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Plan payment for above median earners

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  • Plan payment for above median earners

    I am trying to make some final decisions on when/ if to file file chapter 13 and I ran some prelim numbers myself and came up with a plan payment that is not reasonable. I asked my lawyer and his best guess is more reasonable but I have concerns about the reality of it all from people living it.

    My house bills are higher than the standard amounts they seem to allow and as a single mom I don’t have anyone to fall back on when my kids need more clothes or sports equipment.

    I need to understand how they figure out the payment and if it changes during the process etc ?

    So nervous!,,

  • #2
    The payment should be your income minus your reasonably necessary living expenses. If you have non-exempt assets, the payment must be high enough to pay at least the value of those non-exempt assets to unsecured creditors during your plan. Reasonable expenses include clothing and recreation and entertainment. But, your spending on things like sports equipment very well may have to reduced compared to what they have been in the past. The plan should be livable, but tight because you are supposed to pay all disposable income to the plan or enough to pay 100% of all unsecured claims. But, unless you are trying to keep assets you can't afford, the plan payment should be a relief compared to struggling to pay unsecured debt.

    The payment only changes if the plan initially includes a change or if you or the trustee petition to modify the plan due to changes in income or expenses.

    Have you had an attorney actually run the means test to make sure you don't qualify for Chap 7?
    LadyInTheRed is in the black!
    Filed Chap 13 April 2010. Discharged May 2015.
    $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!


    • #3
      I tried filing a Chapter 7 and that got denied due to presumption of abuse due to my high income. So I am left with trying to go back and file chapter 13.

      most of my debt is due to secured debt not unsecured.

      the million dollar question will be if any of the secured debt converts to unsecured? I have heard that can happen I am just unclear how it happens.

      If they base any deficiency judgements (that I think are what go from secured to unsecured debt) on FMV to Loan Value. Then I think I will be mostly ok.

      If they base it on what they actually sell the properties for on the court house steps I believe I could be in much worse shape as they go much lower and it will potential take a long time to do this and I think that would possibly happen after I am confirmed!?!?

      Another question? I just got notice of my mortgage adjusting and going up $200 a month. How do they account for this in a chapter 13? Each year it adjusts and will presumably go up. I have not been able to refi due to have 3 other homes on my credit (with my ex) I can possibly try to refi once they come off my credit during the BK but not sure what kind of rate I would get.


      • #4
        If a creditor repossesses the property before you file Chap 13, they have only an unsecured claim for the deficiency. If you surrender encumbered property to the creditor in your Chap 13, then all that will remain is an unsecured claim for the deficiency. If you qualify to strip a lien (because the property is worth less than the balance of the debt holding a first position lien), the stripped lien becomes unsecured debt. This all assumes that the debt is recourse debt. In some states mortgages on residential real estate must be non-recourse meaning that a deficiency cannot be collected in which case a creditor to whom you surrender the property would have no unsecured or secured claim.

        If your mortgage payment increases during the Chap 13 and that causes you to be unable to make your plan payment, then you should immediately talk to your attorney about modifying your plan. It sounds like you have an adjustable rate mortgage. Ask your attorney before your petition is filed whether there is anyway to draft the plan to accommodate future increases. Since there are no guaranties of what will happen to interest rates, that may not be possible. But, maybe a plan could say that the payment shall be automatically reduced or increased by changes in your mortgage payment. Or maybe having the trustee pay the mortgage instead of you would take care of the problem. That will increase the trustee fee. If you have a lot of secured debt on assets you are keeping and your plan will pay little or nothing to unsecured creditors, that could cause a problem in your plan. I am just guessing at possible options. Learn all you can, but then discuss this in detail with your attorney.
        LadyInTheRed is in the black!
        Filed Chap 13 April 2010. Discharged May 2015.
        $143,000 in debt discharged for $36,500, including attorneys fees. Money well spent!


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