Chpt 13 Extended?

[curious13]

I am 2 yrs in Chp 13. My house loan modified causing BK secured debt to drop.
Now the trustee extended the plan payment so unsecured can be paid atleast 30%.
Looking at the balance and only 2 yrs in BK this extended balance will be paid sooner than 60 months.

Does this mean the trustee will again extend the payment plan to pay unsecured creditors?

How many times trustee can do that?

[LadyInTheRed]

They extended the plan payment or increased it? I'm assuming you mean they increased the amount of the plan payment and that you were and still are in a 60 month plan. If that is not the case, we need more details to understand what is going on.

You are required to pay all of your disposible monthly income to your plan for the entire length of the plan unless your creditors can be paid 100% before then. When your mortgage payment decreased, your disposible income increased, so you have to pay the difference to the trustee for distribution to your unsecured creditors. If you also have increased expenses, they could offset the decrease in mortage payment.

The trustee can do this as many times as your disposible income increases. Some trustees are more aggressive than others.

I know it is disappointing to learn you won't be able to keep that extra money immediately. But try to focus on the long term benefits of the mortgage modification that will continue after you are done with your BK.

[curious13]

More info is. You guessed it right my loan mod cause the secured debt dropped. So Trustee increased the payment plan last year. This year secured debt was paid off.
So trustee proposed to court that Unsecured debtors need to be paid now because initially they were going to get 0% when plan started.

Now trustee website shows I have to pay unsecured debtors 27000 (total of 3 who are the only claiming party). With same plan payment.

I am figuring it out they will be paid out too with my current plan payment by early 2013. However my BK term is suppose to finish 2015 may.

Does this mean that Trustee will set another balance amount to be paid in 2013 and extend the payments till the end 2015 may? or this is the last extension? Because he could have put a balance amount of more till 2015 but he did not he only proposed it to another year?

Money is really tight and I can use the cash. I thought secured creditors were the priority but if I am keep paying to unsecured creditors then what is the benefit of BK?

[LadyInTheRed]

It sounds like you are in a 60 month plan. You must pay all of your disposable income to the plan for the entire 60 months unless your unsecured creditors are paid 100% before then. Unless you hit the 100% mark, the percentage to creditors really doesn't matter. The total amount to be paid to unsecured creditors is based on your current plan payment which is equal to your disposable income. If your disposable income changes again, whether it goes up or down, your plan payment will change and the percentage to unsecured creditors will change. I suggest you not put too much stock in the numbers on the trustee website, except to make sure they received your payment. They often aren't accurate and up to date anyway. Just make your monthly payment until you complete your plan and let your attorney know if there are any changes to your income or expenses.

What's the benefit of BK? BK is not a free ride. If you can afford to pay unsecured creditors something over 5 years, you have to pay them. It sounds like you are still not going to pay 100% of your unsecured debt. Even if you are going to pay 100%, interest stopped accruing on unsecured debt the day you filed and creditors stopped hounding you. Where would you be now if you hadn't filed? Would you be 3 years from being debt free except for your mortgage?

[curious13]

I guess you are right. I just have to stick to the plan till 2015. Should'nt get my hopes up for early discharge. And yes I am paying less than what I owed so its not all bad. I just hope that trustee wont raise my plan payment again. My attorney is not very helpful he just got the money and told me to keep making payments. He does not explain anything.

Thanks for your advice!

[curious13]

I heard something new?
My plan payments were set for 60000 but my original balance was 125000.
I have paid 37000 within 24 months
Remaining balance per trustee 19000, remaining 36 months.
If 19000 will be paid in next 24 months then I get a discharge? before 60 months? OR
Trustee will increase my plan amount greater than 19000 just to stretch it till 60 months term?

What will happen?

[LadyInTheRed]

You will keep making your plan payments until (1) all allowed unsecured claims, plus trustee fees and attorney fees included in the plan (if any) have been paid 100% or (2) the expiration of your 60 month plan, which ever happens first. This assumes your income at the time of filing was above median.

When you DMI increased as a result of your lower mortgage payment your plan based increased, but it is possible the trustee website doesn't show that if that is where you are getting the $19,000 remaining balance.

Again, without a discrease in your income, the ONLY way to get out of a Chap 13 early is to pay off all allowed claims 100%.

[curious13]

Hmm, well this means I am in it till the end because 100% of unsecured creditors wont be paid off.
Currently there are only 3 creditors


A15000
B 6000
C 2nd Mortgage 94000

Currently Trustee assigned only A 3000 B 1000 C 16000

So when 19000 is paid among these 2 claimants (by next year) Trustee will propose another extension to satisfy ABC? I am assuming until 60 months then leftover will be discharged.

[LadyInTheRed]

What do you mean extended? Isn't your original plan a 60 month plan? If your income was over the median, it is. The trustee doesn't need to do anything. Your plan payment was already increased due to the decrease in your mortgage payment, right? Unless something else changes, you'll continue to make that increased payment until your 60 month plan is completed. Your remaining dischargeable debt will be discharged.

[curious13]

So since my secured debts were paid off and unsecured were paid 33% instead of 0%, I am getting early discharge in 38 months. So happy!
Do I have to show my unsecured discharged debts in chapter 13 on current tax return as income? Do I have to pay taxes now?

[LadyInTheRed]

The discharge of debts does not have to be reported on your tax return unless you get a 1099 from a creditor showing "forgiven" debt in which case there is a form you have to file with your return to state that the debt was discharged in BK and therefore not taxable inocme.

You never answered an important question that could be helpful to others wondering if they can get out of a Chap 13 early: Was your income on the date you filed BK above or below median?

[curious13]

Sorry for late reply my income was above median.

I am happy to report my BK is completed and it feels very good to be out sooner. Now I am extremely cautious in buying anything.

Lesson Learned!