Luxury residence

[Pohio]

Long time lurker, first time posting.

we filed in October and had our 341 in mid November. It went fine with a few questions on expenses but nothing major.

Last week we got the below objection from the trustee:
“The plan does not meet the requirements of 11 U.S.C. § 1325(b) (the disposable income test). Plan proposes to keep a luxury residence while only paying the unsecured creditors 41.80% and Schedule J expenses exceed what is considered reasonable and necessary; Need verification of childcare and medical expenses.”

Our house is included in the plan. We owe 400 and it’s worth 470.

has anyone run across this? We definitely want to keep the house.

I talked briefly with my lawyer last week and he said at this point he does not see cause for concern and asked me to gather documentation on the child and medical expenses. He will send to the trustee and call to see what they are thinking.
I have done this and sent them to his office however he is out this week. It’s been weighing heavy on my mind this week and I wanted to see if anyone has dealt with this. We definitely want to keep our house.

[Carmella]

If you attorney doesn't think it's a problem it's probably not a problem in my experience. I know it's not easy to wait it out. We had an objection and our attorney responded to it and it was fine. I hope it works out in your favor

[sanzu]

Patience is the key

[NoMoney30]

Try not to stress! OMG I know its hard! I filed in March and I didn't get confirmed till last month. I also have a home worth about 400k and at first they were like oh, you will have to sell your house. I was like hell no I can't do that. But we found ways to show that it would not be profitable to sell it. What a home is "worth" is quite subjective depending on the month, the market, the neighborhood, the mood of the person who appraises it. We were able to find enough variance by mulitple sources in how much our house was worth and then factoring in costs of selling and broker fees etc... we were able to prove that selling my house would not produce enough profit to make a dent in our debt. It also helped I guess that I had recently last year refinanced my house and took out a bit of money so what I owe was very close to what it was worth.

But anyhoo... my trustee was a total stickler and I also had them question my child expenses ... I think the child expenses were actually harder to overcome than my house. Hopefully you have a good lawyer and they will take care of you. Good luck!

[Pohio]

Thank you guys so much for the replies. I am not a very patient person so this has been a rough week.
NoMoney30 do you have a lot of equity in the house? I assumed that since we have less then the homestead amount we would be safe? Can they still try to force a sale? We will be paying unsecured more than the equity we have. So I’m not sure what the issue is.

They also questioned child expenses. I gathered that and sent that in and have my fingers crossed.

[NoMoney30]

Hi, I'm not patient either and I'm a control freak...so I feel your pain. The 9 months waiting for confirmation sucked! As I mentioned, we had just refinanced our house and I took out what equity I had at the time. So I actually owe about 415k right now. Depending on what websites we checked, the price of my house swung from 400k to 550k. But they didn't question the value we listed and then when factoring in the potential profit, it was good to go. I actually think we used the tax assessed value of our house which was like 420k.

For my child care expenses, that took the longest. We pay for my son to go to preschool 3 days a week which is 185 a month. Not a huge amount right? Considering most day care is like 900 a week or some crap like that. My husband doesn't work and they pitched a fit and questioned why is my son in preschool when my husband could watch him? I get why they did it...they have to question everything but I'm like come on people...just because mom and dad can't pay their bills shouldn't mean my son has to stay couped up in the house all day. Anyhoo... hubby did have a medical reason why he doesn't work but once we justified why my husband didn't work then they questioned his "school". Oh its not day care ... its school... school tuition only allows I think it was 150 a month. So, they said I had to provide evidence that the "school" really wasn't a school and was a day care. We found some Virginia code that the church (it is a church preschool) operates under and it classified them as a "child day center". So, we sent that to the trustee. She said... that's not good enough...the school needs to write a letter saying they aren't a school. So, I had to go to the school director and beg her to write me a shady letter without actually telling her why I needed it. She reluctantly wrote it and basically just used the Virginia law regulation to say what they were classified as bla bla... it was a pain in the ass. But...they finally accepted it.

Course after that they decided my income was understated too.... I was/am a "luxury" debtor... so I feel like they pounded me super hard. Which they did. I'm now locked into a plan I can't really afford. But soon my son won't have the school expense anymore because he'll be in public school next year and they accepted a plan that I can keep my tax refunds, bonuses etc... so we're just trying to put as much as we can aside to make up for the 2,900 a month BK payment.

[Pohio]

NoMoney30 thank you so much for sharing. It makes me feel a little better even if I’m a different state. Our tax value is slightly below what we owe and that’s what my lawyer listed on the case so I’m hoping they are good with that. Zillow flexes it up a good chunk but it’s not a realistic value.

im glad they allowed your preschool! We have 3 kids further along but I’m trying to get some summer care added in while we alternate some of the time off for coverage. Not sure how they will take that. I also have a son with an IEP that will have it long term and we have been recommended to get some additional outside help for him so I added that in too but an estimate because we have just started looking at the options.

im sure we are considered luxury debters as well but Isn’t kids needs (house, education) shouldn’t be effected.

thank you again. I appreciate it!

[justbroke]

My house was worth around $625K at filing. I think Chapter 13 Trustees just like to call them luxury, but it's all relative to your income and where you live. The Trustee used the word "luxury" to try to say that you should pay more into the plan. I don't know the total amount of your unsecured debt, but if you have $70K in equity, that certainly will be required into the plan (that' could be $1,166 a month alone... on top of your DMI).

The bottom line on questioning things, is that debtors would like to continue living -- what is seemingly -- a "luxurious" lifestyle, while having the full protection of the bankruptcy court. that protection includes keeping creditors at bay and discharging hundreds of thousands, if not over a million dollars in debt (as I did). Sometimes that "luxury" word is misused and I think they mean to say, tongue in cheek, that the debtor is living better than most.

And, looking at the quote you have above, it appears that they're really just trying to say that you have extraordinary expenses "and" you have a nice house. That's the real meaning behind that wording. A Chapter 13 plan is a (hopefully) a well thought-through and carefully orchestrated negotiation. Because that's what it comes down to for the (significantly) above-the-median income debtor. A negotiation and then the documentation to support the extraordinary expense(s). Some attorneys are good at it... some capitulate too easily or tell the debtor to do "more" belt-tightening. I have an entire rant (here on BKForum) about why belt tightening is NOT A GOOD IDEA for families in a Chapter 13.

[Pohio]

justbroke thank you!

with our current payment plan we will pay well more than the 70k back.

I understand what you are saying about the wording but it can be scary to read. My lawyer I’m hoping will go to bat for us on this. To be honest we should have filed years ago but pride caused us to instead keep digging further down.

thank you again!

[justbroke]

To be honest we should have filed years ago but pride caused us to instead keep digging further down.

I know exactly what that is like! There are many here on BKForum that know what it's like to be proud. You see, I was (and I still remain) the go-to person for all my family and friends to borrow money and help them out when they have it rough. I tried to "maintain" appearances. Drained a good portion of my retirement account. Ran up credit cards and personal loans, All while trying to remain strong for family and friends.

My bottom line is this. Having so many balls up in the air, you're bound to drop one. And just when you go to pick that one up... the rest come tumbling down. C'est la vie.