Motion to modify plan

[Jayntee]

My wife and I are 32 months into a 36 month Chapter 13 plan filed in FL, paying 66% or unsecured debt. My wife and I have changed jobs and last year made 40% more than we did when we filed. The trustee has sent us a letter planning to double our remaining 4 payments and extend our plan to 39 months to pay 100% of the unsecured debt.

I'm sorry, but I'm missing the math and the economics here. "Their income is 40% higher (which also put us in a higher tax bracket), so let's double their payment." Obviously the economy is also different now than before we changed jobs.

Is there anything that can be done to negotiate the increased payment? Also, besides the obvious of paying 100% into the plan, is there any other benefit credit wise or appearance wise in paying 100% rather than 66%.

[Flamingo]

Your entire financial estate is under the control of your Trustee from the day you file unti the day you are discharged. A lot of folks for some reason either don't understand that or don't know it. When your income changes, so can your Plan. The Trustee's job is to ensure creditors get paid as much as possible from the debtor(s) and when your income increased, so did the amount of funds available to go to creditors.

This close to the end of your Plan I don't know what you can do to change anything but it never hurts to contact your attorney for any advice he can offer but congrats on the new jobs and the higher income. I would get the Plan knocked out of the way and and get ready to enjoy the extra money you will have when it is paid in full in several months.

[laurannm]

Were you required to report the increase in income, or were you required to submit your tax return?

[woeisme]

% increase in income does not equal % increase in plan payment for the simple reason that all your disposable income is supposed to go into the plan. Any increase in income could therefore be considered "disposable" so it would be possible for the trustee to claim 100% of the increase in pay as belonging to the creditors, which could very well double your payments, depending on what you were paying before the increase. Kinda sucks, but either way, only 7 months to go, and they can't increase it beyond 100% payback, so at least no more possible surprise increases in store.

[lrprn]

Contact your lawyer. Even though your income may have increased, your expenses may have increased as well. You need to decide with your lawyer if you want to file a counter proposal to what the trustee has proposed.

[MajorMike]

Yes, I'd like to know how he found out your income went up.

[Flamingo]

Yes, I'd like to know how he found out your income went up.

I'll bet it was one of two things; picked up by the Trustee via required submission of their tax returns or they themselves reported the income increase which is usually required. During our Plan, we had to report any increases in income or bonuses received and submit tax return copies within 5 days of filing each year until discharged.

[vegas911]

So a payment can be increased soley on an increase of income found on tax returns?
Is tax due considered?

Here is a case - Bk filers have 2 kids claimed as dependents, once over 18 taxpayers loses tax benefit to claim as dependents, so tax owed to IRS increases, putting the filers in WORSE shape to pay on 13, even if income increased.

Would this be a case to notify attorney to lower payment or does trustee not care about that?

[lrprn]

Would this be a case to notify attorney to lower payment or does trustee not care about that?

The predictable loss of a dependent would be a case where it's best to adjust your withholdings accordingly as soon as the dependent rolls off to limit the income increase appropriately long before the additional income shows up.

Amending a confirmed Ch 13 plan by the filer makes sense when there is a significant and long-lasting decrease in your income or a significant and long-lasting increase in your expenses. Amending your plan to handle an avoidable income increase due to a loss of one dependent isn't the way to go.

[Jayntee]

A couple of answers. We have always provided a copy of our tax returns. Our income actually has been at the same level for 2 consecutive tax years, but it wasn't until this year that the trustee decided to pursue it. Our attorney said this is becoming standard practice near the end of Chapter 13s. We have to resubmit our expenses also. Funny thing is that on our original plan we discovered we left off some expenses and our attorney said we probably shouldn't have been paying as much as we previously were.

Vegas911, that was part of my argument also. It's not like our taxes and expenses didn't increase also.

Here's the other kicker. Last month I contacted the trustee because we were prepared to make the final 4 payments and I was told "You can't pay it off early, just put the money in the bank and let it draw interest." Flamingo, I understand your response, but I have an issue when the trustee can in principal continue to amend the plan and impose unrealistic terms. They have our tax returns and know our original expenses and even taking that information into account should provide a better blueprint for a new plan. Here's what the math looks like (made up numbers)
Original Gross Mo Income $1000 BK payment $500
New Gross Mo Income $1400 BK payment $1000

Never mind the fact that we're in a higer tax rate, have additional expenses and inflation has diminished the value of the dollar so my $1400 doesn't buy as much.

We have an attorney and she says she's going to fight it for us, but I hope nobody else has to go through this. We were so excited about finally getting out of this and now we get kicked in the teeth. I know we'll survive, but this sucks.

[vegas911]

I really don't know how much of the bankruptcy finer points operate - I'm not that far yet. But logically, I would think expenses & income should be reviewed for the plan to be modified. I would think the same process used to determine the initial payment would be used again! I'm sure most people expenses go up(increase in family/dependents, utilities, gas, insurance, etc.) Hey it could be cause to have payments reduced.

Just an increase in income may trigger a review, but it shouldn't be the ONLY factor.

Anyone know exactly what the trustee does to review a case? Also, can it go down based on that?

[Jayntee]

Ok, so update. Our attorney says based on a means test she is filing a reply that our payment only increase by $600 until Dec.($1800/mo less than trustees motion). Our hearing is July 29th.

[liz417]

Ok, so update. Our attorney says based on a means test she is filing a reply that our payment only increase by $600 until Dec.($1800/mo less than trustees motion). Our hearing is July 29th.

Good Luck!!

Also, you state that "it's become stand practice near the end of ch 13", are you talking about a review and modification of ch 13 plans? What state are you in? And I think it's really silly that they won't let you pay off your plan early...

Hang in there, it's almost over

[BKParalegal]

Trustee's make 10% of the payment so you are a profit center for them. This is not uncommon, it is a fishing expedition by the trustee. The good thing is , it is not always up to the trustee but the judge. File an amended Schedule I and J, and amended means test, adjusting as much as you can in your favor and lt your attorney fight it out.

Good Luck

[arkienurse]

Ok, so update. Our attorney says based on a means test she is filing a reply that our payment only increase by $600 until Dec.($1800/mo less than trustees motion). Our hearing is July 29th.

How did it go at your meeting?