Question about rental income

[lvarn]

Hello all, this is my first post. We have filled Ch. 13 and are paying 100%. We have abandoned a commercial rental property in our plan, but we will still be receiving the monthly rent payments until the lease expires in August. The bank contacted the tenant and told them to continue sending us the rent check, which we would forward to the trustee. My attorney also told us we should send the rent to the trustee, but he wasn't 100% certain. My question is if we send the money to the Trustee, how will it be applied to my plan? Since we are paying 100%, will it reduce the number of payments I have to make? Or can I keep the rent check?

Thanks in advance for any response!

[lrprn]

Since your lawyer isn't "100% certain", ask your lawyer to ask his bk lawyer colleagues and search bk case law to get 100% certain so he can give you sound legal advice in this situation.

Was your current Ch 13 plan payment calculated including the monthly rental income?

[lvarn]

Well, I'm not really sure how to answer that. We gave the info to our attorney about the rental income, but I'm not sure it was included because the property was going to be abandoned. That really sounds like a naive answer, but because of the way I get paid through my S corp, it is difficult to figure out how they came up with the income amount.

Our plan was set up 100% so we could keep the equity in an office building we own and are paying outside the plan. The attorney told us our income amount didn't really make a difference, as we had to pay 100% no matter what.

Does that help?

[lrprn]

...because of the way I get paid through my S corp...

It helps a lot to know that you are paying yourself through your S corp - definitely adds in a layer of complexity.

Since your non-secured creditor payback is 100%, then if I was you I'd send the trustee the rent check every month until August because it will help pay off the 100% you owe even faster.

[lvarn]

Well that makes me feel better! I was hoping that was the case.

So then, the way I understand it when you are paying 100%, is that every dollar paid in reduces the total amount owed. The rent money doesn't reduce the payment but might reduce the number of months. Do I have that right?

[lrprn]

So then, the way I understand it when you are paying 100%, is that every dollar paid in reduces the total amount owed. The rent money doesn't reduce the payment but might reduce the number of months. Do I have that right?

Yes, you do.

In Ch 13, the trustee and court cannot make you stay in the plan any longer once all the creditors who file claims are paid back 100% or after the plan reaches 60 months.

What happens when you are in a 100% payment plan confirmed for 60 months, paying in any extra just sends additional money to the creditors. Typically over time this can reduce the number of months you have to stay in the plan.

Of course, run this past your own lawyer to make certain this is how things will work in your specific situation.