To ask for revision in CH 13 plan or not?

[woeisme]

Hi there. Background on my case: I'm married filing jointly, when we filed our gross income was ~90K, our unsecured debt was ~90K, and our plan has us paying $1100 per month to unsecured with house payments outside the plan (mortgage plus insurance/tax escrow $700/month). The trustee even allowed $325/month student loan payments to be included in our schedules, and larger than IRS standard amounts for medical (husband has a chronic medical condition that requires on-going treatment that runs us 3K+ per year after insurance pays their part) and higher than IRS standards for cost of commuting to work.

Since March my husband has been home on disability as he had another medical problem on top of the 1st. The way his disability pay works is that after 2 weeks of unpaid leave, he gets 70% of his salary for 6 weeks, then after the 8 weeks is up and he's still on disability, he gets 50% pay for 2 years before having to file for permanent disability (works for the state of Ohio so would get state disability pay as opposed to SSI). So far have not asked my lawyer about ammending our plan for 2 reasons: #1) not sure how long my husband will be off work, whether he'll get better and be back to work soon or won't ever be able to return, so was waiting until we had a better idea of what was going to happen there, and #2) we were quite thrilled with our proposed payments to the trustee, honestly we were able to put away about $300/month with only modest scrimping since the plan started until my husband couldn't work.

So now that it's looking more and more like my husband won't be able to return to work (5 months into this and no improvement in his condition despite numerous types of treatments tried), I'm trying to decide if I should ask my attorney about modifying our plan or if I should just keep trying to fly under the radar for a while longer. Right now we are still able to make our payments ok, despite losing half his income, because #1) I got a pay raise, and worked some overtime, #2) my husband no longer has his commute, saving a lot of gas $, and #3) we haven't been paying the student loan payments, which are voluntary while in the CH 13 (although this will add to our financial burden once we are out of BK). My big concern with amending the plan now is that with the overtime (which was a 1-time thing only possible because our department got a big NSF grant that I worked on) my 6-month look-back will be inflated until December and #2 is that I still sometimes worry that our initial plan had so much wiggle room in it that the trustee might take a much harder look at it when asked for a revision and actually up our payments instead of reduce them. Maybe that's a crazy thought since our medical bills are now higher and our income now lower, but from day 1 I've been waiting for the moment when the rug gets snatched out from under us and this CH 13 becomes a real nightmare like some of the stories I've read about on here.

So I'm asking for advice from anyone who ever had circumstances change during the 13 that made them contemplate asking to have it revised. Did it work out for you? Was it more headache than it was worth? (I totally dread another hearing with the trustee, even tho it went great the first time.) Did they do the 6-month look-back again, or go with the salary you were currently getting because I'm wondering if that overtime is going to be a problem or not? I almost think they couldn't do another 6-month to determine since the revision is due to that the circumstances have changed (job loss, etc.) and I can't see them making you wait until 6-months past the change in circumstance to change the plan, can they?

Thanks for anyone else's thoughts on the subject.

[Flamingo]

We had a reduction of income of $6,000 just shortly after filing due to a former company I worked for going bankrupt from the tech bust in 2000/2001. At our 341, the trustee had me prove the reduction in income (from my former job to the new job I had to quickly obtain) and ordered our attorney to revise our plan to lower our payment. What occurred was our monthly payment was lowered from the initial Plan payment of $1700 (plus mortgage paid outside the plan) to $500 per month (no other changes) and at month 55 of our Plan, we were ordered to refinance and pay off the balance (we would have had enough equity in our house at that time to pay off the balance). That is something you may want to look into if it is an option for you and if you want to keep your house. Please note we wanted to keep our house and that is why we filed Chapter 13. I didn't care what we had to do or what we had to go through in order to do that. And we did it. We also bought out early due to much needed house repairs and bought out at year 4 of the Plan, paying off the Chapter 13 balance and repairing our roof and some windows.

[woeisme]

Flamingo, I don't understand what you mean about being forced to refinance your house at month 55 to pay off the balance? Do you mean to pay off the difference between the $1700 initially proposed payment and the $500 per month payment? If so, over 55 months that would be in the ballpark of 66K, and our house only cost us 75K (and that is what it appraised for before we filed) and we have very little equity in it in this housing market.

My husbands salary is lower than mine, ~38K, so if we lose 50% of it that is about 19K gross, he brought home just a little over 2K net per month, so we'll be down about $1000, which is almost equal to our $1100 CH 13 trustee payment. Reading state laws I think that $600 per month of his disability payment would also be exempt, although not really sure how that all works in the actual schedules, whether it's just exempt in the means test (which we'd still fail, although not by much) or if it's exempt in the schedules for determining the disposable income available to the plan base? But we'd have his $300 gas money that could go towards payments now.

I think I might wait at least another month or two, since my husband is going to see a second neurologist who is also a neurosurgen, on the 31st, since then we'll be a year into our plan and hopefully have a treatment plan that works or at least know whether or not his back/spine can be fixed enough to allow him to work again.

Thanks!

[AngelinaCat]

May I ask what the back problem is? I had a spinal fusion 12 years ago and am doing well.

[woeisme]

He has a couple bulging disks, a herniated disk, and a degenerating disk, and then his spine is twisted on top of all that. Right now he's been going to the chiropractor as often as 3 times a week and has had two epidural injections of steroids in the spine, nothing has helped and in fact the bulging disks look to be closer to herniating than when he started based on his last set of films. Originally the chiropractor didn't think he should do surgery since I guess the disks weren't protruding quite far enough to warrant surgery, but he can't walk 50 feet without being in so much pain he can barely breathe, and often can't sleep at night or even take a shower because of the pain of where it is pressing on the nerves, so I'm hoping when he goes to see the 2nd neurologist at the end of the month they might decide surgery is now an option since he's not getting any better with other treatments. this is on top of another chronic health problem, something called venus statis (may be spelling that wrong) where he basically has circulation problems in his legs like a diabetic would, although caused by a vein disease as opposed to sugar, but the results are the same, he gets ulcers and sores on his legs and feet that won't heal due to the circulation problems, which he has to go to the local wound clinic for treatments, that's the chronic problem that the trustee allowed extra medical payments for, so now that he has the two problems at the same time, he's in pain of one sort or another all the time it seems. I hope a spinal fusion will help the back, or some other kind of back surgery, although I hear it could go either way, some people are great after surgery like you were, others are worse than before. So the health stress on top of the financial stress is just too much fun sometimes!!! :-)

[Flamingo]

Flamingo, I don't understand what you mean about being forced to refinance your house at month 55 to pay off the balance? Do you mean to pay off the difference between the $1700 initially proposed payment and the $500 per month payment? If so, over 55 months that would be in the ballpark of 66K, and our house only cost us 75K (and that is what it appraised for before we filed) and we have very little equity in it in this housing market.

A good attorney will work with you to ensure you have a successful Plan and can stay in it and finish it successfully. What I mentioned is an option that can be used if there is a reduction in income during your Plan and you are having a hard time making Plan payments. If you kept your house in a Chapter 13 due to somewhat substantial equity in your home, your attorney can lower your Plan payment but you would have to refinance prior to the end of your Plan and pay a large sum at the end of your Plan via the refinancing. As I stated, our initial payment (without mortgages) was $1700 per month prior to the income loss; our Plan was modified over five years to reduce the payment to $500 per month and we would pay off the entire Chapter 13 via refinancing, starting paperwork at month 55. Not knowing the equity you may or may not have, I mentioned this as an option if you wanted to really keep your house. You really need to determine if you can afford to keep your house but remember the market will eventually go back up and so will the value of your home.

We had enough equity to buy out early but we bought out early due to major home repairs that could not have waited another 1 1/2 years.

[woeisme]

Flamingo, we probably don't have enough equity in our house right now to cover the cost of selling it, but now I understand your point, if we had equity we were trying to protect, we would need to pay that much into the plan to keep the house, so would do a refinancing to get the money out of our equity. In our case our equity (or lack of it) was more than covered by our $10,000 homestead exemption. Actually everything we have is covered by our exemptions, if we had low enough income to pass the means test and file CH 7 it would have been a no asset case.

We can definitely afford to keep our house, it only cost $75,000, and we don't have a second mortgage or anything, so our monthly payments including insurance and taxes are $689/month. We couldn't rent a small apartment for cheaper than that, let alone a 3-bedroom, 2 bath house with 1800 sq ft. We were just really lucky in finding this place, it had been on the market for almost a year but hadn't sold and the sellers were desperate to get rid of it by the time we came along. (It has some major negatives, is located on a busy street with lots of truck traffic, has no garage and limited street parking, and they had a zoo of animals so the place smelled pretty funky when they were trying to show it, the houses on either side of ours are rental units with rowdy college students living in them, the backyard is so steep it could be a ski hill, etc.) I've learned to tune out the neighbors and the semi-trucks and their jake breaks, we ripped out all the carpets and cleaned like crazy to get rid of the smell, and are just happy that we have plenty of space and very low mortgage payments.