A few questions on ch 13 payment plans

[ColoradoBell]

A few questions:

I thought I was doing a no asset 7 (which I still can do)..so I learned everything I could about 7s and felt pretty competent to discuss w/attorneys.

BUT, due to a forced sale of my home that was set on June 1 for a June 28 closing.....a few attorneys have suggested taht a 13 might help me save the home better than a 7.

So now, I have scant time to decide and know very little about 13's. I 'm sure some of these questions have been asked before, but I'm hoping you all won't mind repeating:

1. If judgment liens are avoided on your home, then I was told they become unsecured debt. So in a 13, would those avoided liens count against the maximum unsecured debt total ($360k) AND would they have to be included in your payment plan proposal?

2. Because of business debt, I didn't have to take the means test, but I think I passed it part 2 anyway. Will the trustee determine my DMI based on my allowed expenses/income for the last 6 months? Is there a 'hardship'situation if I already know my income will be more than halved in two months OR would that prevent me from qualifying for a payback plan?

3. I think I have to come up with a plan to pay my expenses AND a portion of my unsecured debt to qualify, but I'll be taking money out of my retirement to live on and pay. In a 7, there would be no money for unsecured debtors.
So how much is 'enough' to help get the proposed plan approved? (If it were based on my previous income I still don't think I'd have much left over after minimum expenses BUT I do want to qualify so that I can keep my home)

4. Is it true that if I make those payments, whatever they are, for over 6 months that I could then total them for the full 5 (or 3) years and pay them off in a lump sum if I wanted to take it all out of retirement to do so? Does the trustee get paid that monthly fee if I repay the lump sum?

[momofthree]

Is there a 'hardship'situation if I already know my income will be more than halved in two months OR would that prevent me from qualifying for a payback plan?

There is a hardship provision, but being able to qualify is extremely rare (I believe they are only granted in the case of a severe permanent physical disability which you are expected to never be able to work again.) As far as a drop in income, you should be able to amend the plan payment to a smaller amount. The only other alternatives are to convert to a chapter 7 or dismiss the case.

3. I think I have to come up with a plan to pay my expenses AND a portion of my unsecured debt to qualify, but I'll be taking money out of my retirement to live on and pay. In a 7, there would be no money for unsecured debtors.

Not all states require that you pay towards your unsecured debt. I am in a 0% payback plan--we are only paying our car payment + trustee fees + attny fees into our plan. If you are having to withdraw money from your retirement to fund a ch.13, then you really need to think hard about whether you should keep your home.

4. Is it true that if I make those payments, whatever they are, for over 6 months that I could then total them for the full 5 (or 3) years and pay them off in a lump sum if I wanted to take it all out of retirement to do so? Does the trustee get paid that monthly fee if I repay the lump sum?

No. The only way to pay off a chapter 13 early is if you pay off 100% of your debt. Any additional money you pay into the plan during that time does NOT get credited towards your scheduled payments, it is paid above and beyond the scheduled figure so that your creditors receive more money.

You may have read about the OLD law -- before 2005 -- if you paid for a minimum of 36 months, then you could pay off your plan early by paying the scheduled amount in a lump sum. Under new law, this option is no longer available.

[ColoradoBell]

Thanks MOM!!!!!
Your answers very helpful.
The reason I would access my retirement is that I'm retired! My alimony ends and my Social Security is so small that I would need to take from retirement as a supplement regardless. I didn't realize that you could even have a 0 payment to unsecured debt as a plan...wow. Oh and the cost to buy out Xs share would cost less in a loan payment than rent...so the house is way better than renting.

Is there anything that you can think of that I need to watch out for in filling out my expense sheet?

[lrprn]

Mom gave you good advice if you really want to keep the home through Ch 13.

However, I do have two additional questions to ask you.....how much is your home currently worth in the current depressed real estate market? And how much do your currently owe the mortgage lender or lenders?

[HHM]

There are a couple of reasons for doing a 13 in your case, (1) less risky and you can always get out of it, and (2) more options for dealing with security interests.

To your questions.

1. If the plan proposes to strip the judgment liens, they become unsecured debts and therefore count for purposes of the debt limits. They would be lumped in with unsecured creditors and paid a pro-rata share of what ever unsecured's would receive.

2. Colorado follows the Lanning rule (which is on appeal at the supreme court), ultimately, you payment will be based on I&J, but the trustee ALWAYS objects if your B22(c) (which still needs to be done in a chapter 13) shows more than I&J.

There is a hardship discharge, but it is rarely accepted solely for an income drop (especially one that is already known). The judges either want to see a modified plan or conversion to a chapter 7.

3. There is no inherent minimum that must be received by your unsecured creditors, especially if no chapter 7 means test is required. This is something your attorney will figure out.

4. Not true. But, I am not 100% sure what you are asking. Presently, to "buy out" a chapter 13 plan, you pay 100% of ALL claims made in the plan. For example, if your unsecured's have $300,000 in claims, but based on your DMI, you will only pay them $30,000 over the life of the plan, to buy out early, you will need to pay $300,000.

[ColoradoBell]

As always HHN, your answers are extremely helpful.

Which brings up one more:
If my B22(C) showed $300 mo DMI for the last six months income and I knew that that income would be halved in 2 months.....if I committed to the $300 mo would the BK trustee be po'd if I asked for a reduced plan 3 months later? And if the income reduction is beyond one's control, do they normally agree to your new plan or say tough luck?

Is there any place on a B22(c) where I would put the monthly payment for my investment property? and I put in $0 for the HELOC/prop taxes because I dont' pay those until the house sells and then I reimburse X 60%.

IRPRN: the house has a sale contract on it for $600k. mortgage(Heloc) $199. I get half and pay 60% of mortgage and other costs. The judgment liens are high, but hopefully stripped as they impair homestead. In 13 I'd buy X's 40%, pay my share of HELOC taxes etc with a loan from family. The loan paymentis less than rent. I fix up the house and market it in this market and sell within 2 years for double current contract price. The sale finances my retirement. Makes sense to me, but I of course don't matter...will it make sense to the BK court and to the creditors who won't get much but more than if I file a 7.
Wish me luck!

[carmen2010]

I have a question on Ch. 13 plans too. I am supposed to make my first payment July 1. My 341 meeting is July 20.

1. Is there a chance that the trustee will change the payment either higher/lower at the meeting? I'm concerned because my payment is very high and I won't be able to buy groceries, pay rent, gas with a payment that high due at the first of the month.

2. How hard does the trustee review pay stubs? Is it just for the file, or do they review them closely?