Trustee is raising his percentage

[cubfan300]

My attorney has just informed me that in month 14 of my plan, the trustee has decided to raise his percentage to the full 10%. This will mean an increase to my payment of over $240. He also informed me that the judge has already signed off on this action and his own words, said, "If you want to fight this, find a different attorney".
Is this legal? Can a trustee increase his fee after the 341 confirmation? I was under the impression that once the plan was in place, changes could be made, but I certainly didn't expect an increase in the trustee fee this late in the game.

[HHM]

It is legal for the trustee to raise his fee and if the judge signed off, there is not much you can do. (you may not be without recourse, but it sounds like your attorney doesn't want to get involved, which is understandable, he has to work with trustee day in and day out, and it would cost you a lot of money to fight it anyway...more than if you simply paid the increase).

However, I am troubled by the increase in payment...strictly speaking the increase in the trustee fee should NOT increase your payment, all it should do is decrease the amount that goes to unsecured creditors. The only way it should increase your payment is if you have to pay a certain minimum amount to your creditors. Your payment is based on your disposible income.

What you may want to try is amend your plan...

Assuming you have some flexibility in the percent that you are paying to unsecured and your disposible income is the same as when you filed...what you might try is this.

Let's assume your current monthly payment is $600 per month. Over the life of a 60 month plan, you would pay, 36,000. Lets assume that at the time you filed, your trustee's percentage was 7.5%, so over that $36,000, the trustee gets $2,700; thus leaving 33,300 for your attorney and creditors. Thus, you amend your plan with the same monthly payment, based on your disposible income, (i.e. the $600 per months) but since you have been in the plan for 14 months, you have already paid $8,400, thus leaving a balance of $27,600. So you amend your plan so the trustee gets $2,760 of that amount (i.e. 10%), but your creditors now get $24,840.

The net difference to your creditors (at lest in this scenario) is only $690

[cubfan300]

I have come to find out that this is tied to the latest changes in the bankruptcy law. Because we added our 2005 property taxes to the plan in mid-July, and our mortgage is being paid in the plan, and that we were are in arrears on the mortgage, the new law allows for a Trustee to take his percentage of the plan up to 10%. Our payment after adding the property taxes was $2305. Our new payment is $2438, and his fee went from $48/month to $288.16.
All of this seems excessive, but I feel helpless in fighting it.

[HHM]

The trustee fee has nothing to do with the new law, the trustee fee is set by local Bk courts and is capped at 10%.

However, I have to say, having your Mortgage payment paid through the plan is a DUMB move. There is absolutely no reason to do that, you can continue to make your mortgage payment directly, outside the plan...all your doing is putting money in the trustee's pocket (essentially you are paying an additional 10% to have someone else make a payment you can make for yourself). In any event, because it sounds like most of your debt in your plan is secured debt and priority debt, there isn't really much you can do, since those are amounts that MUST be paid, the only way for the trustee to get his new percentage and still be able to pay your secured creditors according to your plan is to raise the monthly payment amount.

[cubfan300]

I agree, it wasn't the best move, however, our attorney didn't give us the option. He told us that specifically, we had to include the mortgage payment into the plan.
Didn't feel right with this guy from the get-go.
I wish I had found this forum before all of this happened!!!
Thanks!

[cubfan300]

Here is a quote from the Trustee's website

Uniform Chapter 13 Plan Effective with ALL cases filed on or after July 1, 2007, the U.S. Bankruptcy Court for the Southern District of Illinois has mandated the use of a new uniform Chapter 13 Plan. The Chapter 13 Plan form is available to the public at the Benton and East St. Louis offices of the U.S. Bankruptcy Clerk and on the Court's website at www.ilsb.uscourts.gov. Also with the implementation of this new Plan, the Chapter 13 Standing Trustees for this District shall begin charging a percentage fee for all on-going mortgage payments made through the Plan.

According to my attorney, that percentage fee is the max, 10%, for everyone.

[cubfan300]

One last question. My wife has a home daycare that she would like to close in order to prepare our only child for kindergarten next August. Her income accounts for approximately 25% of our 80k gross income.
How do trustees/judges usually react to this?

[spell]

HHM has the details right.
Your plan payment should be based off of your available income. In essence, you don't care who the money goes to. Increasing the fee should only decrease the repayment to unsecured creditors.
Well... maybe this is why. Is all of your debt secured? Or is yours a 100% plan? That might explain it.

Your answer to this probably sheds light on what would happen when your income decreases.

[truckerswife]

This may be a dumb question but by on-going mortgage payments are ya'll referring to rears or current payments?

[cubfan300]

Current payments

[truckerswife]

Why would anyone do that? I don't understand. If we have 28 years of payments we would have to pay it back within 5 yrs right?