Over the half-way point, but questions remain

[GUYINA13]

That is not the case, as you mentioned. If there is a loan on a vehicle, then you must be both current and paying the lender in order to preserve the vehicle in a Chapter 7. A Chapter 13 conversion could unnecessarily make that more complex, but I think that flashoflight explained it well.

I don't know why anyone would convert to a Chapter 7 a or near the end of their Chapter 13. There are some very strategic reasons to do this, but just about every conceivable scenario, it's not worth the aggravation, costs (attorney wants more $$$), and more scrutiny (another 341 Meeting and by a Chapter 7 Trustee). A good reason to do this is not that the debtor planned to convert, but there are actually financial issues -- loss of income -- that is driving the conversion. Death of the debtor or co-debtor is another.

I completely understand what you are saying -- but my worry is that I will make all these payments in the chapter 13 and then get to the very end and be a few hundered or thousand short and then have the entire bankruptcy dismissed.

The payment plan has not given me trouble. I have made every payment required to date and I am at the half-way point of the 5-year plan.

It was when I got an unexpected inheritance that things got complicated.

I agreed to turnover most of the inheritance to the trustee, (but I justified for whatever reason that I will just wait until the end of the bankruptcy to turnover the inheritance amount I agreed to pay)

The trustee basically just added that amount to my total plan original amount and it actually has a deadline of the final day of the five-year plan that it needs to be paid (that is how I read it on NDC anyway.

Well I have dipped into that money from time and to time and now am going to have to play catchup with that, so that is why I am worried I will come up short at the end. So I am just trying to look at other options, but my main goal is to stay the course of the chapter 13 and not have to withdrawl for any reason.

[justbroke]

I completely understand what you are saying -- but my worry is that I will make all these payments in the chapter 13 and then get to the very end and be a few hundered or thousand short and then have the entire bankruptcy dismissed.

You wrote that you previously filed a Chapter 7 and your only choice was to file a Chapter 13 since you would have been a repeat filer (within 8 years). Because you wrote that you filed your Chapter 13 6 months before you could have filed a Chapter 7, you cannot convert your Chapter 13 to a Chapter 7.

Conversion from Chapter 13 to Chapter 7 has its nuances. The major thing is that you must have been eligible to file a Chapter 7 at the time you filed your Chapter 13 (it's a little more nuanced based on the district, but that's usually the take away). Since you were ineligible to file a Chapter 7 when you filed the Chapter 13. If they allowed people to do so, then people would file a Chapter 13 as a stopgap, rack up more deck, and then do the conversion, thereby leveraging 348(d).

[GUYINA13]

You wrote that you previously filed a Chapter 7 and your only choice was to file a Chapter 13 since you would have been a repeat filer (within 8 years). Because you wrote that you filed your Chapter 13 6 months before you could have filed a Chapter 7, you cannot convert your Chapter 13 to a Chapter 7.

Conversion from Chapter 13 to Chapter 7 has its nuances. The major thing is that you must have been eligible to file a Chapter 7 at the time you filed your Chapter 13 (it's a little more nuanced based on the district, but that's usually the take away). Since you were ineligible to file a Chapter 7 when you filed the Chapter 13. If they allowed people to do so, then people would file a Chapter 13 as a stopgap, rack up more deck, and then do the conversion, thereby leveraging 348(d).

I honestly don't understand that. In a chapter 13 you aren't allowed to rack up any kind of debt.

I think I had wanted to do another 7 all along but found out from my lawyer I was short a few months of meeting, because of the repeat filer thing you mentioned. But the lawyer is the one who suggested a 7 when I got my inheritance. He actually wanted me to voluntarily get out of the 13 and use him to help me negotiate with creditors, but he also threw out rolling over into a 7 as an option. That is at least how I was reading what he was telling me.

[justbroke]

I honestly don't understand that. In a chapter 13 you aren't allowed to rack up any kind of debt.

That is District dependent. Some districts allow the debtor to rack up debt albeit with some limits. Some districts allow nothing while some allow as much as $5,000 without permission. And, to be honest, many debtors stealthily rack up debt during the pendancy of a Chapter 13, without knowledge or approval or the Chapter 13 Trustee.

As for the nuances in the code, there is a special case for conversions from Chapter 13 to Chapter 7. In 11 USC 348(d), the debtor can add any and all new debt accumulated since the Chapter 13 case commenced. This is probably why many creditors don't like to get too involved with a debtor in a Chapter 13 because the debt could be discharged by conversion despite the debt having been acquired after the filing of the Chapter 13.

I think I had wanted to do another 7 all along but found out from my lawyer I was short a few months of meeting, because of the repeat filer thing you mentioned. But the lawyer is the one who suggested a 7 when I got my inheritance. He actually wanted me to voluntarily get out of the 13 and use him to help me negotiate with creditors, but he also threw out rolling over into a 7 as an option. That is at least how I was reading what he was telling me.

You would be unable to convert your Chapter 13 because it was filed within the time period in which you were barred from filing a Chapter 7. Remember that special case I mentioned above, 11 USC 348, well that basically leaves the original filing date as if the converted case, the Chapter 7, was filed on the same day as the Chapter 13. This is why you wouldn't be "eligible" to convert your case because, as part of the Notice of Conversion, you must verify that you otherwise "qualify" for the converted chapter.

These are the intricacies of bankruptcy. Most debtors will never use the full breadth of the bankruptcy code. Conversion adds all sorts of nuances.

[GUYINA13]

That is District dependent. Some districts allow the debtor to rack up debt albeit with some limits. Some districts allow nothing while some allow as much as $5,000 without permission. And, to be honest, many debtors stealthily rack up debt during the pendancy of a Chapter 13, without knowledge or approval or the Chapter 13 Trustee.

As for the nuances in the code, there is a special case for conversions from Chapter 13 to Chapter 7. In 11 USC 348(d), the debtor can add any and all new debt accumulated since the Chapter 13 case commenced. This is probably why many creditors don't like to get too involved with a debtor in a Chapter 13 because the debt could be discharged by conversion despite the debt having been acquired after the filing of the Chapter 13.

You would be unable to convert your Chapter 13 because it was filed within the time period in which you were barred from filing a Chapter 7. Remember that special case I mentioned above, 11 USC 348, well that basically leaves the original filing date as if the converted case, the Chapter 7, was filed on the same day as the Chapter 13. This is why you wouldn't be "eligible" to convert your case because, as part of the Notice of Conversion, you must verify that you otherwise "qualify" for the converted chapter.

These are the intricacies of bankruptcy. Most debtors will never use the full breadth of the bankruptcy code. Conversion adds all sorts of nuances.

Well I appreciate that and that is good to know. I really don't want to roll into a 7 anyways, I just want to explore all of my options because I am worried I will come up short in the end of the 13 due to the inheritance money - but its not impossible that I could catch up before the end.

My lawyer spooked me when he described the trustee (at the beginning of my 13). He made it sound like this trustee would have no issues fighting someone's case from completing if they made all their payments on time but came up just a few dollars short in the end. Maybe all trustees are like that, but that definitely got my attention.

[shipo]

Have you considered taking advantage of the COVID-19 inspired ability to extend your Chapter-13 to up to 7-years? If you think you might come up short by a few months worth of payments, this might be an option.

[GUYINA13]

Have you considered taking advantage of the COVID-19 inspired ability to extend your Chapter-13 to up to 7-years? If you think you might come up short by a few months worth of payments, this might be an option.

Is that real.

No I haven't even thought about something like that. My ultimate goal though would be to finish on time, but that would be something I need to look into.

On a separate topic, so what happens if you make it all the way to the finish line of your 13 plan and you do come up a little short?

I know all the old debt returns per se, but I assume whatever you paid into the plan is credited and then there is the question of statue of limitations with old debt. I know each state is different, but I think 5 years is kind of a common statue of limitations that creditors could pursue someone legally with old debt.

So if your plan falls short, just before the five year mark, I wounder what happens when it comes to statue of limitations?

[shipo]

Others may comment with more detailed information, but I do not believe the statute of limitations applies here; if the debt was good when you filed, it is still good if/when you opt for, or are forced into, a dismissal, regardless of whether your Chapter-13 was 36, 60, or even 84 months.

Then there is the point of the money paid being applied to the outstanding debt, yes, that is true, but, but, but..., what is also true is monthly interesting to the outstanding balance(s) is applied retroactively, and as such, you might end up owing MORE than you did when your Chapter-13 started, even with your payments being applied.

[flashoflight]

All of your pre-petition debts are tolled from the statute of limitations during the 13.

You were 0% interest during the 13 with no fees allowed on unsecured. If you fail to get the 13 discharge, you will owe way more than the starting balance at the beginning of the 13. And you cannot count on the statute of limitations to save you. You really need to complete the 13 and make up as much as possible the missing $15k.

In hindsight, it would have been better to give all of the inheritance to the trustee and pay 100% to unsecureds if possible. Then you would have gotten a discharge early. Whatever was leftover would have been refunded back to you. Of course, I don't know if you needed the money for a dire emergency back then. In my case, the $15k windfall would have not been nowhere close to pay the unsecureds at 100% so I would have kept the money like you did.

[GUYINA13]

All of your pre-petition debts are tolled from the statute of limitations during the 13.

You were 0% interest during the 13 with no fees allowed on unsecured. If you fail to get the 13 discharge, you will owe way more than the starting balance at the beginning of the 13. And you cannot count on the statute of limitations to save you. You really need to complete the 13 and make up as much as possible the missing $15k.

In hindsight, it would have been better to give all of the inheritance to the trustee and pay 100% to unsecureds if possible. Then you would have gotten a discharge early. Whatever was leftover would have been refunded back to you. Of course, I don't know if you needed the money for a dire emergency back then. In my case, the $15k windfall would have not been nowhere close to pay the unsecureds at 100% so I would have kept the money like you did.

You are spot on with my thinking.

When I got the inheritance, I thought for sure that I would just be able to turn that entire amount over and my case would be fully paid and I would be done with the bankruptcy.

My original 13 plan base was pretty low and up to the point of the inheritance, I had no issues whatsoever making the monthly payments.

But upon a deep-look, It was quickly pointed out to me that my base (what I owe in the five year plan) was so low, only because I was basically getting out of paying any of the unsecured debt back (maybe 3-4000 would go to unsecured at the completion of the five year plan) the rest of the money paid into the plan all went to the secured debt (basically a car payment)

So getting an unexpected inheritance literally opened up the floodgates in a very bad way for me.

I couldn't turn down the inheritance (which I strongly wanted to do) , because that would've been fraudulent as it was explained to me.

So I literally went from like a 5 percent payback plan (of the unsecured debt) to now a 92 percent payback plan, and its all because of the inheritance.

When you are paying back 92 percent of the debt, (not even a full 100 percent plan which has extra benefits as I understand) you kind of wonder why you even went this route to begin with. A chapter 7 would've been more ideal or once I got the inheritance, working with the creditors themselves might have been a whole lot better

[flashoflight]

GUYINA13 Your numbers don't make sense to me. If the original 5% would result $3-4k going to unsecured, 100% would require $60k-$80k windfall which is far short of your inheritance. How much unsecured debt did you owe prior to BK? To pay off the 13, you have to make all plan payments (which includes the 5%) due in the 60 months plus the 95% to unsecured which according to my math is $60k-$80k. It is not enough to prepay the remaining trustee payments like you said and you're not supposed to prepay them anyway unless it is a true 100% payoff. It sounds like the inheritance puts you in a 25-33% payback, far short of the 100% payback. The end result is that the $15k gets flushed in the toilet to unsecureds with no benefit to you like getting out of the 13 early. In my district, I would have tried to keep it by getting permission to spend it on unforseen emergencies like totaled car, broken HVAC, broken laundry machines, numerous repair bills for the car that's somehow not accounted for in sched J, etc. It's easier for a homeowner with a lot of deferred maintenance to pull this off.

[GUYINA13]

GUYINA13 Your numbers don't make sense to me. If the original 5% would result $3-4k going to unsecured, 100% would require $60k-$80k windfall which is far short of your inheritance. How much unsecured debt did you owe prior to BK? To pay off the 13, you have to make all plan payments (which includes the 5%) due in the 60 months plus the 95% to unsecured which according to my math is $60k-$80k. It is not enough to prepay the remaining trustee payments like you said and you're not supposed to prepay them anyway unless it is a true 100% payoff. It sounds like the inheritance puts you in a 25-33% payback, far short of the 100% payback. The end result is that the $15k gets flushed in the toilet to unsecureds with no benefit to you like getting out of the 13 early. In my district, I would have tried to keep it by getting permission to spend it on unforseen emergencies like totaled car, broken HVAC, broken laundry machines, numerous repair bills for the car that's somehow not accounted for in sched J, etc. It's easier for a homeowner with a lot of deferred maintenance to pull this off.

Yep, I probably don't know what the heck I am talking about

And looking over the plan once again, the trustee actually has it listed as a 100 percent plan -- which I know is not right

Anyway to break it down:

I started the chapter 13 with right around 26,000 in secured debt and began the 13 with about 29,000 in unsecured debt (like a gazillion credit cards with low credit limits)

All of my payments to date have gone towards the secured debt and I am now over the half way point of a 5 yr plan

My orginal plan base - I thought anyways was about 3-4 thousand more than the secured debt, so that is where I got those percentages from, but thinking about it that extra money originally was to cover the lawyer costs and trustee fees and none of the unsecured debt

Once I got the inheritance, the trustee just literally ballooned my base plan of what I owed to almost double