Almost done.... please help with what to do

[planted]

We owe a final chapter 13 discharge amount of $30,000 after 5 yrs of paying $500 per month to the trustee. The money has to come from refinancing our home, but no one will refinance us to pay this off and be relieved from this long 5 yr. ordeal.

What are we to do?

To add to the confusion the trustee set the final amount based on our home value over 5 yrs ago. The home is not worth that much now.

Any advice or experience in this matter will greatly be appreciated.

Thank you all in advance for your time.

[lrprn]

If I'm reading your post correctly, you've paid for five years on your confirmed 5-year Ch 13 plan but still owe $30K to the trustee. Can you provide us with more details about that?

Have you talked with your lawyer about this situation yet? If yes, what did your lawyer say? If no, you need to contact your lawyer to find out how to best approach this situation. For example, would it be a good idea for your plan to be amended to reflect the decreased current value of your home?

How much is your home worth now compared to the original estimate five years ago?

[despritfreya]

Your situation is why balloon payments at the end of the Plan are not a good idea. Worked great when banks were lending money like water falling from the tap and property values were irrationally rising, but does not work when the over-inflated market finally collapses and the property you once thought was worth a ton is back to its real value. Not to lecture here, but you obviously filed just before the market collapsed. You should have been discussing this problem with your attorney long before now.

The problem you face is that there was a reason you were paying $60k into the pot. The reasons have not changed but your ability to completely fund the Plan has. Why were you paying in this amount? Did you have non exempt property you were trying to protect? If so, what was/is it? Were you trying to pay taxes, a vehicle? Irprn is correct. We need more details.

Des.

[planted]

Thank you for the responses here.

Yes our plan started out on the standard 3 yr. plan paying 500 a month for 36 mos. At the end, we were to pay off the final discharge amount of 42,000 based on the equity in our home. That was assuming we could get a refinancing. We have tried everywhere for the loan but no one is willing since we are in a 13. This put us into two more years of paying 500, each month, applied to the discharge amount. In two more months it will be the end of the plan and $ 30,000 for the final amount.

I worry because how are we to pay this off at the end of 5 years with banks so tight.

I wish the trustee could consider my home as my retirement account and not take what little we have. I am just a carpenter and 59 1/2 yrs old, I am very concerned as I have nothing else put away, no other real estate, except the home I built with my own hands.

To answer your questions; Yes, we had one years income tax placed into the 13 as well as other non secured debt. Our only property is our primary residence. Since I'm a good carpenter and built our own home, I was always hoping my home would be our future. It seemed to be the only way we ever got ahead.

I did finally buy a newer truck 2 mos. before the BK, paying that on the side. There is also a truck camper bought two yrs. before involved in the 13 worth about $14,000 5 yrs ago.

I Want to thank you again for any information. I don't understand a lot about the exempt property. I have always considered it our retirement when we sold it but, things change obviously.

The only advice out attorney will give us is, "there are a couple things we can do when we get to that point" That is all he has said. Now only two mos. away.

[despritfreya]

To answer your questions; Yes, we had one years income tax placed into the 13 as well as other non secured debt. Our only property is our primary residence. I did finally buy a newer truck 2 mos. before the BK, paying that on the side. There is also a truck camper bought two yrs. before involved in the 13 worth about $14,000 5 yrs ago. The only advice out attorney will give us is, "there are a couple things we can do when we get to that point"

Well, you are now at that point. Sounds like you filed a 13 so you could keep the camper that, when you filed was worth $14,000.00. In addition, maybe you had non-exempt equity in the home, which, by today's standards, is probably no longer there. Depending upon the amount of income tax being paid, my guess is you are paying your unsecured creditors close to the $14k for the value of the camper plus any non exempt value that was in the home when you filed. Am I correct? How much are the taxes?

I do not know your specific situation but, at this point, if you otherwise qualify for a 7, maybe you should consider converting and giving the camper to the Trustee. The home may have depreciated enough to eliminate any non-exempt value therefore the Trustee may not care about it.

Des.

[planted]

The remaining unpaid income taxes were just under 10,000 back then, now almost paid off completely in the BK. The camper is nearly paid off too in the BK. My property taxes are $3600 a yr. which gets paid by our mortgage holder each year. I am not ready to sell our home yet, I need to work till I'm at least 65.

I wish the trustee would consider the reduced equity and just discharge us... we could start saving some money, perhaps get medical insurance again and pay off our two gas cards that are up to the max.

I cannot give up the camper as it's the only enjoyment we get and does not cost much to go camping or visit family.

Thank you all again

[RunningMan]

You could give up the camper for now and maybe tent camp. If the equity in your home (you didn't say how much equity you have) is currently less than the exemption you could convert to a chapter 7 as Des suggests and keep the home. Then once all your debt has been discharged under the chapter 7 and you save a down payment, you could purchase another camper. If your case is dismissed, it will be hard to enjoy much when the creditors start calling again. If they get a judgement, they could possibly take the camper from you anyways.

[planted]

Running man, I appreciate your thoughts and advice. Thank you for that.

I must say though while reading your post and some others too, that there is some confusion between a dismissal and a discharge. Discharge means a successfully completed 13 where a dismissal is what you do not want since creditors can start collections again and means you were unsuccessful in your BK plan.

That's why I'm asking how many others received a successful discharge without paying the final BK balance because home values dropped? Plus I know retirement accounts cannot be taken away in BK so why can't my home be considered my retirement since there are no other real assets? Thank you again.

[RunningMan]

A home is not a retirement account, but it is protected to some extent. In addition to your retirement account, Oregon allows a $30,000 homestead exemption on your home. $36,000 if joint owners. You stated that your taxes are nearly paid for but are not paid yet. That means you are still paying priority creditors and haven't paid anything to unsecured creditors yet. My understanding is that priority creditors get paid first. Even assuming that the equity in your home has dropped below the exemption (you still haven't said how much equity you have), how can you protect the camper without paying $14,000 to the unsecured creditors? If you can't pay 100% to the priority and secured lenders, plus the amount you need to pay to keep the non-exempt assets, how can you get a discharge and not a dismissal? I am far from an expert, so maybe I am missing something.

[momofthree]

I don't believe there is any way to get a discharge without paying the balloon payment. Despritfreya is an attorney, and has suggested (though acknowledging that we don't have all the necessary details) that your best option may be to convert to a ch.7 so that the last 5 years won't have been wasted. If you can't come up with the balloon payment, the case will be dismissed, and all your debt comes back + interest + penalties. Is keeping your camper worth that? Probably not.

[despritfreya]

Discharge means a successfully completed 13. . .That's why I'm asking how many others received a successful discharge without paying the final BK balance because home values dropped? Plus I know retirement accounts cannot be taken away in BK so why can't my home be considered my retirement since there are no other real assets?

I do not believe you understand the Chapter 13 concept, especially when you ask why your home cannot be considered in the same light as qualified retirement accounts. Your residence is not a "qualified retirement Plan". But for a few states, there is a separate and distinct exemption for a residence, called a "homestead exemption". One has absolutely nothing to do with the other and the fact that you think you are going to retire off of the sale of your home is completely irrelevant as it relates to the issues at hand.

A Chapter 13 allows you to keep all of your non-exempt assets under very specific circumstances. By your comments, I am going to assume that when you filed, the equity in your home was above the allowed exemption. I am also going to assume that you were permitted to keep the camper, because you agreed to pay its value to your creditors or compensate them in some way for the diversion of disposable income as it also sounds like you still owed $$ on it. As a result, you had to pay the general unsecured creditors what they would have received if you had filed a Chapter 7 some 5 years ago, plus whatever agreement you reached with your Trustee to keep the camper.

I can virtually promise you that no one has been allowed to modify their Plan to reduce funding simply because some asset is no longer worth what it was when the case was filed. If that was allowed, everyone would elect to change their Plan as everyone has lost value either in non-exempt real property or even a vehicle that was non-exempt at the time they filed bk. The value of your assets were fixed, depending upon your jurisdiction, either at the time you filed your case or at the time your Plan was confirmed. What has happened to the value of those assets, as it relates to the Chapter 13, has no relevance today. It is what is was, not what it is.

If the equity in your residence is still over the allowed exemption, converting to a 7 will mean that you could lose the home but you would be paid your allowed exemption amount. If you have that kind of equity you should have no problem getting a loan secured (even if it is a 2nd lien) by the home to pay off your case. If you no longer have equity in the property over the exemption, a Chapter 7 Trustee is not going to bother with it. As to the camper, and assuming it has some value that a Chapter 7 Trustee would want, if you are not willing to part with it then, unless you do something to pay off your 13, your case will eventually be dismissed.

By the way, the taxes, to the extent that they are not paid, will survive a conversion or dismissal. In the case of a conversion where the Trustee liquidates property, some of the taxes will get paid but whatever does not will still be owed by you.

Des.

[planted]

Des, What a terrific answer. You put some time into writing this. I thank you for helping me understand. I doubt I have much equity any longer. It's just a very special hard to find kind of place.

What you are saying is to do the conversion to a 7 since I cannot get a loan to pay the final $30 k. They would require me to sell the camper worth, about 11k now, pay that to the chapter 7 trustee and be able to keep my home since we are making the mortgage payments. How about keeping my two trucks? One is very old, just a carpenters work truck but, the other is still worth about $15,000, can I keep that one in a Chapter 7 conversion? Thank you very much.

[despritfreya]

What you are saying is to do the conversion to a 7 since I cannot get a loan to pay the final $30 k. They would require me to sell the camper worth, about 11k now, pay that to the chapter 7 trustee and be able to keep my home since we are making the mortgage payments. How about keeping my two trucks? One is very old, just a carpenters work truck but, the other is still worth about $15,000, can I keep that one in a Chapter 7 conversion?

Remember, I do not know the specifics of your case. I am making a lot of assumptions and you need to discuss your options with your attorney.

If you convert, you do not sell anything. Your Chapter 7 Trustee takes control over the non-exempt assets and he/she liquidates them. If your house is no longer going to produce $$ for the bk estate, it will be left alone and you simply continue to make mortgage payments. The vehicles that do not have liens on them, if exempt, are left alone. If they are not exempt the Trustee takes control. For example - the one that is worth $15k, if there is no lien on it or, if a lien, very little owed and no exemption to fully protect it, you will lose it. If you owe $$ on the vehicles and are current in the payments (I think you mentioned that you were paying them outside the Plan) then you will continue to make payments on them. However, after 5 years, my guess is that you do not owe much and there may be non-exempt equity.

Again, you must discuss the specifics with your attorney.

Des.