100% Paypack Question

[berrymom31]

Hi, I'm really new to this. We have a super slow attorney, which for now is OK as we are not paying any bills except house and car payments! We have been trying to get as much money saved up, in cash, as possible for the coming months when we will have the BK payment. My question is, under what circumstances does someone have to pay back 100% of their unsecured debt?

We have about 65,000 cc debt..our house..and two inexpensive car payments. We gave up our new car and are waiting to hear how much the shortage is going to be once they sell it. We did this under the advice of our attorney to show the trustee we are trying to cut back. The car we bought was from one of those places where you pay every 2 weeks and there is nothing on our credit report showing a loan. The other car a family member has financed for us and we pay them directly.

I think we may have a bad attorney as it took them 2 months to give us an estimated payment after we paid a $600 retainer. Then we had to barge into their office and demand an answer because they wouldn't answer any of our calls or return our messages. Then the payment came back at $2000 for 5 years which would put us paying twice as much as we originally owed. Since we are paying our house and cars outside the plan, there has obviously been some sort of mistake as we barely make 100,000 combined each year. I did the means test at leagalconsumer.com and it had our disposable income in the negative!

Sorry this is so long,...my questions are this...under what circumstances do you have to pay back 100% of your debt and how accurate have any of you found the means test calculator at leagalconsumer.com to be?

thanks!

[lrprn]

,...my questions are this...under what circumstances do you have to pay back 100% of your debt...

If you file Ch 13 and on the Means Test and Schedules you show sufficient disposable income to pay back 100% of your debt to all unsecured creditors who file claims, then you are in a 100% payback plan.

...and how accurate have any of you found the means test calculator at leagalconsumer.com to be?

This and other online Means Test calculators give filers an idea of what to expect if they file. They are by no means accurate, especially for Ch 13, because these calculators do not take into account local court and trustee customs and recent bk case law decisions. Also these calculators do not show you the required Schedules A-J - a crucial part of filing Ch 13.

Did you sign your Ch 13 forms knowing the $2K monthly payment amount and that there is no way you can pay that amount for 5 years?

At this point realistically you have two choices - (1) set up a face to face appointment with your current attorney to go over your filed forms page by page together so he/she can explain how the amounts came out the way they did and if the amounts aren't justified or serious errors were made, request he/she file amended forms with the court immediately; or (2) go shopping for another lawyer who will take your case on after you fire lawyer #1 and refile amended forms (which will cost you more) while you make your $2k payments or voluntarily dismiss your 13 to try again from scratch with the new lawyer.

Having an excellent and very experienced lawyer in Ch 13 is a necessity as you have discovered the hard way. If you truly are trapped in a situation that you cannot support for the coming 5 years, then you have some hard choices to make.

[woeisme]

From my reading of the OP's post, I don't think they have filed yet, is that correct? I don't see how you can end up with payments that are higher than what you owe though, since 100% payback is the max. My husband and I have a combined gross income of about 90K, with 1 child, and the original estimate my lawyer gave me was that we'd have to do a 100% payback, with payments at $1750 I think. When we worked through the schedules and did all the paperwork, and included all of our expenses, including childcare and were able to justify some higher than IRS tables allow for medical and car costs due to chronic medical condition and long commute for my husband's job, our actual payments were $1100 and 65% payback to unsecureds.

[woeisme]

Sorry, hit reply button before finished. Anyhow, not all of our creditors filed claims so we'll end up paying back 75% to those who made claims. If you are showing negative disposable income to fund a CH 13 plan at 100K income, I have a feeling you are going to have to give up some things because obviously you have expenses (mortgage, cars, whatever) that are way above the usual allowed amounts. As I said before, sometimes this can be negotiated with the trustee, as in our case for the monthly medical expenses that we were able to document were much higher than average, but there has to be some $ that can go to the creditors with that high of an income I'd think, since we make 10K less than you and are managing to pay back about what you owe. (although there are sure to be many other variables in our budgets, so I'm not saying your payments will be higher than mine, they could very well end up being less if you live in a more expensive part of the country, have more dependents, etc.)

[liz417]

When we worked through the schedules and did all the paperwork, and included all of our expenses, including childcare and were able to justify some higher than IRS tables allow for medical and car costs due to chronic medical condition and long commute for my husband's job, our actual payments were $1100 and 65% payback to unsecureds.

Hi there Woeisme,

Just wondering about your comment about adjusting the IRS tables for actual expense for medical and commute. I am too concerned about this since my hubby commutes and it is beyond the allowable expense. Did you and your attorney work it out before your 341 or did the trustee ask any extra questions regarding this at your 341?

[berrymom31]

No, we have not filed yet. We had our first meeting with the attorney on May 8th. We put her on retainer and she said she would have an estimated payment in a week. Two months later we had not heard a thing and we called weekly and left messages and never got a return call. Tuesday my husband barged in and the paralegal jumped up and said...I'm so sorry....your amount seemed really high when I ran it so I was going to have the lawyer run it and she was on vacation and were really busy now.....anyway she said she would get back with us in a couple of weeks.

Our mortgage is $205,000 with a payment of $1,750. Then a second mortgage payment of $464. We gave up our new SUV with a payment of $475 and downgraded to a van with a payment of $232 for only 2 years. My husbands car only has two years left at $280. I don't see that these car payments are unreasonable. There is nothing we can do about the mortgage payments. If you add these up with utilities, food, health and life insurance, car insurance...there certainly is not $2,000 left! Our actual income is 98,400. We have three kids......bring home about $5,700 per month.

[woeisme]

Hi Liz, our attorney just put the higher than IRS exemptions amounts into the schedules when she submitted our plan. She did have to write an explaination beside it, justifying the amounts. We were ready with the mileage amounts from mapquest and doctors bills from the previous year and diagnosis and patient charts and everything to show my husband's condition was chronic, had all the info with us at the 341 meeting, but the turstee never asked a thing about it, just saw the justification our attorney wrote in the plan and that was it. Not sure if all trustees are so easy-going, but it was a HUGE relief for us. The only issues our trustee had with our plan was that the house appraisal slipped through the cracks and they didn't have a copy of it and my lawyer made a typo on one line or something like that, so was freaked out when I got their objection to confirmation notice, but it was all taken care of easy enough and the plan was approved without the actual amount of payback ever being in question.

BerryMom, have you actually looked at what is reasonable in your area for your mortgages? I'm not saying that $2200 a month is unreasonable, I know in some parts of the country that would even be low (like the coasts) but you do want to check what is allowed in your area. Otherwise I don't see any problems, your car expenses are definitely low enough to pass the trustees radar. With 5 people in the household, you should be able to get a much more reasonably low CH 13 payment than your attorney is saying.

[JRScott]

Okay so your gross income is 8200 a month but your net income is 5700 per month. I have to ask are you having to much taxes taken out? That is do you get a big refund every year. If so I'd adjust down the tax withholding, there is no reason to let Uncle Sam use your money interest free for a year, at current inflation your losing money doing that.

On a gross of 8200 a month your house payment is about 27% of household income, very reasonable actually. (Counting both mortgages). With your new vehicle payments that's only 6% of your household income again very reasonable.

Are you sure these are outside the plan? You are not behind on the house or cars are you?

For the rest of the items you list how much are you paying?

Heath and Life Insurance? (Please tell me you didn't buy life insurance for your kids...)
What are your utility payments? (Please break it down )
How much for food?
How much for gas?
Medical treatment a month?
car insurance?

I"m assuming your cc mins are around 2000 dollars a month right now.
home insurance? ( or is that in your mortgage?)
clothing?

[berrymom31]

OK, I just looked back at my records..take home is about $6,250 per month. This varies some because I am a contractor and my husband takes call and may make more..but not usually less. There are some months I make less than I do and mine is cash with no taxes taken out. I have to file 1099 at the end of the year.

That take home pay is with health insurance taken out at $500 per month.
Home owner's insurance and taxes are taken out of house payment
Car insurance-$150 per month
Utilities-660 (elec, gas, phone, cbl, internet, cell)
elec-250 in summer 150 in winter
Gas-250 in winter-100 in summer
Cell-$140
Cbl/phone/internet-$150 all with same company paid together
Water-$50
Life insurance-$75 for hubby and I only
Food-$800 per month
Gas-4-500 per month
Daughter's preschool-$110 during school months
Dance-$70 per month

This is all bare minimums. I have to have the internet for my job as I work at home, and my cell...these are both tax deductible for me. This is no clothes or shoes for anyone in my family. No out to dinner, no movies, no Christmas or birthday gifts. I realize that we did this and we should have to pay it back, but geesh, do they not expect us to buy our kids Christmas for the next five years? My husband is already working 2 jobs and I work one and then do some substitute teaching during the school year. I honestly don't see how we can work anymore than we already do.

Our atty said that our kids would not have to quit their sports or preschool and such. My oldest boy plays baseball at $55 per year and my youngest plays football at $135 per year.

Yes our minimums were about 2,200 per month. The interest rates got so high..nothing was coming off the balances. We stopped making those payments in May when we had our first atty visit and paid the retainer. This has been a lot of relief and were trying to save for Christmas and school clothes now before we have the BK payment. But after that starts I don't know how we are going to do it.

My husband's parents filed & just before the new laws went into effect and walked away scott free with $50,000 in CC debt. I guess it makes me mad that because we work hard and try and make a good living for our family..I feel like we are being punished, while those who are eligible for 7 are not. I know this was our debt, but I feel like I've paid each and every cent back that I borrowed by paying outrageous payments that went towards interest for years. For example...one card we bought carpet from empire today. The total was 9600. After 12 months interest free...the interest tacked on made it 12,600. We sent $1,000 per month for three months trying to get our balance down. Then spent 2 years making $400 per month payments. With the interest, the balance is still 11,200. The total we have paid them is over $12,000...more than the carpet was worth. This is the same with all of our accounts...years of high payments and little to no reduction in balances. Now, the law, that should protect consumers is making me payback every cent extra I have for the next five years to the same creditors that I feel I have paid twice over already. I'm sorry this got so long, I just really feel like there is some error in the law here. The harder your work, the more your penalized.

[liz417]

opps!

[liz417]

[QUOTE=woeisme;177147]Hi Liz, our attorney just put the higher than IRS exemptions amounts into the schedules when she submitted our plan. She did have to write an explaination beside it, justifying the amounts. We were ready with the mileage amounts from mapquest and doctors bills from the previous year and diagnosis and patient charts and everything to show my husband's condition was chronic, had all the info with us at the 341 meeting, but the turstee never asked a thing about it, just saw the justification our attorney wrote in the plan and that was it. Not sure if all trustees are so easy-going, but it was a HUGE relief for us.




Thanks Woeisme,

Good to know and I'll be prepared when it's my turn at the 341 meeting!

[gymbo]

BerryMom, have you actually looked at what is reasonable in your area for your mortgages? I'm not saying that $2200 a month is unreasonable, I know in some parts of the country that would even be low (like the coasts) but you do want to check what is allowed in your area.

I'm curious about this too... Our gross income is about $90k.
Our house payment is $2019 on $226k Plus 2nd mortgage of $116/month on $8k. We bought the house 1 year ago and financed 100% because we used all of our equity from our LAST house to pay off debts. We used the second mortgage to make improvements to the house and recently had it appraised at $270k.

What if the court finds the house payment excessive? Does that mean we have to give it up? Even if we are not behind in payments? Does this differ between a 7 and a 13?

Sorry to change course of the thread. Sounds like lots of people posting here are in my same/similar boat. Thx

[kmb]

Our mortgage payment is $1840 a month and our HELOC payment is $550 a month and neither one was questioned by our attorney or our trustee. About $600 of the monthly payment goes to our escrow though for our ridiculously high taxes. Our income was high enough that we are in a Chp 13, but the only discussion that was ever brought up about either was "are you current on your payments", which we were.

[rrockinggramma]

it is all about allowable exemptions. If you have a lot of equity and you file a chapter 7 then after your exemptions, any difference would have to be paid out to your creditors. You could pay off the trustee or he could seize the house as an asset and sell it off to pay to your creditors. Usually payment arrangements are made in a chapter 7. But then, most just file a chaper 13, which allows you to keep your house. (if you have lots of equity)

If you have NO equity or little equity, then your exemptions probably cover any difference.

In a chapter 13, the basic rule is that your creditors have to be paid what they would have received IF you had filed a chapter 7. So in the first scenario, that difference would have to be paid out in your chapter 13.

In the second scenario, your creditors get whatever is left over (based on disposable etc) but you wouldn't have to make up that difference in your plan base.

So if you have 50,000 in house equity, then in a chapter 13, at the very least, your plan base of payback is 50,000.

[gymbo]

Thanks,

We have about $36k in equity and in WI, if I am reading the rules correctly, we can excempt 40k...