A few questions regarding income increase, death of child, looking for input

[nascarsse]

First time poster, long time reader.

We are in Michigan Eastern District

To start - Filed for chapter 13 in July of 09. We were confirmed in September of 09 paying roughly 7% with a 2nd lein strip.

In March of 2010 we lost our youngest child. We were able to keep our tax returns to help pay for the funeral, but they cam no where close to making a dent and fortunatley our parents were there to help us out.

In july I recieved a pay increase of 10k / year as well as a year end bonus of 4500. My wife is also making a bit more money now, roughly 1500 / year.

My questions are as follows-

Our lawyer recommended we wait to report the increase i income until tax time this year. We are working to repay our parents for the loans for the funeral, as well as trying to make some major and much needed repairs to our home. Our oldest is headed of to college this fall. We also have a major auto repair that is needed. As you can see we have a lot on our plate.

My goal is to retain as much as possible of the income increase to help work through these issues. We also underestimated a few of our expenses at the begining of this process.


What are the chances that we can retain most or all of this income?
How does a trustee handle a death in the family and the costs involed?
Where can I locate list of ALL allowable expenses?
If it doesnt work out and the trustee asks for more money, can we exit the chapter 13?
If we exit the chapter 13 what can I expect from our creditors?
For the first time in 15 years we are living a comfortable life. We arent purchasing any nice to have related things. We have a daughter that has worked very hard to have an opportunity to attend college and we want support her with that.

Can anyone offer any input or experience comments to help us determine what to look forward to?

Thanks for your time.

[AngelinaCatHub]

Welcome to our Forum. First let me extend condolences upon your loss. Tough thing to go through.

Not a 13 person but there is a book on C13 by Nolo press that will help you a bunch. It is about 25 bucks pdf download. There is also a C7 book most helpful.

I'll touch on what I can in your questions:

What are the chances that we can retain most or all of this income?
This is up to the individual Trustee. Explain all to him as you did here. It is not wise to not timely report any bk changes and I disagree with your lawyer's advice.
How does a trustee handle a death in the family and the costs involed?
Again, that is a judgment call about a subject that probably never came up to most Trustee's. It still would depend on the Trustees good will.
Where can I locate list of ALL allowable expenses?
Google this as well as the book I mentioned. A more experience C13 person will chime in soon I am sure.
If it doesnt work out and the trustee asks for more money, can we exit the chapter 13?
If we exit the chapter 13 what can I expect from our creditors?
You can expect them to go back to square one and charge back interest and charges as well as suits just as if you never got bk protection.
For the first time in 15 years we are living a comfortable life. We arent purchasing any nice to have related things.
This is good. Consider a conversion to a C7 if you can qualify. If not I would stick with what you know and finish the C13 or your condition will change for the worse.
We have a daughter that has worked very hard to have an opportunity to attend college and we want support her with that. You can only do your best. She must attempt to get some help through grants and scholarship.

Hope that helps a little. 'Hub

[Pandora]

My condolences to you and yours at such a devastating loss.

Here is the site that can walk you through it all and provide answers to what you've asked.

http://www.uscourts.gov/FederalCourts/Bankruptcy/BankruptcyBasics/Chapter13.aspx

[nascarsse]

Thank you very much for your input. Still looking for more especially anyone that may have had a similar experience.

[newbie2]

Nascarsse, first, I am so sorry about the death of your child.

I am also in the Eastern District of Michigan, and can help answer a couple of your questions. As you know we (those of us in a Chapter 13) are required to turn in our income tax returns to the trustee each year, as well as income tax refunds. When the trustee gets our returns they check for income increases and can adjust our plans to make sure the unsecured creditors are receiving "all disposable income". However that doesn't mean that they do so each time there is an increase. Your increase sounds large, but your income going in to the plan may also have been high and the increase minimal in relation to that higher income. (We had one increase in income during our plan, and the trustee didn't raise our plan payments. As our attorney stated: "The increase is minimal.")

Whenever there is an increase in income we are supposed to let our attorneys know so that they can amend the plan if needed. You are also allowed to show any increase in expenses since you filed, and that may offset the increase in income. It sounds like your attorney advised waiting until you filed your income tax return to notify the trustee of the income increase. I'm not sure why your attorney advised that, but there was probably a reason for it. (Ours asks that we notify them immediately of any increase in income or decrease in income.)

The funeral expenses: I'm sure you kept receipts. Hang on to them. Since you are paying back your parents for their help during that difficult time it is quite possible the trustee will allow you to keep doing so. Let your attorney know about all of this. We also paid for a funeral / cremation during our plan, and that was never questioned. It took every bit of our meager savings, but we saved our receipts and let our attorney know about it.

Your daughters college expenses? I'm afraid that will have to be on your daughter (student loans, scholarships, grants, etc) or whatever you can scrape up to help her. It will not be allowed as an expense to the detriment of your unsecured creditors.

Also, if you voluntarily dismiss your Chapter 13 you can expect the creditors to come back at you in full force, with interest. The 2nd mortgage strip will also not happen, as that happens only upon a successful discharge of your Chapter 13 plan.

Please make an appointment to sit down with your attorney and go over all of your options. Bring with you your most recent paystubs, any bonus information, and all current expenses.

Good luck to you.

[Flamingo]

I am sorry as to your loss. Unfortunately, please note that the court system and legal world is emotionless. What matters to the trustee in your situation is the change that has occurred to your situation and the trustee's job is to ensure creditors receive as much as possible. If your income has increased or there has been a decrease in your household expenses (one less in household), that is what matters. Unfortunately, I disagree that your attorney is making you wait to report all this as that may not be to your best interests due to the delay and the long time since the income increase and funeral expenses. If you dismiss your Chapter 13, you will end up at square one before you filed - your debts will go back to 100% and all late fees will be added but whatever you paid into the plan to the point of dismissal will be subtracted. I suggest sitting down with your attorney and discussing all your options. Best of luck to you.

[nascarsse]

Thanks everyone for your input.