Base amount increased $5000 because of my tax refund that I sent to my Trustee

[cbmmom5]

Hello,

I noticed that my base amount increased by $5,000. I requested that my attorney find out why. My trustee emailed my attorney back and said that my increase was due to my tax refund. I do not understand that at all. I had about $4,000 back in taxes and I submitted it right away to the trustee. National data center listed the amount as being received. My trustee is not saying he did not get the money. He is saying that my base plan increased because of my refund. Is this normal? Will my base plan increase every year when I send my refund in? Thanks for any feedback.

Connie

[justbroke]

Yes... this is normal. Your base is usually based upon your current "disposable monthly income" (DMI) which was set when your plan was confirmed. Unless your attorney already included your tax overpayments (refunds) into the calculation, any money received as a refund from filing taxes, is "additional" DMI. Thus your plan base increases.

The reason they do this, is so that the debtor doesn't away with just paying the "base" amount if the "base" amount is not the debtors entire disposable income. Example: say your base was $10K over 3 years. Your monthly "DMI" payment is $277.78. You have $20K in allowed unsecured claims. If you received a $4,000 refund in each of those three years, yet were only paying $10K, the unsecured creditors would never get paid what they are entitled to (which would be 100%, not the 50% calculated). So your base would go from $10K in year one to $14K by year two, $18K in year 3 and $20K at end of the plan.

As for why there is a discrepancy between "$4,000" refund and the $5,000 increase on 13DataCenter... I can't explain that.

[cbmmom5]

Thank you for responding. We did not keep our refund if that makes a difference. When you state: So your base would go from $10K in year one to $14K by year two, $19K in year 3 and $20K at end of the plan.; does that mean our payment will go up as well? We were confirmed for a payment of $970 for five years paying 100% back. If it does I wonder if I should try to get less back in taxes?

Connie

[justbroke]

Your (monthly) payment would never go up unless you had an increase in income, or a secured debt payment increased. An example of a secured debt payment increasing would be an adjustment on an adjustable rate mortgage (ARM).

(Note: I made a mistake with the $19K in year 3... should have read $18K.)

[bpokey]

Okay, now I'm confused. If you're in a 100% payback plan how could the base go up?!?! What's higher than 100%?

[justbroke]

Yes, i didn't notice that there was a payment in there at 100% for five years. If so, the base should not go up! There's something wrong. I think that cbmmom5 is either not in a 100% plan or there is something wrong with the Trustee.

However, the Trustee can take the refund and apply it to the base. It would just mean that the plan gets paid -- to 100% -- a lot sooner.

[cbmmom5]

Hello,

Justbroke, I am in a 100% payback because of my income. I figured that by applying my taxes my 100% pay back would be completed sooner or if I had to pay for the five years, perhaps my student loans would receive more money. I am very confused. My attorney takes the stance that you should never question the trustee in fear that you may tick him off. I can see now that by increasing my base there will be no way I will pay off early or my student loans will receive a bigger chunk.

Any thoughts on how I should fix this issue?

Connie

[justbroke]

I would politely demand that your attorney find out why the base changed in your 100% DMI case. I would first, though, find out exactly if you're in a 100% case. Sometimes, debtors believe that they are in a 100% case when they actually have either crammed down one or more vehicles, or they have stripped a junior mortgage on a home. Additionally, the surrender of secured property, such as a home or vehicle, can also create additional unsecured debt.