Question

[summer72]

Hi. I've been reading and reading and have found some good information. Now, I need some guidance. My husband and I filed ch 13 in January. After tweaking our plan the payments went from 257/month to 733/month. The letter we received today stated that we have to come up with another 500.00/month in income to make the plan feasable. Big difference. Our mortgage arrearages are included in the plan. Right now, total payback is about 27,000.00 with everything. I asked our lawyer what if we could borrow the money for the mortgage arrerages and convert to chapter 7. Really, the only thing holding us back from ch 7 is the mortgage arrerages. I can not lose this house. I've lived here my whole life.

Lawyer told us that we would have to wait a year to file chapter 7, because it would look funny to the trustee/judge. Is that true? The letter also stated that the judge probably won't even approve the plan because it's only paying unsecured creditors 5% versus the normal 15%.

Any insight??

Thanks!

[daisey]

I thought in a chapter 13 all you had to pay was your disposable income and all of it. If that is the case why would payments go up that much? Did your income go up, or did they not take all of it to begin with?

[summer72]

According to our schdules, our disposable income is 53.72. The attorney wants my husband or me to make an additional 500.00 per month to make up the difference. It would be my husband working overtime I don't know that he can bring in that much though. It's a bit much I'll have to call tomorrow about it, but wanted to know about converting to chapter 7.

[aa06a47]

There is only a couple of reasons the proposed payments may be higher than the disposible income shown on the form. 1) You must pay into the plan at least as much as you would in a Chapter 7 where they come and auction everything off. 2) You must pay back 100% of the arreas into the plan.

You may have one or both pulling your monthly payment up. If you fall into neither category, then, in my opinion, your lawyer is doing you wrong.

Others may chime in as well, there might be other reasons your payment is more than your disposible.

[summer72]

I left a few things out for the purpose of keeping it short. However, it might help to explain things more.

Our first plan of action was to pay 50/2 months, then 257/for 10 months and then refinance in month 12. This was the lawyers idea. That was shot down by the trustee, he wanted proof right now that we could refi in 10 months. This amount also included my Durango which has a balloon payment due in April. The attorney is trying to pay that thru the plan I assume so that we don't have to try and refinance the balance.

We are paying the arrears on the mortgage and property taxes and another lien on the cars back at 100%, but the unsecureds are being paid back at 5%. I don't know. In our meeting last week, the attorney said don't worry let's just get confirmed and then we'll explore a refi. This law firm also helps with that.

I look on Pacer and see cases that this law firm handles and people pay a lot less per month then us and make a heck of a lot more money! I know that it's our fault that we are in this situation, but we could deal with the 257 payment.

A market analysis was done on the house and it came in less than what we owe. That's good for us at this point because it lets us pay back less to unsecured creditors. However, the attorney said that in a refi it can appraise for much more than the market analysis.

[summer72]

Oh, and another thing, in the letter we got today it stated that the judge probably would not approve this amended plan! WTF! He wrote in the letter that the trustee prefers 15%, but we could argue that this plan makes sense. It's all up to the judge. So if the judge doesn't approve the plan of 733/month that we already don't have, we're screwed.

Feels a bit better to vent...

[gunsmoke]

the trustee wants your house.

[lrprn]

Summer, it sounds like to make up the arrearages on your mortgage, car lien, and property taxes in your plan payments, you are being forced to increase your monthly payment to a level you can't sustain over 3-5 years - that's why the trustee won't confirm the plan. You only have $50/month extra income - that cannot support a monthly Ch 13 payment that's $730/month. That's why your lawyer wants you to put another $500 a month into the pot to try and make up most of the difference.

The bk law doesn't set a "minimum %" that must be paid back to your creditors - the bk law just states the amount your non-secured creditors receive must be as much as they would have received if you filed Ch 7. A minimum of 15% may be the local custom of your Ch 13 trustee or court.

If you don't have any equity in your house, how does your lawyer expect you to be able to refinance in 12 months and not be so upside down on what you owe on your house vs its real value that you will almost certainly be in financial distress that you cannot overcome? You could end up up losing the house eventually anyway.

Please forgive me, but I need to ask you some hard questions. Since your lawyer also helps to get his clients' mortgages refinanced after he helps them file Ch 13 just to then get them out of their plans after less than a year, do you realize that his doing that is a gigantic conflict of interest? He stands to directly gain from encouraging you to file Ch 13 and then refinance because he knows you are desperate to keep your house and will do anything to not lose it. If he helps to get your house refinanced, who's to say that the "lender" he sends you to is not working behind the scenes with your lawyer? (It wouldn't be the first time.) And if that's the case, what's to keep the lender and your lawyer from taking your house if you can't make the bigger house payments you'll owe after buying your way out of Ch 13 with a refinance? (And I still don't know how you can get enough money to buy your way out of a Ch 13 honestly if you have no equity in your house :/)

Hopefully I misunderstood your situation - please let me know if that's the case. It's just that you seem to be taking a huge risk here - don't let your overwhelming need to keep your house blind you to what you may be enabling down the road.