How possible coming tax increases could affect Plan

[alorth]

Alorth,
I'm also wishing you all the best. My heart truly goes out to you as I think you case is the most difficult I've read about. Being from Michigan myself, I feel a certain amount of irrational guilt because my case was pretty smooth and I know your's has been very difficult even getting to confirmation. Sort of the way a soldier feels guilt when his buddy gets killed and he makes it home safely. Please stay in touch here with us. This community has been the most caring I've had the pleasure to be a part of (as related to the internet world). I want to be here when you have your hamster dance.

Blessings,
The Bajan

Thank you for the kind thoughts.

[justbroke]

I guess I don't understand how you can think we would have ANYTHING to put towards savings in a Chapter 13 Plan?

I'm stuck on what's making your plan payments so high that you will pay 65% and with a $70K baloon payment at the end. To me, this indicates that you are keeping some otherwise exempt property, or have very tight expense categories.

Allow me to explain. In my Chapter 13, I was thinking of getting rid of one of the cars. After carefully evaluating that I received $489/month towards "payments" and about another $200/month for maintenance, that was $689/month that came out of the DMI and went to the car. My car payments were around $385/month at the time, so that helped me right off the bat. The $200/month for maintenance wasn't so bad because one of the cars was a 2007 and I filed in 2008. What I'm saying is that you have "buffer" room in the expenses. My car did need new tires and I ran on the old ones as long as possible, but I saved the $300/month for emergencies. It came in handy when my main septic line cracked and backed up and I had to pay to dig up my driveway (concrete), repipe, and re-pave.

In my food category, instead of going out all the time, we took the $1,350/month for food and other things and reduced it down to about $1,000/month. That meant learning to shop better (two for one specials at Publix!), and not splurging on new clothes "every" month. That was another $350.

Remember, DMI is what's "projected" is left after your allowed expenses. It doesn't mean that your expense is less one month, you have to send that extra "DMI" to the Trustee. If you are struggling to rub two nickels together at the end of each month, that's a problem. I wish it were better for you because a Chapter 13 is not meant to be punitive.

What property are you keeping that is causing the 65% payback to unsecured creditors? Is it the house?

[LadyInTheRed]

I was looking back at Alorth's previous posts to try to figure out why the plan is so tough. I don't think there are any non exempt assets being paid for. The trustee objected to Alorth's high mortgage payments, private kindergarten tuition and other miscellaneous expenses. The judge decided that a specific dollar amount should go to unsecured creditors. Prior posts don't make clear how he arrived at that number and I'm not sure Alroth even understands it. My suspicion is that the judge took the difference between Alorth's stated expenses and what the judge decided was reasonable and decided that is what should go to unsecured creditors. Alorth's attorney is apparently afraid of the trustee and the judge, so I also suspect that the attorney did not fight as hard as he should have.

Does that about sum things up, Alorth?

[justbroke]

If that's the case, LITR, then I am really sorry to read about this entire case. Fortunately, some Districts allow you to keep the primary residence so long as it's reasonable for your individual salary. I couldn't imagine them throwing me out of my home because the mortgage payment was higher than the county average (under the IRS collection "standards"), just to send $$$ to the unsecured creditors. While I have read that some Districts literally force Chapter 13 debtors to give up real property in order to satisfy sending $$$ to creditors, this is the first case that I can say hit home.

Hindsight is 20/20. I wish that alorth didn't have such a plan with NO savings at all, including the inability to contribute to the 401(k).

[keepsmiling]

Hopefully Alorth will chime back in. I have been hoping to hear from you again, Alorth, because your story was extraordinary.
I believe there was a new sheriff in town ( the judge) who was basically using him to set an example.

[alorth]

@justbroke....You have completely MISUNDERSTOOD my case and my posts.

The balloon payment itself is NOT $70,000.

The TOTAL of all payments to the unsecured creditors in the confirmed Plan is $70,000 (figure was determined and named by our Judge).

WITH the secured creditors, interest, attorney fees, administration fees, and TT percentage added in, the TOTAL we will pay is going to be about $92,000, give or take.

Our monthly payment is about $1000/month (to make things simple). SO, 60 payments x $1000 = $60,000. Add in 5 yearly tax returns that will average about $5500 per return (hopefully), and you get another $27,500. Add those two numbers together, you get $87,500. Which leaves a balloon payment at the end of about $4,500.

Depending on the tax returns, the balloon payment could be more or less than that $4,500.

Hopefully it is clearer now.

(And yes, the house payment is $2,400/month, so that eats up a lot of our monthly income, and is being paid "outside" of the Plan. The PMI on our loan will drop off in 2 years and the payment should drop by about $200/month. I wish we could refinance and take advantage of these 3% rates right now, because we are paying about 5.75%, but that just isn't gonna happen.)

[justbroke]

Sorry alorth, I'm just basing it on what I read in this thread. My assumption was wrong, but you have so many contingencies, like high tax refunds, that I still don't like the balloon or the way you get to the end. Me saying that I don't like it, just means that I wish it was better for you.

[alorth]

@ LITR (and keepsmiling, too)......Yes, your synopsis about sums it up. I really don't know how the Judge came up with the $70k figure to the Unsecureds, but he did so independent of the TT. It IS unusual to require a balloon payment at the end, and I'm surprised he accepted it.

As far as the Montessori, we negotiated with the school, told them about the BK and our budget and situation, asked if they could help us in any way, and they are letting us have this final year at roughly half cost (the amount the TT "allowed" us for child care/tuition combined). It is just the one year, and then my daughter is going to Public School the last 4 years of the Plan. Our Plan payment steps up about $300 next year when we are done paying the tuition.

As for our atty....he definitely got a lot more money out of us than he should have, being that it was his advice and mistake on the Means test that led us to file a CH 7 originally, and then start fighting the Motion to Dismiss the 7, before converting to 13 and then paying full price for that.

I'm over it though....I just want to hopefully get through this whole thing as the Plan states, not have too big of a balloon pmt at the end, and get on with my life.

We still have that exempted "cushion" of $4000 in the bank that will serve as our emergency funds should we need it, and we've already had to replace a well pump tank in our house that cost $500. I expect some car repair/maintenance expenses before too long as well.

What can I do? Just gotta keep plugging along. Its not like I want my life to fly by, but I do want this 5 year Plan to go quickly, so its kind of a Catch 22.

[justbroke]

Yes, just keep plugging along and staying in plan and hope for the best.