Can you buy out of a Chapter 13?

[papie]

We're in a 100% plan and have 16 months left. Our financial situation has changed drastically over the last six months. I contacted our lawyer to notify them that we had an increase in income and she said not to worry about unless the trustee said something, but she doesn't expect him to say anything.

By December we should have enough in savings to cover the plan base amount that is listed in 13datacenter.

Is it possible to make one large lump sum payment and pay our plan off early? I realize we'd have to go through our lawyer and get approval from the trustee and all that jazz, but I was just wondering if there were any laws or anything against doing something like this, or any reasons why it might be a bad idea.

[kornellred]

As has been discussed somewhat frequently on this forum, the 2005 BAPCPA legislation makes it impossible to get released from a Chapter 13 payment plan unless 100 percent of the listed claim amounts are are paid in full, not just the plan base, which may be far less that the claim amounts. Just make sure you understand this condition.

[momofthree]

If you are truly in a 100% payback plan, then yes, you can buy out early. Good luck and keep us posted!

[AngelinaCat]

Look for posts by Flamingo. She and her DH did an early buy-out of their Ch13. They filed under the old law, before things changed with the BK laws in 2005. Their buy-out occurred after that date.

[HHM]

Yes, if you are in 100% payback, then you would only need to pay the balance of claims filed in your case. However, if your BK includes something like a 2nd mortgage lien strip, you probably want to see the plan through because you are probably not a true 100% payback because the 2nd mortgage isn't getting paid in full (or, at least that is unlikely).

Note, aside from just ending the BK and stopping the payments (which is beneficial in and of itself), there isn't much other benefit to getting out early. All credit related aspects of a chap 13 BK are based on the filing date, not the discharge date (except for future mortgages).

[spidge]

Yes, if you are in 100% payback, then you would only need to pay the balance of claims filed in your case. However, if your BK includes something like a 2nd mortgage lien strip, you probably want to see the plan through because you are probably not a true 100% payback because the 2nd mortgage isn't getting paid in full (or, at least that is unlikely).

Note, aside from just ending the BK and stopping the payments (which is beneficial in and of itself), there isn't much other benefit to getting out early. All credit related aspects of a chap 13 BK are based on the filing date, not the discharge date (except for future mortgages).

I am attempting to wrap my head around this. If they pay off early the amount of the claims at 100% would the amount be the same as completing the payments on a monthly basis. Why would they have to continue?

What if the 2nd mortgage holder did not make a claim? Would they then be able to pay early and be done?

[spidge]

I am attempting to wrap my head around this. If they pay off early the amount of the claims at 100% would the amount be the same as completing the payments on a monthly basis. Why would they have to continue?

What if the 2nd mortgage holder did not make a claim? Would they then be able to pay early and be done?

Any thoughts on this would be appreciated. Of course I ask to see if it may apply to my situation.

I am in the middle of my ch13 and was given the option of 3, 4 or 5 years with the payments larger or smaller accordingly. I chose the 5 year plan for the smaller payments. My payback is only 3% and many creditors did not make claims including the 2nd mortgage holder. They are scheduled, but no claim was made.

So according to HHM I would have to pay all claims in full before I could buy out, but what about the 2nd who did not make a claim?

[HHM]

Spidge, you are confusing some issues. My answer was directed at the OP's specific circumstances, your circumstances are different.

There are 3 types of balances in a chapter 13 bankruptcy.

1. Total of all scheduled (listed) claims (this number is an estimate anyway).
2. Plan Base (this is the monthly payment times the number of months of the plan)
3. Total of "approved" claims (these are the creditors that filed their proof of claim and the POC was approved) + administrative expenses (strictly speaking, your attorney and trustee also have "claims" in BK, but I can see where it might be confusing to lump those claims in with regular creditor claims).

To buyout early in chapter 13, you must pay #3 in full regardless of the balance due on #2; the total of all POC's filed in the case along with all administrative expenses.

Pre-2005, the debtor was able to buyout using #2, but not any more.

In a 100% plan, #2 and #3 are generally the same amount. Why this issue can get confusing is when we talk about the percent going to unsecured creditors, the percent is calculated as a percent of #1. In your situation, you are 3% payback to unsecured...well, that statement is not helpful, because you need to know the amount for #3.

[spidge]

Confused, I am. I am not sure which column would be line#3. Is it Principal owed?

[HHM]

What column where?

Every creditor that is getting paid filed a proof of claim. All you need to do is add up the POC's, that is the buyout.

Although a bit more time consuming and costly, it is probably easier to simply view the POC's on PACER and add them up manually then decipher 13datacenter.

[spidge]

it is probably easier to simply view the POC's on PACER and add them up manually then decipher 13datacenter.

That is likely my problem.

[justbroke]

I agree that 13 Data Center can be a bit cumbersome. My Trustee would actually keep all the "good" claims with a claim number below 100. The claims that weren't being paid (because they were "not allowed") would have a higher number. I think those were over 100. So if a creditor filed Claim #5 (in PACER), and it was disallowed, then it would be claim 105 in 13DataCenter.

[goon]

HHM is right in that the best way to be sure is to look at the claims in pacer.

In my case the principal owed column does represent the remaining unpaid portion of #3 from HHM's list. But my understanding is that this may be different depending on how your trustee uses 13datacenter.

Also keep in mind that this does not include the trustee's % so a payoff amount would be higher than the remaining unpaid balance of claims.
(this also gets more complicated if you have any secured debt being paid through the plan which is being paid interest).

At the end of the day the only way to have a true payoff number is to get it from the trustee (via the lawyer). Thou you can "estimate" based on the claims.

HHM, Also Just to clarify, in a 100% plan wouldn't #2 and #3 be different because of the trustee % ?

[HHM]

HHM is right in that the best way to be sure is to look at the claims in pacer.

In my case the principal owed column does represent the remaining unpaid portion of #3 from HHM's list. But my understanding is that this may be different depending on how your trustee uses 13datacenter.

Also keep in mind that this does not include the trustee's % so a payoff amount would be higher than the remaining unpaid balance of claims.
(this also gets more complicated if you have any secured debt being paid through the plan which is being paid interest).

At the end of the day the only way to have a true payoff number is to get it from the trustee (via the lawyer). Thou you can "estimate" based on the claims.

HHM, Also Just to clarify, in a 100% plan wouldn't #2 and #3 be different because of the trustee % ?

No, because your monthly payment would need to include administrative expenses.

[goon]

No, because your monthly payment would need to include administrative expenses.

Sorry, my bad, for some reason I completely missed that #3 included administrative expenses (ie trustee %).. That is what I get for reading these things and responding when I am tired...