VERY UNHAPPY With Plan Modification

[unclerico]

I am in the process of having our plan modified however I don't like what my attorney is telling me and I don't think the *new* plan payment is correct!

We have 44-45 months remaining and are 10 months since confirmation. Our plan is 100% payback and my current weekly deduction is 423.00

My plan breakdown currently is

Mortgage Payment $ 946.00
Car 263.00
mortgage Arrearages 1896.00
Unsecured 22,000

All of this comes out of my weekly plan payment.

We want to surrender our house since the market is getting worse. The plan reworked does not add up! With our mortgage dropped from the plan our payment should go down to about 170-180 per week. We will be renting a house for 1100.00

My attorney insist that because our income went up our plan payment has to accordingly. What does not make sense is if we are going to pay our rent out of our pocket why would our plan payment go up to 550.00!!!

If we drop our house payment and our plan payment goes up to 550.00 our plan will be completed in little over a year from now. This is not supposed to happen since our 100% payback plan is not supposed to be less than 3 years!


So who is right and who is wrong????? Advice please!

[momofthree]

I'm curious as to why you'd give up your house when renting is going to cost you more each month. Even when you add the arrears to your regular payment, it's still less than $1100/mo.

Have you checked the IRS standards for rent for your area? It could be that they'll only allow the IRS standards and that's why your payment would increase....

[unclerico]

My Payment should not be less than 60 months. Why should I be forced into paying a plan that crams it into a little more than 24 months? Also, when we are done with our 13 we will be upside down 60K in our house, we want a complete fresh slate. The worst thing after completing a 13 for us is to be stuck in a house upside down by 60k. Not to mention our neighborhood has become very bad. The house we are renting is in very nice area.

[UNDERMICH]

Do not sign the papers. If you believe you can not make the payment do not agree to terms. Make attorney fight for you or find a new one.

[momofthree]

My Payment should not be less than 60 months. Why should I be forced into paying a plan that crams it into a little more than 24 months? Also, when we are done with our 13 we will be upside down 60K in our house, we want a complete fresh slate. The worst thing after completing a 13 for us is to be stuck in a house upside down by 60k. Not to mention our neighborhood has become very bad. The house we are renting is in very nice area.

Some districts will allow you to spread the 100% payback over 60 months, other districts require that you submit 100% of your DMI each month as the bankruptcy code specifies and simply pay it off sooner. It sounds like you may be in one of these districts. The bad neighborhood is a valid reason for wanting to ditch the house, however, keep in mind that you can walk away from your house at ANY point in the future, even after the bk is completed and they cannot hold you liable for the deficiency. You don't have to surrender it during the bk to reap the benefit. You'll also want to look into the IRS rent allowance to see if you'll be allowed the $1100 rent payment. Since you're in 100% payback, the odds are in your favor, but check with you lawyer anyway. Good luck and keep us posted.

[tammygirl1]

momofthree, is there a different impact to their credit score if they were to surrender it before their 13 discharge then after their discharge? I am just curious as we will prob surrender ours in the future...100k underwater even after the lien strip but can't rent for less than mortg. with family of 5 right now...

[momofthree]

As far as I know from reading the forum (and I could easily be wrong), the mortgage has to report to the credit bureaus as "included in Bankruptcy" or "IBB" once you file regardless of whether or not a foreclosure takes place at any point down the line.

[HHM]

You must devote all your disposable income to the plan. Someone already mentioned the probable issue, by the letter of the BK code, you must devote all DMI, if that would pay off the plan sooner than 60 months, so be it, that is what you pay, you don't have the absolute right to stretch it out to 60 months (or even 36 months) when you are a 100% payback, the plan gets paid off when it gets paid off. OR, the issue is you have more income. Also, keep in mind, the mortgage deficiency will become an unsecured debt (class IV), it is unlikely you will be 100% payback at that point.

You are missing the other part of the disjunctive when it comes to plan length.
1. Debtor must devote all disposable income to the chapter 13 plan.
2. A plan must be 60 months (if over median) OR until all claims are paid in full.

Thus, if your DMI can pay 100% of claims in less than 60 months, that becomes your plan length.

[momofthree]

HHM brings up another point. If you walk away from your home, then the deficiency balance becomes unsecured debt, making it $82k (or more). You'll end up paying MORE into the plan if you give up your home than if you stay. As I stated before, it may be in your best interest to stay in the home until your plan is completed in a little over a year, and THEN ditch the house. That way you don't have to pay the deficiency balance into the plan...You think paying 100% of your dmi for a little over a year is sucky? Imagine paying 100% of your dmi for 5 years! Ouch!

[newbie2]

HHM brings up another point. If you walk away from your home, then the deficiency balance becomes unsecured debt, making it $82k (or more). You'll end up paying MORE into the plan if you give up your home than if you stay. As I stated before, it may be in your best interest to stay in the home until your plan is completed in a little over a year, and THEN ditch the house. That way you don't have to pay the deficiency balance into the plan...You think paying 100% of your dmi for a little over a year is sucky? Imagine paying 100% of your dmi for 5 years! Ouch!

You can't do that in a Chapter 13. Unsecured debts are discharged in a Chapter 13, not secured debts (unless it happens within the plan. IE: Giving up the home during the plan.)

[unclerico]

So, the deficiency is or is not something I will be responsible for? As stated, either way I NEED to move. It is urgent and we have already signed a lease. We are moving in two weeks.

[momofthree]

Can you point to this in the bankruptcy code? Or can an attorney chime in here? How can you be held liable for a debt that was included in the bk?

I know that in MY bk petition, the unsecured portion of my mortgage is listed as unsecured and counted towards the unsecured debt limit. Of course, since we're keeping the house, it's not included in the list of unsecured creditors to be paid (which are being paid at 0% anyway, so it's a non-issue for me). But if I were to, say, lose my job in 10 years and thus lose my house, how could they come after me when the mortgage was included in my bk? Would I seriously have to file bk AGAIN to discharge the same debt that was included the first time?

[momofthree]

So, the deficiency is or is not something I will be responsible for? As stated, either way I NEED to move. It is urgent and we have already signed a lease. We are moving in two weeks.

The deficiency will be included in your list of unsecured creditors and be paid as such. However, the mortgage company DOES have to file a claim for deficiency balance, which they may or may not do.

[unclerico]

The deficiency will be included in your list of unsecured creditors and be paid as such. However, the mortgage company DOES have to file a claim for deficiency balance, which they may or may not do.

I see, here in SE Michigan that could take over a year for them to do. They would have to sell the house first I am assuming. I did speak to the paralegal and she said that the plan was wrong as reworked. The other person working on my case quit and moved out of State. She had agreed with me about the 180/week over 60 months and is going to file it that way. Now if later on the BOA comes back and files a claim then so be it.

[momofthree]

I see, here in SE Michigan that could take over a year for them to do. They would have to sell the house first I am assuming. I did speak to the paralegal and she said that the plan was wrong as reworked. The other person working on my case quit and moved out of State. She had agreed with me about the 180/week over 60 months and is going to file it that way. Now if later on the BOA comes back and files a claim then so be it.

That's GREAT news! Congrats and keep us posted on your progress.