Plan Payment

[Jf24]

I went to observe some 341 meetings today and ran into my attorney and was he answering some questions I had. I know I should consider him right but one thing does not make sense to me. He said there are 3 ways income is calculated for a payment plan. The means test, schedule I and a third way but I forgot what the third was, may be something about assets.

He said they take the highest amount after calculating all three. In my case it would be the means test due to overtime late last year. My schedule I should be my current income, I have no overtime in the past 2 months. He said since the means test calculation would be used I may have to wait till July to file, then no overtime will be on the means test.

It just don't seem right or even logical. Should I find another atty?

[LadyInTheRed]

The third way your attorney mentions is the Chapter 7 liquidation test which means that your Chap 13 plan must pay to your unsecured creditors at least what they would receive in a Chap 7. This only applies if you have non-exempt assets or if there are preferance payments that a Chap 7 trustee could get back to distribute to unsecured creditors.

The "Schedule I method" really is a combination of Schedule I (income) and Schedule J (expenses). Schedule I minus Schedule J = plan payment in most cases.

Your attorney's explanation sounds mostly correct. However, if you will have no overtime in the future and you can verify that, your Schedule J and your plan payment should reflect what your anticipated future income is. If the past overtime is a one-time event and creates an issue for you, you should ask your attorney about applying the Lanning decision which says that Schedule I should look forward. But, your attorney hopefully knows the trustee best. If he thinks there may be a fight and you aren't talking about a large difference in plan payment, it may not be worth the additional attorney's fees it would take to fight, even if you do ulitmately win. Of course, this partly depends on what is covered in your attorney fee agreement. Waiting for the overtime to fall off your means test may be a better option.

If you haven't retained this attorney yet, you should consult with another attorney or 2, regardless of whether this attorney is willing to use Lanning to argue that past overtime should not count in calculating your plan payment. It's always good to interview more than one attorney and chose the one you are most comfortable with.

You should never just consider your attorney right. If something doesn't make sense to you, ask more questions until it does. But, do keep in mind that there is much about bankruptcy law that doesn't always seem right or logical.

[Jf24]

You cleared things up for me thank you.

This was my third atty I interviewed and was retained back in Dec. I felt most comfortable with him. I would be loosing $500 if I went elsewhere at this point.

My overtime is not a 1 time event. Been getting it for a long time but came to a halt due to the industry I am in. It's the postal service and no way to prove or verify it. The only thing is the common knowledge that we are loosing billions and OT is one area that they have to cut to save. Don't know what kind of proof I can come up with besides printing news articles on the situation.

[Jf24]

Another thing i was told that my tax check would be counted as income if I file after I get it so either way my income would be boosted and would have to do the math to see if the tax check offsets the income from late last year and file before it.

[LadyInTheRed]

Another thing i was told that my tax check would be counted as income if I file after I get it so either way my income would be boosted and would have to do the math to see if the tax check offsets the income from late last year and file before it.

That makes sense. If your withholding is high and you get tax refunds every year, those refunds should be included in the calculation of your disposible income. It is your actual tax liability that should be a deduction from your income. That may not be the same as the amount whithhheld from your checks.

Can you get a letter from your supervisor saying that you will not have overtime in the future? Even if you can't, I suggest you ask your attorney more about it. News articles about finalized budget cuts and elimination of overtime may or may not be sufficient evidence. But, if it is not all yet finalized (haven't read much news about it lately), you may have no choice but to let the OT be included or wait to file.

[Jf24]

One thing that will help is if I can at least hold out till April, the 3 paychecks with overtime in Sept will drop off and be replaced with the 3 paychecks in March with no OT. I can also do taxes in April by deadline and will not be in the previous 6 months.

[LadyInTheRed]

April will be here in no time.

[SMinGA2]

The April 15th deadline for filing taxes is only if you owe. But you'll most likely need to give a copy of your tax returns to your attorney who will have to give them to the trustee.

If you have only paid this attorney $500, then it might still be worthwhile to try out a few more attorneys. Ask these questions - what income/expense info will determine your payment - in your consultations. Finding an attorney who will fight for you may save you more than $500 in the next 3-5 years.

[Jf24]

I know it's not an exact amount in figuring this but just adding up all the take home pay in overtime in Oct, Nov and Dec and divide by 6 it comes to about $500.00. Thats a big of chunk of change to shell out a month for the next 5 years, especialy when the overtime is not there. I would have to wait till July to file to get no OT in the figures.

Last cc payments were in Oct, last 1st mort payment in Dec and last 2nd mort payment was in Nov. Student loans also last paid in Nov. Wondering how long I have with this timeline.

[Jf24]

That makes sense. If your withholding is high and you get tax refunds every year, those refunds should be included in the calculation of your disposible income. It is your actual tax liability that should be a deduction from your income. That may not be the same as the amount whithhheld from your checks.

Can you get a letter from your supervisor saying that you will not have overtime in the future? Even if you can't, I suggest you ask your attorney more about it. News articles about finalized budget cuts and elimination of overtime may or may not be sufficient evidence. But, if it is not all yet finalized (haven't read much news about it lately), you may have no choice but to let the OT be included or wait to file.

I do taxes with turbo tax and looks like I will be getting around $4500 back, fed and state combined. I have never filed after Apr 15th. If I wait to file so this is not income in a month before filing do I have to file an extension, both fed and state. If I file both taxes and BK in April it will not count as income but do I keep this? I know future tax refunds will have to be turned over but does this one have to? Just half (married but filing BK separately)?

[SMinGA2]

Regardless of when you file, the tax refund is an asset because you are already 'owed' it. If it exists as cash on hand or in your bank accounts when you file, or an amount owed to you that has not been paid out yet, its still an asset. Whether you can keep it or not depends on your exemptions. If you cannot protect it with exemptions, then you could get the refund (cash) before filing - and spend it on necessary items/repairs OR items that would be exempt.

One thing to discuss with your attorney: if you're due to get back a $4500 refund for 2011, do you need to modify your withholding now? The trustee will get a copy of your returns, and pay stubs, and will see if you're over-withholding. $4500 is an average of almost $400 per month. Meaning a nice amount to fund a ch. 13. (Withholding extra tax to keep your pay checks low is not a good way to try to stay out of a ch. 13.)

[Jf24]

Do they take into account the part of the refund that you get from a deduction on property tax and mortgage interest?

[SMinGA2]

That is part of what impacts how you should set up your withholding. Your filing status, deductions, etc. all factor in. I stand by what I said: discuss with your attorney if you need to adjust your withholding. (If so - you can also assess your list of expenses, to see if there is anything you need to add.)

Now if you're giving up the house, you would need to calculate how that impacts your future year tax situations. I don't recall if you have said whether or not you're giving up the house.

[Jf24]

Nope, saying put. Hope to strip 2nd (1st is under water).