Adding secure debt into payment plan

[nmocean]

So I go to the attorney to file Chapter 13 he is wanting to include in the trustee payment my car and student loan. He was wanting to include the house at first, I have never heard this before, he was telling me not to make my car payments and student loan payments and I am current on both as it was going to be included in the BK. I refused to sign and the payment was out of reach because all the figures included overtime that is not guaranteed and I have worked a ton of it.

[justbroke]

When you pay secured debt... any debt... through the Trustee, you pay a premium on that amount. In some cases, that could come out of your pocket (if you have negative DMI). Typically, the Trustee's fee just "offsets" your DMI and the unsecured creditors suffer (for each $1 the Trustee gets in fee, it comes form the unsecured creditors... if the DMI is a positive number).

What your attorney is saying is to pay the house outside the plan. It's not a bad idea if it is allowed in your District. I paid my house inside the plan and my payment (PITI) went to over $5,000. The Trustee was getting $500 to make my house mortgage payment (which included taxes and insurance). Ridiculous to pay $500 to write a check... if you ask me! If your income is irregular, your overtime is spotty, then you shouldn't confirm a plan. However, you must realize that this is based a lookback of your actual income (Means Test) and a forward look of what you expect (Schedule I/J). If your income changes, just have your attorney modify your confirmed plan.

A Chapter 13 is a special tool and if you can't deal with the realities of, what one judge called, an aspirational budget, then you are not the type of debtor that should file a Chapter 13. It reads to me as if he was trying to make it work based on your actual income. He even took the home outside the plan to save some money (going to the Trustee).

The bottom line is this. If you can't afford your home and car(s) and living expenses without your "non-guaranteed" overtime, then a Chapter 13 will never solve your debt issues. Unless you were to surrender something.

[LadyInTheRed]

If you stopped working overtime and stopped paying on unsecured dischargeable debt, could you afford to pay your living expenses? If so, you should stop the overtime and wait 6 months to file.

[nmocean]

If you stopped working overtime and stopped paying on unsecured dischargeable debt, could you afford to pay your living expenses? If so, you should stop the overtime and wait 6 months to file.

I agree my salary is so large because of the overtime if it comes to a straight pay with overtime reduced or none at all then what? What we are going to try to do for one month is try it on our own, we are going to take out the 3120.00 to see if can realistically be done. My house payment, vehicles, utilities are not high payments but when there is a chance of getting a 16.00 bring home paycheck for two weeks, how in God's name is a family supposed to pay the house, utilities, put food on the table, gas in the car? My pays in the last six months have avg. about 20-40 hours extra a pay. In this time frame I have been able to pay off several accounts, medical bills, braces, and catch up on all my utility bills. (my bills got behind with our paycuts at work and my wife in all her wisdom decided to have a mid-life crisis and only pay house and vehicles). It was tough to get caught up on utility bills that are several months behind, what I did was open my own bank account and started paying all the bills instead of her. I'm in the process right now of saving to pay off more debt and I have enough to settle at least one card and pay another in full, but I am putting that on hold to see about this bankruptcy option.

[LadyInTheRed]

Your utility bills are dischargeable. If you file BK, you can use the money you set aside to pay the deposits the utilities will aks for to continue your service.

Whether or not you can survive on a certain amount should not require expirimentation. Figure out your total cost of living and do the math to determine if you can afford it without overtime. This is something that you should do before filing BK anyway so that you are certain BK is going to help. Have you taken the pre-bk filing course? It should help you come up with a budget. Maybe you can't afford your car and home.

[nmocean]

We have taken the pre-filing course I can afford all my house car utilities etc. and everything is current except CC's I have even paid a few of them off as well as a couple of medical bills. I just have a problem with them taking my whole pay leaving me with basically nothing if I so happen to get a straight pay, by the time the court acts my family is starved to death and there would be no money even to commute to work.

[justbroke]

What you describe is exactly the problem with irregular income. Chapter 13s do not deal efficiently with quick and unexpected changes. If you are in a District where a Wage Deduction order is not necessary, you could ride these waves, but you put the case at peril for paying late.

If you have a savvy attorney and an "understanding" Trustee you may be able to do what I did. I had kept one of my rental properties when I first filed Chapter 13. I was going to rent it out. However, I had a wage deduction order from my place or work. I petitioned the court, by motion, to pay the Trustee outside the "wage deduction" order for the rental unit... specifically in case the renter did not pay! While not exactly your issue, it is very similar where your income may fluctuate. The problem for the court, however, is making sure that you are in fact paying your "disposable income" to the Trustee.

In your case, you would need to establish and maintain a rolling fund to hold your over in these periods and to modify your plan immediately if the trend (lack of overtime) continues. As you're seeing, reliance on overtime is a major issue with keeping a Chapter 13 plan on track when the overtime is factored. Unless you're in a 100% plan, it will be difficult if you are already concerned that your overtime pay could drastically change.

[nmocean]

ok get paid today I had most of my utility bills paid if they would take 1000 out of my check like they want I couldn't survive. I had one ot day on check paid bills and car insurance wouldn't even had any money for a loaf of bread absolutely no way will I do this I will settle each one as I can

[kmjatl]

My first plan was kicked back because the Trustee said: "Payments should be made by payroll deduction."

My response: "Please provide the specific section of the Federal Bankruptcy Code which requires this."

I received no response, and was not required to pay by payroll deduction.

Try that approach.

[justbroke]

There is no specific section of the bankruptcy code requiring payroll deductions. Some of the Trustee here in Florida are a little more relaxed these days and allow ACH payments as well as scheduled ACH payments through the Trustee's website. I like that option better than payroll deduction (if you ask me).

Most judges, and Trustees, look to the duties of the Trustee which is in the bankruptcy code. They find this in 11 USC 1302 (b)(5) which reads that the Trustee's duty is to "ensure that the debtor commences making timely payments under section 1326 of this title..." This has been interpreted in the majority of cases is to make sure that the debtor makes payments, and the wage deduction is a means to insure payments.

Here's what our Southern District of Florida says on this...

Wage Deduction Orders - Deadline for Submission of Local Form. A debtor who is not self-employed must submit a proposed Local Form "Agreed Order to Employer to Deduct and Remit and for Related Matters" to the court prior to the meeting of creditors. The proposed order must be signed by the debtor and debtor's attorney. If the proposed order is submitted to the court in electronic format, the order must contain the actual imaged signature of the debtor. The attorney for the debtor, or clerk of court, if the debtor is pro se, shall serve the order on the employer. If a wage deduction order has not been entered the court will conduct an evidentiary hearing to determine feasibility at the confirmation hearing. The court will not confirm a case without a wage deduction order in place, absent extenuating circumstances.