be amended after that & before confirmation, within reason. Meaning for necessary adjustments to income/expense schedules such as if he does not know the EXACT new amount of his net pay per period for recently adjusting withholding...

[Jengo]

Getting the net pay corrected - by resolving child support and/or tax withholding levels - before filing would be a wise idea.

I told him last night that he needed to adjust the withholdings that he is claiming for his taxes so he'll break even every year hopefully. Of course, I will help him if something comes up as I know any debt he incurs after his filing will be his responsibility to pay outside of the BK arena. I know he has to get approval from the Trustee before incurring anymore debt once he files.

What he is going in on when he files will be the old withholdings that he claimed on his taxes; thereby, giving him a higher take home pay. But given how it looks now, it seems that there will be an additional 4 to 500 a month to go to unsecured creditors. Since I am sure there will be amendments later on because next year his take home will be different because of adjusting his tax withholdings, that portion to go to unsecured creditors can be used to compensate the change in income. I'm relieved now that since he has additional to pay unsecured creditors now, definite income change in future, that he will have enough to compensate for it and the feasibility of his plan.

[mikemc411]

My understaning is ....Of that 4- 500 a month that will go to unsecured creditors... part of that could be going to you for child support... The court may force him to account for child support in the plan... Why send it to unsecured, when it could go to support his child? according to the sticky at the top of the forum... % payback does not matter....

Most child parenting plans ussually specify who gets to claim the child as a dependant on taxes... Generally the person paying child support...

[Meatstick]

Most child parenting plans ussually specify who gets to claim the child as a dependant on taxes... Generally the person paying child support...

The above only may be true in very few cases. The general rule of thumb is the primary custodial parent is the one who will get to claim the dependent child on his/her taxes. Paying court ordered child support generally means you are the not the primary custodial parent. The only real way around it is by mutual agreement in writing between the primary and non-custodial parent.

[Jengo]

The above only may be true in very few cases. The general rule of thumb is the primary custodial parent is the one who will get to claim the dependent child on his/her taxes. Paying court ordered child support generally means you are the not the primary custodial parent. The only real way around it is by mutual agreement in writing between the primary and non-custodial parent.

I have a question regarding the jurisdiction of the BK court's ability and how far it may extend into family matters. Does the BK court have jurisdiction to order him to pay child support or what have you. Since he on averages owes 10k or more every year, may be a little less or little more, that that extra 4 to 500 will be put to his taxes when he changes the with holdings. If his taxes ends up eating all of his dmi, and if judge orders that child support be included in his filing, he'll be screwed and will have to cut back possibly on necesary expenses.

Given that he is going to have to adjust his with holdings on his taxes to break even, that 1200 or so extra a month may decrease. His income right now is based on high with holdings. He makes 6 figures a year. I'm not sure if he has adjusted for it or not yet but he is aware that he needs to and soon. We may have an appt this week and getting that much closer to his finally filing for BK. Unfortunately it has to be done soon. Of course, I don't mind helping him financially if he ends up owing taxes or what have you. I don't know if that would make me responsible at that point for his taxes. I hope not, since I am the spouse paying it for him as a gift in essence.

The IRS knows we've been separated for 3 years now and EVERYTHING has been kept separate. It's been this way 2 years after we got married. There are no joint accoutns, no joint debts, no sharing of income, etc., and it's been this way for well over 10 years. It's made our lives a lot easier if you will doing it that way. He's responsible for his debts and I'm responsible for mine..of course, outside of gifts and such. When I told the IRS this the last time they froze his accounts and mine as well, they understood and told me to file an Innocent Spouse Claim or some such deal. I ultimately didn't because it wasn't worth my time and the 2k or so they took from me. Ever since telling the IRS this, they've left me alone when dealing with my husband and his taxes. I'm just hoping that if I do help him if he doesn't adjust withholdings enough and ends up owing during his BK that the IRS may automatically see me as a target, especially if he defaults and stops paying into his plan since I paid during his Chp 13 for any taxes he accrued during it because of not adjusting with holdings enough.

Another areas is to my understanding, after he files, he has a certain amount of time to submit a plan. I know that it can be amended and don't mind paying the amendment for him if I have to for the changed plan after he gets a better idea of what his income will be like every month. Since we are on a serious time limit here and needing it filed with the BK courts before April 13, I'm hoping that he'll be able to file even if his income and amount he makes every month is NOT yet set because the with holdings hasn't gone into effect yet.

[mikemc411]

What would be the problem with child support?
The money would go to you,
you seem to be happy giving money to him,
so in essense the child support is 'protected' money...

why not run the numbers, and for example if he has $600 DMI (after making sure he is covering his taxes), then agree on $400 a month child support, so that would make his DMI for the plan $200...

[Jengo]

What would be the problem with child support?
The money would go to you,
you seem to be happy giving money to him,
so in essense the child support is 'protected' money...

why not run the numbers, and for example if he has $600 DMI (after making sure he is covering his taxes), then agree on $400 a month child support, so that would make his DMI for the plan $200...

I'm just trying to figure out what will be better for him and ensuring that he isn't living as tightly as possible. I'm assuming that if his taxes aren't paid back in full within that 5 year period that it may throw him into Chapter 7; thereby possibly losing what assets he has? Or having to majorly cut back in other areas and this is without providing child support. One asset being an older porsche that he has been overhauling and rebuilding it. As of right now, it is not street legal to my understanding. He used to race it. There's not many assets though. It's not absolutely necessary though that I have custody of my son. But since we are separated and share custody and if he has him as dependent, it may prove more beneficial for the entire family. I don't know. I'm just trying to figure out what is going to make it a bit easier on all of us. I think once he gets his with holdings adjusted right we'll have a better idea as to how to approach this. Plus it looks like we'll have his tty appt coming up in the next few days to week and then getting him filed.