how do they determine monthly payments?

[4ever]

Trying to get everything ready to file. Lawyer said we made a little too much money so we have to go with the 13. How to they determine if you pay for 3 or 5 years? Does it depend on how much you owe? I have been reading this board day and night and our debt seems minor compared to everyone else. I would say around $45,000. Do you only keep receipts at the beginning to show the lawyer or are you keeping them to show him every month until the BK is over? Does the trustee only leave you with enough money for basic bills and take the rest for CC payments? I know right now we have more money left over since we stopped paying our CC but I'm am sure we won't have all this money after filing. From what I read you shouldn't have much money laying around in your bank account. So do you just put in what you need for bills and the trustee and keep the rest out? Doesn't the lawyer look at your pay stubbs every month you are in BK and wonder why you aren't depositing a majority of your check?I would think they would squeeze out every penny they could to pay the bills you owe on. I'm in missouri BTW but would like general answers from anyone on these questions. Thanks.

[SMinGA]

If you are over median income, you do a 5 year plan. If you are under median, you have the option of a 3 year plan. (But some under median do 5 years if they can't afford to pay enough in 3 - but this gets a bit complicated as its based on their particulars.)

In short, your payment is NET INCOME - (ACTUAL EXPENSES, BILLS) = DMI
DMI = your plan payment

For actual expenses, you need to reasonably estimate what you need monthly for groceries, gas, household needs, childcare, etc. You also need to consider bills like utilities, insurance, etc. By reasonable, I don't mean living extravagantly but I also don't mean for you to plan on a diet of rice and water for 5 years. Even some amount monthly for entertainment would be allowed. Don't forget about things like medical: what do you spend on average for copays, glasses, prescriptions, over the counter stuff? Also, home maintenance for things like lawn care supplies, pest control and routine servicing of your a/c unit? Some of those things may not be a monthly expense but you need to estimate the annual total and apply 1/12 to your monthly budget. Such as if you spend $1000/yr on vehicle maintenance, you'd need to show $83/mo monthly on your budget. Also consider if you need to make any changes now before filing, that will impact your budget. Do you have life insurance? If not, look into getting a basic plan. Do you have high deductibles on your auto insurance? Might want to change them to $500. If your property taxes & insurance are not paid thru escrow, count 1/12 of the annual in your monthly budget.

Secured payments may be paid directly by you, so counted when figuring out your DMI. In some plans, they are paid thru the plan and if that is the structure you would not count it as an expense.

Say you have $5000 net income, $2500 on groceries/gas/clothing/vehicle maintenance/utilities/insurance/etc. If your mortgage and car payment is to be paid thru the plan, you'd have a $2500 plan payment. Or if you have $1200 mortgage and $400 x 2 car payments that you make directly, then you would have a $500/mo plan payment.

[SMinGA]

If you're under median, here is an example of why one might end up in a 60 month plan:

Let's say you have $300/mo dmi. Your plan is to pay $3,000 in atty fees and you filed to save your house, which you are behind in payments. Your mortgage arrears is $8,000. $300 x 36 = $10,800 which is not enough to pay the atty fees + arrears + trustee fee. (Trustee takes 5-10% of all you pay in, depending on the district.) So you could do a 60 month plan, total paying $18,000, which would be sufficient. A little would even remain at the end to go to unsecured creditors.

[4ever]

Thanks. That made it pretty easy to understand.

[SMinGA]

Glad I could help - and that I didn't over explain things. (Sometimes I go on and on and on...)

It really is a simple math equation. Sometimes there is a little haggling though, as to what you should be allowed for certain expenses. Large cell phone, large cable bills for example. If you have $200 for each of those, trustee could argue that its too much. And if you have higher than normal costs for utilities, medical, etc. - be prepared to back it up with paperwork. It might not be necessary, but do what you can to be prepared.

[4ever]

The only thing I"m worried about is our internet bill (Hugh's net).It's 89 a mouth because that's all we can get out in the sticks.

[SMinGA]

My opinion - not legal advice - is that if its your only option, they can't argue much about it.

But you can insulate yourself by rounding up slightly on other areas, where you are less likely to be questioned. Such as if you think you use $115-125 a week for groceries, and its below the IRS guidelines for your family size, budget for $125 or even $130. Same for other expense categories - add $5 here, $5 there...

That way you can build in a little bit of a buffer. And once in your plan, you can make a goal to save money here & there - such as if you have in $130 for groceries and stick to $115, it adds up over time.

Also - make sure you account correctly for a month. Your income will be a monthly average. If you think of your expenses as 4 weeks worth, you'll be shorting yourself since there are more than 4 weeks to the month. Estimate weekly x 52 and divide by 12.

[NoTomatoCan]

I know it totally varies by district, but we have HughesNet and didn't get any issues about it. It is our only option (phone lines connect at FCC minimum of 14.4k - boo to that). It is necessary for my job though, just not paid for by employer.