Questions Regarding CH13 Plan Mod to add Mortgage Arrears

[Acropora99]

Hello,

I have a confirmed Pro Se Chapter 13 plan. My confirmed plan did not include my mortgage arrears because there was a trial modification proposal; however, the plan stated that the Modification had to be completed within 180 days from when I filed. The Modification will not be complete so, I need to file an amended plan to include the mortgage arrears.

I need to revise my budget to include money to make the increased plan payment. A mortgage modification is still in the works. I am also a below the filer so I have a lot of flexibility when I create my budget (On paper, there is only so much I can realistically afford). I filed on April 2nd and Confirmed in August.

My question is, how do I calculate the payment for my arrears? I want to make as low a payment as possible since I believe the Modification will take place. Can I propose a tiered payment that starts with a very low amount or do I need to calculate that payment based on the total arrears divided by 60 months. Or do I need to calculate the payment based on a timeline of less than 60 months since I am already several months into my confirmed plan?

Thanks for any suggestions.

[despritfreya]

It is calculated based upon the number of months remaining in your Plan. If you filed in April, your first payment fell due in May therefore, December is the 8th month of the Plan so, based upon a 60 month Plan, you have 53 months (including December) to go.

You can propose a graduated payment Plan but such plans are deemed “speculative” and you will have to establish that the increased payments are feasible.

You also have to consider your post petition mortgage payments. If you have been making the “trial period” payments and your loan modification is not approved, you are not post petition current since that trial period payment is less than your normal monthly payment. You have to add to the pre petition arrears the post petition default.

Lastly, do not forget that you also have to provide for the Trustee's fee. So the pre and post petition arrears are increased by that fee for proper Plan funding.

In the end, unless you can really afford the home, if the loan mod does not materialize you will most likely have to walk away.

Des.

[Acropora99]

Thank you for your response Des.

What would be difficult for me is to make increased Chapter 13 plan payments and repaying post-petition arrears at the same time. I have a stipulation agreement from the counsel for my mortgage company to allow me to repay post-petition arrears over the next 8 months in addition to the regular monthly payment. I need to also repay pre-petition arrears through my chapter 13 plan. I need to amend my plan to add the pre-petition arrears.

I would like to propose no increase in my Chpater 13 Plan payment for the next 8 months and then begin making an increased Chapter 13 Plan payment, after the Post-Petition arrears are caught up. Is it possible that my Trustee could accept such a proposal? Or any suggestions for making the best impression on my trustee when I contact his office about this.

Thanks!

[despritfreya]

I would like to propose no increase in my Chpater 13 Plan payment for the next 8 months and then begin making an increased Chapter 13 Plan payment, after the Post-Petition arrears are caught up. Is it possible that my Trustee could accept such a proposal?

Yes it is possible but you will have to produce an amended budget (Schedule I and J) that shows you can afford the higher payment in 9 months.

Des.

[justbroke]

I agree with Des because this is where Chapter 13 filers get into the most trouble. That is, trying to keep property they really can't afford. Personally, if you can't afford it now, how could you later? Life happens and a Chapter 13 should not be so punitive.

You should ask yourself, is the home more than 10% underwater and is it really worth keeping? This should be purely a financial decision. I wish your the best. I have gone through Chapter 13 myself and would be happy to answer more questions. Des is awesome, so you are already in excellent hands!

[Acropora99]

Thank you all for your responses. I have sent my proposed changes to my chapter 13 plan to the trustee and Amended Schedule I and J showing that I can afford the changes to my chapter 13 plan. I am hoping they will let me know their objections so I can make changes as needed. I have a hearing on Dec 12 regarding the creditors motion for termination of the automatic stay on my home. The creditor has agreed to conditionally accept the continuance of the stay if I can present a plan to the trustee that they will not object to.

I have a family of 7 and my mortgage is equal to or less than any apartment or rental home in the area with at least 3 bedrooms. The addition of the post petition arrears complicates things a bit. My current plan payment is 227 per month, the amount of post petition arrears will be an increase of $775 per month for 8 months. The pre-petition arrears will add $300 per month to my chapter 13 plan, I cannot financially make that work while paying the post-petition arrears. I have proposed a plan that would keep my chapter 13 payment at 227 for the next 8 months and then increases the plan payment to include the amount necessary to pay the pre-petition arrears.

Aside from income constraints, are their any reasons I am not thinking of that would make the above unworkable?

Thanks!

[justbroke]

Any change in income or other "life events" that could put you into serious trouble. The plan needs to be not only viable but must also be able to deal with life's little problems. If you can get through the 8 months, maybe it won't be so bad. Whether the Trustee thinks this is feasible and that you're not going to default on payments anyhow, is a question only the Trustee can answer.

[Acropora99]

The trustee has responded to my modified plan to include the pre-petition mortgage arrears. The trustee says that my plan to begin payments on the mortgage arrears beginning in August 2013 is not feasible yet, if I agree to begin making the payments in January 2013, they have no objection.

My problem is I need to make payments on my post-petition mortgage arrears between now and July 2013 and cannot afford to increase my Chapter 13 plan payment until August 2013. The amount of the payment is enough to pay off the pre-petition arrears within 60 months. Any ideas why the trustee says my plan is not feasible?

I am wondering if it is because I am presently making a payment to one secured creditor and will be making no payments to the other (mortgage) until August 2013. Perhaps I need to propose a reduced payment to each creditor until August 2013?

Thanks.

[justbroke]

Des speculated that feasibility would be an issue. I think the only way around this is for you may be to go to the Judge and see if the Trustee's objection can be overruled. Otherwise, you are in a tough position because you can't afford to pay back both arrears at the same time -- making your plan infeasible.

You would probably need to go back to the creditor's attorney to stretch out the time period since you only have a stipulation for 8 months. Post-petition arrears are tough to deal with.

I have never seen a 180-day (6 month) "trial" period for a modification. I think the creditor is blowing smoke! They'll probably tell you, at the end, that they either need more "trial" payments or they don't want to modify. I know and understand that you are doing this Pro Se, but I would have filed with the arrears already in plan. The simple fact that you have post-petition arrears is what is still troubling me as to whether this REALLY is feasible. Perhaps, the Trustee is correct.

[Acropora99]

OK, I was able to speak with the trustee. The trustee objected because in my chapter 13 plan I stated a specific amount for each equal monthly payment. I intended that amount to be beginning in August 2013 going forward in equal monthly amounts. The trustee told me that amount had to be distributed beginning immediately, if I want to do a graduated payment, I should just put pro-rata. I also included adequate assurance, the trustee told me that this is for pre-confirmation. When I asked if I needed to include anything for it they said that was legal advice. Would I need to include anything for Adequate assurance since I am adding this creditor post-confirmation?

Additionally, I am having a hard time understanding the concept of "Equal Monthly Payments" as required by 11 U.S.C section1325(a)(5)(B)(iii). Anybody able to explain what that means?

Thanks!

[Acropora99]

It appears that I have found my answer in Re: Espinoza. My plan to use graduated payments or step-up payments has been ruled by Utah courts to violate the "Equal Monthly Payments" provision. If the creditor does not object to my plan, the court will accept it, if the creditor objects, I may have a problem.

[justbroke]

I remember Espinosa. In any event you may end up in front of the Judge on this. There is no way to really tell.