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% Payback (it doesn't matter)

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  • #46
    Originally posted by justbroke View Post
    I thought I responded to this, but I was having trouble with the site on that day.

    Anyhow, it has nothing to do with the equity right now. In a Chapter 13, you are paying things over a period of time. So, you are diverting money to a non-homestead (primary residence) to pay for an investment.

    It's not an equity question in the present tense. You are still keeping a property that has a particular value... whether it's encumbered or not. You are paying that property while the unsecured creditors are penalized while you enjoy actually paying down the property (gaining equity) and any other equity gained by appreciation over that period.

    If you are able to have a plan confirmed, where you're paying 0% to the unsecured creditors, while you're keeping an investment property and paying it down... let us know. This will be the first reference case for me to use as caselaw. I just haven't seen it. it makes no sense, and there is nowhere provided for it in the code.

    Huh? If you're referring to how the plan works in 11 USC 1325, then I don't think you understand it correctly. The disposable monthly income (DMI) is calculated based on, first, your current monthly income (CMI). From your CMI, allowable expenses are deducted, these are known as the IRS Allowed Expenses (Allowances). Aftery our allowances, you then deduct your Additional Expenses (Additional). After that, your Debt payment is figured (Debt Service). Your debt service is then also deducted from your CMI. What is left over, is known as the Disposable Monthly Income (DMI).

    The Debt Service amount includes payments on secured debt including arrears. It also includes the Trustee payment as well.

    The DMI is the DMI and nothing else. The entire purpose of the DMI, is to be submitted to the custody and control of the Trustee... and paid to the unsecured creditors.

    I don't understand the misunderstanding. If you cramdown a car, it will likely NOT change your DMI.
    Ok say I give it up.. what do the creditors get? the extra 314 a month that I was paying on it? It is property period right I'm just trying to see what are the options..? I'm confused.. I thought chapter 13 protects you.. based on exempts.. If that is the case you just need to say you have no exemptions in a chapter 13 and you do have exemptions in a chapter 7.. now that does not make sense..

    O and the code does say that it is the property value at time of filing.. So why would it matter what the value is over years after filing..

    ok the bottom line is I would have to pay the value which is about 32000 over 5 years correct to not have any problems?
    The information provided is not and should not be considered legal advice or establish an attorney/client relationship.

    Comment


    • #47
      Originally posted by bklawn View Post
      Ok say I give it up.. what do the creditors get? the extra 314 a month that I was paying on it? It is property period right I'm just trying to see what are the options..? I'm confused.
      If you give up the car, and already had a positive DMI (which I think you said it was liek $2,063/month), then your DMI would increase to $2377/month.

      Originally posted by bklawn View Post
      I thought chapter 13 protects you.. based on exempts.. If that is the case you just need to say you have no exemptions in a chapter 13 and you do have exemptions in a chapter 7.. now that does not make sense..
      It does protect you. There are exemptions but I don't understand what you really want to do. The way exemptions work is the same no matter which chapter of Bankruptcy. However, the way that certain things work in a Chapter 13, are very different than a Chapter 7. Because Chapter 13 is a pending bankruptcy (and pending for 3-5 years), income and expenses are treated much differently in the Chapter 13 context.

      Originally posted by bklawn View Post
      O and the code does say that it is the property value at time of filing.. So why would it matter what the value is over years after filing..
      As I eluded to above, much of the Code is shared between the Chapters, but Chapter 13 (and Chapter 11 and 12) are very different in how you apply the code.

      Think of Chapter 13 as a Chapter 7, only you are asking the court to protect you from creditors for 3-5 years... before you get your discharge. That's very powerful. However, there are certain things that go on during a Chapter 13 that are necessary to administer the case fairly to the creditors.

      In a Chapter 7, valuation on the date of the case starting makes complete sense, because a Chapter 7 is over rather quickly (discharged in 90-120 days), and you need something set.

      In the Chapter 13 context, homesteaded (primary residence) property is treated well and in that context, your exemptions are in tact and any equity gained during your "pending" bankruptcy, is not property of the estate.

      However, for investments and spending money on things that are to the detriment to your creditors, the Trustee can complain and file an Objection to Confirmation if they don't feel you're dedicating money to your Plan to pay unsecured creditors. Whether it's Chapter 7, 9, 11, 12 or 13, you must file a petition that is in good faith. The same thing goes for your Chapter 13 Plan -- it must be in good faith.

      Many Trustees don't think it's good faith to pay very little to unsecured creditors, while you continue having an investment property while it is gaining equity (through appreciation and/or payments). In those cases, they will file a "bad faith" objection to confirmation because the creditors suffer while you get to keep that property. Yes, it makes no sense at all when there is no equity, the place pays for itself, and you have no money to contribute to the unsecured creditors.

      I'm just saying that it's within the unsecured creditors and trustee's right to file such an objection based on your circumstances. Whether they will get you to pay the market value of the property into the plan to the unsecured creditors... is anyone's guess. In my District, they did this same thing to me. Required me to pay 100% of $150K in allowed unsecured claims to the unsecured creditors, if I kept the investment property!

      Your mileage may vary. I'm only pointing out the hurdles that you may go through.
      Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
      Status: (Auto) Discharged and Closed! 5/10
      Visit My BKForum Blog: justbroke's Blog


      I am not an attorney. Any advice provided is not legal advice.

      Comment


      • #48
        It does protect you. There are exemptions but I don't understand what you really want to do. The way exemptions work is the same no matter which chapter of Bankruptcy. However, the way that certain things work in a Chapter 13, are very different than a Chapter 7. Because Chapter 13 is a pending bankruptcy (and pending for 3-5 years), income and expenses are treated much differently in the Chapter 13 context.

        As I eluded to above, much of the Code is shared between the Chapters, but Chapter 13 (and Chapter 11 and 12) are very different in how you apply the code.

        Think of Chapter 13 as a Chapter 7, only you are asking the court to protect you from creditors for 3-5 years... before you get your discharge. That's very powerful. However, there are certain things that go on during a Chapter 13 that are necessary to administer the case fairly to the creditors.

        In a Chapter 7, valuation on the date of the case starting makes complete sense, because a Chapter 7 is over rather quickly (discharged in 90-120 days), and you need something set.

        In the Chapter 13 context, homesteaded (primary residence) property is treated well and in that context, your exemptions are in tact and any equity gained during your "pending" bankruptcy, is not property of the estate.

        However, for investments and spending money on things that are to the detriment to your creditors, the Trustee can complain and file an Objection to Confirmation if they don't feel you're dedicating money to your Plan to pay unsecured creditors. Whether it's Chapter 7, 9, 11, 12 or 13, you must file a petition that is in good faith. The same thing goes for your Chapter 13 Plan -- it must be in good faith.

        Many Trustees don't think it's good faith to pay very little to unsecured creditors, while you continue having an investment property while it is gaining equity (through appreciation and/or payments). In those cases, they will file a "bad faith" objection to confirmation because the creditors suffer while you get to keep that property. Yes, it makes no sense at all when there is no equity, the place pays for itself, and you have no money to contribute to the unsecured creditors.


        Your mileage may vary. I'm only pointing out the hurdles that you may go through.[/QUOTE]

        Originally posted by justbroke View Post
        If you give up the car, and already had a positive DMI (which I think you said it was liek $2,063/month), then your DMI would increase to $2377/month..

        no the car is a cram down from 605 a month to $353..


        [QUOTE= I'm just saying that it's within the unsecured creditors and trustee's right to file such an objection based on your circumstances. Whether they will get you to pay the market value of the property into the plan to the unsecured creditors... is anyone's guess. In my District, they did this same thing to me. Required me to pay 100% of $150K in allowed unsecured claims to the unsecured creditors, if I kept the investment property! ..[/QUOTE]




        O ok I see, so they can make you pay 100% of you unsecured debt to the creditors even if they get $0 out of it.. I see now how it works.. looks like they will be getting it then.. i have about 149K in unsecured. You are saying that you have 150k in usecured and you had to pay 100% back even if your NDI does not cover it.. I will pay the market value if that is what it takes.. I have no problem, but the codes are not clear.. If I give it up they get $314 more, which is the payment on the House..
        The information provided is not and should not be considered legal advice or establish an attorney/client relationship.

        Comment


        • #49
          Originally posted by bklawn View Post
          O ok I see, so they can make you pay 100% of you unsecured debt to the creditors even if they get $0 out of it.. I see now how it works.. looks like they will be getting it then.. i have about 149K in unsecured.
          I'll leave you with this. Sometimes, the Trustee's (and creditor) objection to confirmation is all bark with no bite. A skilled lawyer can usually defend you or get the Trustee to blink and make some sort of stipulated agreement. It is never cut and dry.

          Originally posted by bklawn View Post
          You are saying that you have 150k in usecured and you had to pay 100% back even if your NDI does not cover it..
          Exactly! (However, I moved back into my primary residence and decided that fighting with the Trustee over equity and payments and the like for my investment property was just not worth it. It was empty, I was having trouble renting it (at the amount I absolutely had to have in order to cover principal, interest, taxes and insurance), and was just frustrated by the Trustee wanting 100% to the unsecured creditors. So, I gave it up.)

          Originally posted by bklawn View Post
          I will pay the market value if that is what it takes.. I have no problem, but the codes are not clear.. If I give it up they get $314 more, which is the payment on the House..
          Well, that's what they would want... the $314 being contributed to the unsecured creditors. You wouldn't need to give it up, only you'd need to contribute at least $314/month more to the unsecured creditors. They think of it this way... you have $314/month to spend on that which is not necessary for an effective reorganization but want the unsecured creditors to suffer? If you put an additional $314/month on top of the DMI... then that would quiet any objection to confirmation due to bad faith.
          Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
          Status: (Auto) Discharged and Closed! 5/10
          Visit My BKForum Blog: justbroke's Blog


          I am not an attorney. Any advice provided is not legal advice.

          Comment


          • #50
            Originally posted by justbroke View Post
            I'll leave you with this. Sometimes, the Trustee's (and creditor) objection to confirmation is all bark with no bite. A skilled lawyer can usually defend you or get the Trustee to blink and make some sort of stipulated agreement. It is never cut and dry.

            Exactly! (However, I moved back into my primary residence and decided that fighting with the Trustee over equity and payments and the like for my investment property was just not worth it. It was empty, I was having trouble renting it (at the amount I absolutely had to have in order to cover principal, interest, taxes and insurance), and was just frustrated by the Trustee wanting 100% to the unsecured creditors. So, I gave it up.)

            Well, that's what they would want... the $314 being contributed to the unsecured creditors. You wouldn't need to give it up, only you'd need to contribute at least $314/month more to the unsecured creditors. They think of it this way... you have $314/month to spend on that which is not necessary for an effective reorganization but want the unsecured creditors to suffer? If you put an additional $314/month on top of the DMI... then that would quiet any objection to confirmation due to bad faith.
            lol... that sounds much better.. Thanks for the info.. that is what I'm looking at doing I will pay that.. but not 100% payback,, they can have everything if that is the case... i will be staying in the 2 bedroom house that is about 500sqft. That makes more sense, they know you can't pay 100% back if you could, you would be doing it now.. plus the bank has more houses than they can handle now.. so I think it will be ok.. I will let you know how it turns out..I'm planning on filing like in oct or Jan.. trying to see if I can get my 6 months income down.. cause we are not getting anymore overtime.. that ectra 24000 to 30000 helped to pay the creditors.. it will nevr happen again if I or we get out if this.. live off what we make or even less.. I hope the trustee is a good one. We are in the northern district in Georgia..
            The information provided is not and should not be considered legal advice or establish an attorney/client relationship.

            Comment


            • #51
              Well, I have absolutely no property and my first attorney quoted a payment somewhere in the 90 percent payback range. Does not sound like such a good deal to me lol. I guess they don't figure living expenses in very well. If I could afford to pay 90+ percent back to all my creditors, I would do that. I will be researching more attorneys though.

              Am tempted to wait, pay the IRS with money I am not using to pay the largest minimums, stockpile an emergency fund and retainer, and drop the bomb when the car is paid (almost) off. That would be 12K less I would have to pay back (the BK rate for the car was the same as my rate now.)

              Here's hoping for no lawsuits till then though.
              First consult: You go now, no CH 7 for you. You spent entire buffet. 13 has a 95 percent payback. (Owwwch) On to next consult....

              Comment


              • #52
                You have to remember, that under a Chapter 13, your creditors can't even call you, much less harass you. Also, you don't pay interest. There's no way most folks could pay off their debt in 5 years with the current interest rate structure. No way.

                You have to look at the power of the automatic stay and the no interest period as a tool.
                Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                Status: (Auto) Discharged and Closed! 5/10
                Visit My BKForum Blog: justbroke's Blog


                I am not an attorney. Any advice provided is not legal advice.

                Comment


                • #53
                  Originally posted by justbroke View Post
                  You have to remember, that under a Chapter 13, your creditors can't even call you, much less harass you. Also, you don't pay interest. There's no way most folks could pay off their debt in 5 years with the current interest rate structure. No way.

                  You have to look at the power of the automatic stay and the no interest period as a tool.

                  And that is ultimately why I will file. However, I need to have an emergency fund just in case this plan is the best anyone can do. I am going to have to seriously look at my miscellaneous expenses and see if it can be improved...first one leaves me with 700-800 max for all expenses.

                  (And I really hate to be paying on my five year old car for another five years...it may not outlive the payments. Note to self: longer pay terms are also not a great deal.)
                  First consult: You go now, no CH 7 for you. You spent entire buffet. 13 has a 95 percent payback. (Owwwch) On to next consult....

                  Comment


                  • #54
                    I worked my plan very carefully. My budgeted expenses allow me to put 10% of my income in savings and my plan allows for less than 1% repayment of the unsecured. It's a thing of beauty. A true work of art. I'm so proud.

                    That is partially because I did not skip one single ANNUAL expense in my budget. And part of that 10% right now is actually going toward court fees and the cost of printing or copying and mailing stuff for my BK, amendment costs, etc and gas to the court house.

                    Comment


                    • #55
                      Any help is appreciated in PA. I have 60k in credit card debt. I have a new house that I have no equity in and 2 new cars with no equity. Our take home pay is about $6k/mnth. Living expenses including mortgage, cars, food, etc is about $4500/mnth. Any idea what kind of monthly payment i'd be looking at in a chapt13 plan for 60mnths.

                      Comment


                      • #56
                        Pete I am in Western PA ....Started at 71% payback , after 341 got lowered to 40% payback... YAHOO. I could never imagine being out of debt in my lifetime. Hoping never ,ever to let myself get in this position again. Its cash only life now. Not easy sometimes and I dont get everything I want but the feeling of being debt free in 5 yrs is awesome ....
                        Those who live in glass houses should not throw stones
                        Chapter 13 filed 10-21-09
                        Discharged 4-13-15

                        Comment


                        • #57
                          I'm getting ready to meet with my attorney to go over a budget for my chapter 13 filing. Do you have any advice on how you came up with your yearly budget so you only got stuck paying back 10% of the debt?

                          Comment


                          • #58
                            Pete, you don't plan your budget to pay back x%... Analyze your income & expenses and the difference becomes your plan payment. So be realistic on your expenses and take some time to think about it. Consider the things you need constantly (Food, gas, etc.) and also the occasional items (clothing, vehicle maintenance, etc).
                            Get mortgage modified: DONE! 7 months of back interest payments amortized, payment reduced over $200/mo
                            (In the 'planning' stage, to file ch. 13 if/when we have to.)

                            Comment


                            • #59
                              you can claim 20000.00 personal assets for each person that is under the bankruptcy and that cannot be touched by the creditors, I think its called the trumph card, that is one of the perks under chapter 13, jewelry to collectible items and anything that comes out to that amount, we had to get an estimate from experts and submit it for a coin collection, we didnt have anything nearly close to the 20 thousand each. good luck
                              Chapter13
                              100% unsecured/secured payback
                              "WAITING FOR DISCHARGE" DONE!

                              Comment


                              • #60
                                yep, that is a plan, we also came up with a very hard budget, we may not do or buy many things but we also have money in bank that when we do come out of our chapter we will be alot better off then anytime in our lives. Gosh no debts, cant you imagine that. Budget, budget and budget even more. you can cut costs every where. When I go out now I make all right hand turns and just circle round my errands for the day and I save on gas. so many ways to budget..
                                Chapter13
                                100% unsecured/secured payback
                                "WAITING FOR DISCHARGE" DONE!

                                Comment

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