What I don't Understand...Unsecured vs. Secured Creditors

[alorth]

I was under the impression that when a Plan is paid on, there is a strict order of who takes precedence in getting paid.

For instance...Trustee and Attys. get their share first. THEN the Secured creditors. And LAST, the unsecured creditors get whatever is left divided up evenly amongst them.

Isn't this the case?

And IF IT IS THE CASE, then WHY can a judge or trustee essentially tell us to abandon our home and stop paying on it, and move to somewhere cheaper if I want to get my Plan confirmed because if I don't, then there isn't enough money going to the Unsecured Creditors? Isn't that doing HARM to a Secured Creditor in FAVOR of the Unsecured Creditors, who are supposed to be LAST in line? How can this be acceptable? Why wouldn't the Secured Creditor argue against this?

I mean, why should it just be decided arbitrarily, and not by the rule of law?

The Secureds take Precedence over the Unsecureds? Am I wrong?

If I can make my house payment to my secured creditor (and I CAN), and also make a payment into a 13 Plan that does pay SOMETHING to the Unsecureds, then HOW can we be told that isn't enough?

I just don't get it.

I know the TT is paid a commission based on what the Unsecured Creditors get, but that should not be a valid reason for them to demand MORE at the expense or Harm to a Secured Creditor.

The IRS estimate for housing cost for a family of 3 in our county should play no role in a 13. We are paying the Secured Creditor on Time, and also can pay into a plan that gives the Unsecureds some payback, and that's certainly more than they would get in a 7, and I would argue they've already made out anyway in writing off the debt, getting tax breaks for that, and also in the exorbitant interest they all collected back when we were making our payments on time for years on end.

I feel the game is fixed against us not by law, but by the whims of who we got UNLUCKY enough to be faced against in the forms of the TT and the Judge, and their personal preferences are superceding the Law, or how it should be applied, especially in this day and age in America, when the Government should be looking to AVOID foreclosure of homes if at all possible.

[despritfreya]

You don't seem to understand. A secured creditor can look to its collateral for payment and, if upon liquidating the collateral, the proceeds are insufficient to pay off the debt in full, it can amend its secured claim to unsecured and share in the distribution.

The issue the court and trustee has with your case is their belief that you are living an extravagant lifestyle and should downsize in an effort to pay back the money you borrowed. That is why you were unable to stay in the 7 - you make a lot and, in the eyes of the trustee, spend a lot. So, as it relates to a Chapter 13, yes, the court can require you to surrender the expensive house. It can also determine that expenses such as private school tuition are not reasonably necessary. But, just remember, it is the judge who makes the final decision. If you want to fight then you fight and go to “trial” on the issues raised by the trustee.

While I have never had a client forced into giving up a home, I have had clients lose fancy vehicles and be required to cut down on such things as private school expenses. The creditors, trustee and the court have the right to allege that a debtor, who, in their minds, is not willing to do some belt tightening, is proceeding in bad faith. I even had one client barred from ever filing another bk and if an attempt was made, the case would be immediately assigned to this same judge, no matter where in this Country the case was filed. Yes, this was a "bad" case with "bad" facts but these things can happen and, in this case, the judge’s decision was upheld on appeal.

Des.

[alorth]

You don't seem to understand. A secured creditor can look to its collateral for payment and, if upon liquidating the collateral, the proceeds are insufficient to pay off the debt in full, it can amend its secured claim to unsecured and share in the distribution.

The issue the court and trustee has with your case is their belief that you are living an extravagant lifestyle and should downsize in an effort to pay back the money you borrowed. That is why you were unable to stay in the 7 - you make a lot and, in the eyes of the trustee, spend a lot. So, as it relates to a Chapter 13, yes, the court can require you to surrender the expensive house. It can also determine that expenses such as private school tuition are not reasonably necessary. But, just remember, it is the judge who makes the final decision. If you want to fight then you fight and go to “trial” on the issues raised by the trustee.

While I have never had a client forced into giving up a home, I have had clients lose fancy vehicles and be required to cut down on such things as private school expenses. The creditors, trustee and the court have the right to allege that a debtor, who, in their minds, is not willing to do some belt tightening, is proceeding in bad faith. I even had one client barred from ever filing another bk and if an attempt was made, the case would be immediately assigned to this same judge, no matter where in this Country the case was filed. Yes, this was a "bad" case with "bad" facts but these things can happen and, in this case, the judge’s decision was upheld on appeal.

Des.

If I hear that term "belt-tightening" one more time, I think I'm going to bash my head in a wall!!!!!!!!

We have been doing NOTHING but belt tightening for the last 3-4 years.

The ONLY "things" we have left are our HOUSE, and the school we've sent our daughter to (which we've all but given up on by the way).

We both drive older used cars, after giving up expensive newer cars. We sold the Boat. We gave up the timeshare. We sold our 3rd car/convertible that was purchased as a gift to my wife right after she graduated from graduate school almost 20 years ago. We have no jewelry or collections or "fancy f'ing things".

I sit here typing this on a "couch" that is ripped up and looks like it belongs in a drug den, but we haven't bought a new one. We sleep on a 12 year old mattress that needs to be replaced, but don't dare do it. I wear clothes that are 15-20 years old for chrissakes!

Not to mention the medical expenses we endure in co-pays and prescriptions...yeah....we DO PAY out our EARS for that stuff, if they want to know where our money goes!!

Yeah...REAL extravagant!

Our house is a 2100 ft sq. 2 level home with 4 bedrooms. 3 are used as bedrooms, the 4th is a home office. NO FINISHED BASEMENT. NO REC ROOMS. NO GOURMET KITCHEN, or POOL, or ANY of that LUXURY crap! The home was purchased at the near HEIGHT of home values, and was refinanced once to take the equity to pay CREDITORS before we went BK.

I challenge any TT or Judge to tour my home and call it "LUXURY". What a frigging JOKE.

We have tried to do the RIGHT thing. And TRIED AGAIN? And what do we get? THE SHAFT!!!!!

ALL I ask is to stay in my GD HOME! But I guess the Government won't be satisfied until they have taken absolutely EVERY GD LAST THING we hold dear, to pay the F'ing Banks!!!

I have seriously HAD ENOUGH of this GD process, and this GD f'd up world. We have Downsized, and Downsized, and none of it is acknowledged by ANYONE! We are treated as though we're trying to get over on the process because of the income we make...well WE ARE NOT, and it is spoken for. Damn it, what do we have to do? Is there NOBODY who can understand this?

We MADE a Plan in GOOD FAITH, keeping NOTHING but our home, and asking to send our child to Catholic School, but NO is all we hear. Time and AGAIN.

THIS is why the number of 13's filed isn't where the Government thinks it should be. AND this is why they fail, or never get confirmed.

And when you have a Judge who also seems to side with the Creditors every bit as much as the TT, or so you've been told by EVERYBODY involved in the local jurisdiction, then you as the lowly debtor have no fair shot. Hell, our atty. is scared out of his F'ing mind of this Judge as he reminds us several times every time we meet!

The Banks sure as HELL haven't suffered from our BK. BUT I spend every waking hour in worry, and in misery, with a life upended, and I sleep for sh*t.

But hey, at least the Government is looking out for The Banks instead of the little guy in this process...not like they don't screw us all on a daily basis already without their help. SOOOOO Happy my taxes go to things like bailouts for the Banks. Yes, my taxes which are always paid on time!

I seriously can hardly take this crap anymore.

[alorth]

By the way des....I'm only referring to "belt tightening" negatively not because YOU said it, but because we've heard it here in reference to our case from TTs and attys. time and time again, and never seem to get any acknowledgement or credit for the extreme belt-tightening we've already done.

My rant was not an attack on your response, though more just an illustration of my COMPLETE frustration with our situation and the seeming lack of ability to get our point across to anyone...and especially to anybody who really matters in our case.

[justbroke]

Some of your frustration with the home, which could be considered "necessary for the effective reorganization of the debtor" in a Chapter 13, may lie around your debt ratios. If your home is more than 31% of your gross income, then it is going to draw concerns. Remember, that you need to lump in taxes, insurance and reasonable expense for repairs. Additionally, if you have arrears on the home, then that could compound the issue and make the housing payment significantly higher than just looking "simply" at your regular (non-escrowed) mortgage payment versus the PITI payment.

Otherwise, you'd need to fight it in court and hopefully the Judge will find that your home is "necessary for the effective reorganization of the debtor". At least here in Florida, they hardly EVER challenge the home in a Chapter 13 if the total costs are under the magic 31% number. (Otherwise, it doesn't even make sense to keep a home that you really can't technically afford.)

[alorth]

Some of your frustration with the home, which could be considered "necessary for the effective reorganization of the debtor" in a Chapter 13, may lie around your debt ratios. If your home is more than 31% of your gross income, then it is going to draw concerns. Remember, that you need to lump in taxes, insurance and reasonable expense for repairs. Additionally, if you have arrears on the home, then that could compound the issue and make the housing payment significantly higher than just looking "simply" at your regular (non-escrowed) mortgage payment versus the PITI payment.

Otherwise, you'd need to fight it in court and hopefully the Judge will find that your home is "necessary for the effective reorganization of the debtor". At least here in Florida, they hardly EVER challenge the home in a Chapter 13 if the total costs are under the magic 31% number. (Otherwise, it doesn't even make sense to keep a home that you really can't technically afford.)

That's EXACTLY it jb.....our percentage on the home, W/ taxes and maintenance is well UNDER that 30 % mark. Payment, Taxes and Insurance alone are at 24%. There are NO ARREARS, as we are still up to date on the payment. Wish I was in Florida. We brought this VERY ISSUE up to the TT at the 341 last week, and he said that the JUDGE - YES, THE JUDGE, NOT THE TT (him) - in this case doesn't even pay attention to the percentages when it comes to the house, and that instead, he looks at the TOTAL case in comparison to the income, and "decides" more or less "on his own" that the debtor should be paying "X Amount" in to a Plan every month, and what the debtor should be able to live on in this county, and if the Plan doesn't meet what he thinks it should, it won't get confirmed EVEN if the TT and the debtor, US, agreed to another more lenient Plan. In other words, THE JUDGE essentially makes a Plan and says its the Bottom Line, regardless of anything else worked out between the TT and debtor. Real Nice. Individual circumstances need not apply. I guess the dockett is so light on 13 cases he has the time to do such a thing in every case? Most have never heard of such a thing from what I can gather.

And no...can't sleep. : (

[despritfreya]

If you are at your wits end with this process and believe you are in the "right" then you take it to the judge. You continue to fight - not give up. Remember, even the judge is not the final arbiter. You can appeal.

And, no, I do not take offense to your "rant". You believe you have been wronged and cannot get those you have to deal with to see it. Nothing wrong with venting and nothing wrong with fighting.

Des.

[justbroke]

I agree. Until someone stands up to this type of judge, then the judge will continue to act in such a manner. I do know that some judges will review individual cases, but this is the first I have read of a judge, in Chapter 13 cases, setting the final payment amount!

[Slingerland]

I agree. Until someone stands up to this type of judge, then the judge will continue to act in such a manner. I do know that some judges will review individual cases, but this is the first I have read of a judge, in Chapter 13 cases, setting the final payment amount!

Unfortunately there are two issues here in appealing: an attorney willing to go after a judge, and money to pay the attorney.

[justbroke]

Unfortunately there are two issues here in appealing: an attorney willing to go after a judge, and money to pay the attorney.

This is precisely why these issues are never directly addressed through the BAP and/or District Court. Unfortunate, but true.

[alorth]

Unfortunately there are two issues here in appealing: an attorney willing to go after a judge, and money to pay the attorney.

Money to pay the atty. is a biggee for us...especially in considering whether or not we could appeal a ruling.

I'll probably not post again for awhile, since I'm now in a bit of a waiting game again. Met with my atty. this morning to get some documents together that the TT ordered post 341...

Those will be sent in, and then it looks like we wait until the confirmation hearing which won't be until May, but we will probably hear about the TT's objections to our Plan before that....maybe. I hope.

Dreading going before the Judge at the Conf. Hearing and getting HIS ruling, but I've gotta try and keep myself composed for the next month or so that I have to wait, because I'm driving my self crazy with worry.....and every time I meet with my atty. and he talks about this Judge, he makes me worry more.

Just gonna keep praying that maybe something won't go the way I fear it will, but that we'll catch a break somewhere.

[justbroke]

Just have your ducks all lined up and quacking in unison.

[keepsmiling]

Sending positive vibes your way. Good luck and hang in there, appeal if necessary.

[keepsmiling]

Just wondering....can you try looking up this judge's rulings while waiting? In case the tt is just using scare tactics?

[biotechsolution]

If you give up and don't try to list the private school tuition (pad the budget somewhere else) I can't imagine why you won't get confirmed. especially if you're paying something to unsecureds.