Payback Plans

[jacksjean]

Hi Everyone: I'm new here and have found this forum to be a life saver!

Reader's Digest Version: Single mom; two kids (one biological; one adopted special needs) I filed Chapter 7 in 2001. Fast forward to 2010....I have a good income but have large cc debt (approx. $20K). Got trapped in the payday loan gig - even went so far as to hand over the pink slip to our only vehicle for one of those car title loans. Now late on student loans (was in forebearance forever).

I am meeting with the attorney who completed my 7 on 6/11. After researching this site and completing online Chapter 7 means tests, I think a 13 is the best option. I have a home that is $100K under water that I really want to keep (this is the only home my special needs son has ever known (tear). My mortgage payment was modified in 2009 so it is finally manageable but I'm behind my second property tax installment AND I owe California Franchise Tax Board. I feel so poor....

Anyway, I noticed that people quote a dollar amount that they pay into the plan and also make reference to a percentage payback to unsecured creditors. If you are not making any payback on unsecured debt, what is the money you are paying into the plan? Where is that money going?

Help me, veterans to the new bankruptcy laws and those blazing a trail before me, please!

Thanks for listening -

[momofthree]

My payment is broken down as follows:

$511--car payment
$40--attorney
$59--trustee fees
=$610/mo.

[Universal]

I have no idea how my 1,240 a month is broken down as far as payments made by the Court to creditors.

[sheilaE]

Hi JakesJean,
It varies with each persons situation and how much debt you have. One person can be paying back hardly anything ($) and another is paying $$$. Some people will say it's a piece of cake while others will say it's absolutely awful and they can hardly make it though the month.
I feel your pain though...we also have a special needs child and are hoping to save the house.

[ColoradoBell]

I'm just now trying to come up with a payback proposal.....so I've been researching this subject too.

I believe that the amount you payback is based on the Trustee's decision of how much disposible monthly income you have. Have you taken the means test? Or have you learned that your income is under the standard amount for the number of people in your family? If its under, then you can decide on a 7 or 13 and the amount of payback that you MUST pay depends on how much you'd have to pay back to unsecured debtors if you went Ch 7. I'm guessing that in your case, if your house is underwater, that this might be 0.

I think I've read that insofar as secured debt that is not avoidable...that you do have to pay that back in your plan. So those taxes you owe might have to be paid back over 36 or 60 months. If you added up the taxes...lets say $10,000, you would pay back 10,000 divided by 60 each month. Then , if you had more disposable income than that amount, you'd pay whatever that is in addition.

At least I think that 's what the deal is.....but I'm not a lawyer and I'm not at all sure. HHM or JustBroke might be able to give you the correct answer!

[lrprn]

I noticed that people quote a dollar amount that they pay into the plan and also make reference to a percentage payback to unsecured creditors. If you are not making any payback on unsecured debt, what is the money you are paying into the plan? Where is that money going?

Hi jacksjean and welcome to BK Forum!

Ch 13 payments are set using a complex interaction between your gross income from all sources during the six months before filing, a combination of your own expenses plus the mandated ones defined by the bk law, and your state's exemptions. If you have sufficient disposable income left every month according to the Means Test or Schedule I minus J (which one takes precedence depends on your local court's custom), then that disposable income figure becomes your Ch 13 payment.

When you file Ch 13, your unsecured creditors have 90 days (govt creditors like the IRS have 120) after your 341 meeting to file a claim to receive what they can through your plan. Those that don't file claims won't receive a penny and the debt you owe them is wiped out. The only exception is student loans (both private and govt). Only in very unusual and rare circumstances can student loans be discharged in bankruptcy.

Your Ch 13 payment is split into several portions. Your trustee gets a specified % every month according to your bk district and state. Your trustee will first pay off your lawyer and any priority creditors that your plan has the trustee paying in total. Once those debts are paid in full, the trustee begins to pay the unsecured creditors.

Ch 13 plans are discharged after reaching the specified number of months for your plan or when all your unsecured creditors that filed claims are paid back 100% of what you owed them. Since most plans reach their specified number of months first, the % that your unsecured creditors with claims will receive of what you owed them is what the payback % is.

This is why two Ch 13 filers with the same income and the same debt load can have very different Ch 13 payments and very different payback %s.

Hope this helps make more sense of a very complex and shifting set of circumstances and definitions when filing Ch 13. Keep asking questions - we'll help you sort this out as best we can.

[deepinit]

My payment is broken down as follows:

$511--car payment
$40--attorney
$59--trustee fees
=$610/mo.

I am hoping to be in a similar deal as you - did you think about paying the car outside of the plan and reducing the chap 13 to 36 months payback instead?
Was that an option for you?

[HHM]

This is somewhat of a broad question to answer (whole books are written to answer at).

In GENERAL; your chapter 13 payment is based on your disposable income (income minus necessary living expenses). The means test is the starting point for that analysis, but the means test is not the final determinant of that payment. Also, to address what ColoradoBell said, it is NOT the trustees decision on what you pay back, it is the COURTS decision. The role of the trustee is one of adversary, not decision maker. The trustee advocates for your creditors, it is ultimately the judge that confirms plans.
One of the trustees favorite arguments right now about use means test value relates to liquidation value of the bankruptcy estate. They argue that the amount shown on B22 is what must be paid to unsecured creditors (class 4), so that is why you see some mention on this forum a certain percentage that unsecured creditors must receive in the plan.

Now, depending on your circumstances, there can be a variety of issues that make calculating a chapter 13 payment complex; equity in non-exempt assets, priority and secured debts that MUST be paid, your actual ability to fund a plan, etc.

Conceptually, chapter 13's are not difficult to comprehend, you pay what you actually afford to pay back to creditors after paying your necessary living expenses. But the devil is in the details, that is why it is VERY INADVISABLE for any person to do chapter 13 without an attorney.

As for the house...children are very pliable when it comes to change. It seems more like you are using your son as an excuse not to make a good financial decision for YOUR reasons, not his. Think of it this way, if you DUMP the house, re-buy in 3 years, you will actually start building equity. Is your family better off 10 years from now still in a house that hasn't even reached break even, of in house where they actually have equity that could be tapped for emergencies. Don't make excuses.

[momofthree]

I am hoping to be in a similar deal as you - did you think about paying the car outside of the plan and reducing the chap 13 to 36 months payback instead?
Was that an option for you?

It was an option, however our attorney told us that our local trustee won't approve any plan that pays less than $200/mo, which would have paid $7200 over 36 months--all to unsecureds (after paying trustee & attny fees of course). By paying the car thru the plan, it only costs us an additional $100 a month, which is $6000 over 60 months. With a very negative dmi, it would have been very difficult to try to find an extra $200 a month, but $100 was do-able. Even so, the trustee came close to objecting to our plan, and our attorney had to fight for us a bit....Dh & I experienced quite a bit of sweating and panic at our 341, but our attorney came through for us.

[jacksjean]

Thanks, everyone for the sound advice! Another question on attorney fees in payback plans....

My next door neighbor is filing Chapter 7; total attorney and filing fees is $1899. How she came up with that kind of money is beyond me...

Anyway, I see that payback plans include $ for the attorney. Does a Chapter 13 cost more - generally - than a Chapter 7? My filing fee of $274 is less than her filing fee of $299. Would I still need to come up with $1600 for the attorney PLUS a monthly fee to the attorney via the payback plan for say 60 months? That's A LOT of money!

Shaking my head wondering where I'm gonna' get the money.....

Your thoughts, please?

[sheilaE]

Our chapter 13 is going to cost a whopping $3700.00. If we would have qualified for a 7 it would have cost us $1800. 13's are more complicated which is why they cost more. I've read on here of people who have paid more for the 13's and some who have paid less. Our attorney requires it all up front before we can file which is why we have yet to file.

[forgotten]

Our chapter 13 is going to cost a whopping $3700.00. If we would have qualified for a 7 it would have cost us $1800. 13's are more complicated which is why they cost more. I've read on here of people who have paid more for the 13's and some who have paid less. Our attorney requires it all up front before we can file which is why we have yet to file.

For myself, if you think about it... A chapter 7 would have cost me $1500, and chapter 13 is costing me $63,000 (payment to unsecured for 60 months in this figure).

Just like taxes, the more you make the more you owe.

[sheilaE]

For myself, if you think about it... A chapter 7 would have cost me $1500, and chapter 13 is costing me $63,000 (payment to unsecured for 60 months in this figure).

Just like taxes, the more you make the more you owe.

That's depressing, but so very true.

[SMinGA]

It can be overwhelming - but it helps to try to keep the emotions out and only consider the business side of it.

Some things typically paid in a plan:

*atty fees - atty may require part payment up front, and allow some to be paid in the plan (ch. 13 is often more total fee than ch. 7)

*trustee fee - depending on your district the trustee gets 5-10% of what you pay in

*mortgage arrears, tax debts, secured debt

$ that remains after paying these types of things goes to unsecured.

Some things must be paid in full during the course of the plan - such as if you have mortgage arrears.

When we file later this year, I anticipate majority of my plan payments going to the atty/trustee, pay off hubby's vehicle, and ~$1,000-2,000 or so to go to unsecured over the course of a 36 month plan. (We're below median.) We no longer have mortgage arrears, just modified the mortgage. Ultimately though the unsecured will get a little more, since our district requires tax refunds to go to the trustee. Our refund is due to child tax credits, we claim exempt, but in our district the source of the refund does not matter.

[KAKRN97]

I am just starting my Ch 13 repayment. Even though for the majority of my 6month look back, DH was laid off, he went back to work on April 13. I filed 5/28. Attorney at first figured I'd qualify for CH 7 easy peasy but apparently they take into consideration the income you are currently receiving on the day you file. So with DH now working, I had to file Ch 13.
My payments are going to be $1353/month for 36 months(not yet confirmed but that's what set out in the papers filed). When they paralegal originally told me I'd have to do a 13, she said my payments would be about 1K per month. Then when they did the numbers again, my DMI was around $1353..I just mailed the first payment on Friday as I was told by my attorney that the first payment is due within 10 days of filing and then on the 15th of the month thereafter. That pretty much took up ALL of my paycheck this past Friday leaving me with less than $150 to get me through the next two weeks. Gotta have money for gas for my vehicle since I drive 30 miles ONE way to work--i've looked for closer job opportunities, it has been a no-go these last few years.

Now I've gotta fight with the scheduling coordinator at work to get the time off for my 341 hearing since the Courthouse is 75 miles away from me and will take me well over an hour to get there and I'm not familiar with the city so I'll be nervous driving there and will have to leave at like 8am so I won't be able to work the night before and not untill 11pm that night.