In big trouble with 13!!

[road warrior]

I've been in chapter 13 for 4 years, scheduled to be done in January 2013. I'm making a monthly payment of $1086, paying our $400/month home mortgage outside the plan.

In Feb. 2011, I got a work comp settlement of $40,000 for an injury I sustained at work and had 2 surgeries for. I didn't report it to the trustee, and I wish now I would have. So, instead of kicking me while I'm down, read the rest of my dilemma.

3 weeks ago, I got a nasty call from my lawyer. He told me the trustee found out about my settlement and basically is ready to throw my case out. He wanted receipts/bank statements, basically anything that showed where I spent the money.

I sent receipts for about $28k, showing I'd hooked onto the city sewer system, built a shed on our property, bought a four wheeler, and made other improvements to our house that had been neglected for quite some time.

Now, the trustee wants $23,000 in addition to our regular payments of $1086/mo. by January 2013.

Option 1 - I can sell my truck, 4 wheeler, a utility trailer I had for my now defunct lawn mowing business, and whatever other household items I can get money for. I can also change my withholding allowance at work to get no federal tax withheld for the next year, hopefully netting me enough to pay this $23,000 off by January.

Option 2 - sell about $6-8k worth of stuff and try to refinance our home with a VA loan.
We currently owe $58k on a house I think is worth around $85-$90k.
My lawyer is a jerk and doesn't answer emails in detail, and I hate to call him because I don't do well talking on the phone without getting mad and yelling.
I don't know if I should try to contact the trustee and talk directly to him or not. I'm at the end of my rope!
Any advise??

[Mayo]

What is done is done. I'd personally go sit down with the Lawyer and hammer out a plan. If you refinance your house you would probably still need permission from the Trustee. Good Luck.

[justbroke]

I would not contact the Trustee. Your lawyer is there to run interference. Without your attorney, the Trustee would have already moved to dismiss your case. It is not worth beating you up over the mistake of hiding money from the Trustee. Your options are to either allow the case to dismiss or to find a way to come up with a lump sum by your last payment date in January.

The options you list are all fair options. However, the refinance could be difficult if you haven't maintained your credit well enough over the 4 years in the Chapter 13. To refinance, you'll need permission from the court and Trustee. You'll also need to file a modified plan. These are things that your lawyer will help you with.

Do not be surprised if this runs up additional fees that you must pay your attorney... maybe even outside the plan.

As Mayo has written, it's time to make an actual appointment with your attorney, rather than trying to hash things out by e-mail. Go in, admit your fault, and come up with a plan. The plan, in the end, may end up being a combination of both #1 and #2.

Please don't be mad at your attorney. It doesn't read as though your attorney did anything wrong.

[LadyInTheRed]

If I were you, I think I'd start working on both options. Sell whatever you can and decrease your federal withholding. But also try to get a refinance to pay your taxes when they come due. I normally wouldn't suggest decreasing withholding, but I think owing the IRS will be preferable to getting your Chap 13 dismissed after getting this far. If you can't get a cash-out refi, you can use the $1086 for a payment plan to the IRS after you finish your Chap 13.

I agree with JB: Don't contact the trustee. The trustee is there for the creditors, not for you. Make an appointment with your attorney.

[lrprn]

A quick question for you.....did the injuiry that led to your worker's comp settlement happen BEFORE or AFTER you filed your 13?

I'm asking because I also received a worker's comp settlement during our active 13 but our lawyer said that since my work injury happened AFTER we filed, that our trustee had no right to take the settlement and our lawyer would fight it in court if our trustee tried. (In our case, I did notify our lawyer as soon as I found out I would be receiving a >$10K settlement.) Our trustee was aware of the settlement but never asked for it.

[catleg]

Has your income and/or expenses gone up or down since you originally filed (did you lose pay on account of your injury or suffer added expenses).
These might help mitigate the trustee's claim.

[Flamingo]

First, the trustee will not work with you directly since you are represented by counsel. If you try to call, you will be advised to contact your attorney so you need to sit down with your attorney and go over all this. You know you made the mistake of not reporting any of this to your attorney. One's financial estate during the Plan years is under the control of the trustee and if there is any financial gain (or loss) during that time, it needs to be reported. That means any insurance settlements, inheritances, bonuses, increases (decreases) in income, lottery winnings, etc. Not to report those items could spell disaster as you have found out. Some people get to keep settlements (or portions thereof as your trustee only wants a certain portion of the $40,000 you received). Our trustee took half of an inheritance to my husband from his father who passed away during our Plan. We reported everything as we did not want to risk any problems, trouble or dismissal.

You will need to sit down with your attorney and figure out what needs to be done and your posting is an excellent lesson for those that may read this that they need to report anything like this ASAP upon learning they are even entitled to a settlement to avoid problems and a possible dismissal of their Plan.

Best of luck to you....

[road warrior]

A quick question for you.....did the injuiry that led to your worker's comp settlement happen BEFORE or AFTER you filed your 13?

My injury was after our filing.

Thanks to all who replied.
I'm still working out details of how to sell things, since I need court approval and then a motion is filed and I have to wait 21 days for creditors to object.
I never knew things could be so long and complicated until this. I sure hope we make it through all this!

[shark66]

My injury was after our filing.

That being the case, you're not in as much trouble as you would've been otherwise.

Let's hope your attorney is competent enough to get you out of it...

Good luck to us all.

[road warrior]

After 4 months of talking to various banks and lenders, my local bank has agreed to refinance our house so we can pay off our bankruptcy. We close tomorrow afternoon at 3pm. After 4 1/2 years, this horrible time in our lives will finally be behind us!!
After all is said and done, we will end up paying about $4000 more than we originally filed on.
Our house payment will go up approx. $400/mo., but without the bankruptcy payment we should have the house paid off completely in less than 5 years!!

[justbroke]

Congratulations on your upcoming closing.

[159515951]

You're adding debt to your house to keep a 4 wheeler? This sounds like bad financial decision making, but it's your life.

[road warrior]

You're adding debt to your house to keep a 4 wheeler? This sounds like bad financial decision making, but it's your life.

No, I'm adding debt to my home to pay off the $23,000 I didn't pay to the trustee for my work comp settlement. Plus, I'm done 6 months early and still keep all my assets. Best of all, I won't go to jail for bankruptcy fraud. Thanks for your encouragement 159515951.

[road warrior]

159515951 - I guess your post really rubbed me the wrong way. Maybe you didn't comprehend everything in my original post. Either way, in your words, it is my life and I'm pretty darn sure I'll be out of my bankruptcy and have a home and vehicles paid for before you do.
In case you haven't noticed, this forum is for advice, help, and learning from others' mistakes - not condescending remarks such as yours.

[keepsmiling]

Congrats on the GREAT news.
But I just have to ask.... did your income go down while you were disabled during the surgeries? Was there additional medical expense? Or has that already been subtracted from the 40K?
Gotta cover all the angles ya know.