% Payback (it doesn't matter)

[alli]

Well last year We got a very small refund of $24.00 and that was not too painful to give up. Also it was the first year of our Bankruptcy so I hadn't noticed that we were paying 100% yet so I surrendered that refund. However this year or 2011 tax year, we got 300.00 back and had some emergency roof repairs to do so we used the money plus in reviewing our statement I noted we were paying the credit card co. 100%. So I guess I felt a little indignant because we needed the money so bad and if they were getting paid that rate why did they need my additional money. I wrote a nice letter to the trustee explaining our roof expense and he wrote back a very cold letter not addressing my letter at all other then to say " your plan requires you to turn over your tax refunds to the trustee"....how cold hearted can he be!!!

[bklawn]

No, if you are getting money back on your taxes at the end of the year, you raise it up so you get a bigger check. You will pay less taxes for that year, which means you will not get as big of a refund. I'm not a tax person, but that is what I do sense I'm in a chapter 13. Any tax return you get, goes to the trustee. Just remember that if they see that now they are not getting tax refunds from you, they might ask to see you pay Stubbs again. They will see that your taxes are less now on your paycheck because of the deduction change. That will change your payback a little. I would change it a little at a time. Raise it to 3 or 4. Try to break even at the end of the year with your taxes. How much are you getting back? Adjust enough not to get any refund back. They have programs out on the Internet to predict your Taxes for the year. I would adjust enough to not get a red flag.

[alli]

Interesting...change my deductions??? But I am married with no children and I claim 1 deduction already. Should I make it 0 (zero)? I'm really stupid about things like this...sorry

[bklawn]

Because your tax refund is disposable income and you have to pay all of your disposable income to the plan. Once all secured claims are paid, your plan will end. So, depending on the size of your refunds, your plan could end several months early.

Just change your deductible to get more money doing the year so you don't get a refund. Pay back $100 or so. Get your money doing the year.

[LadyInTheRed]

How does this affect my situation? I am 25 mths into a chap 13. I was ordered to surrender my tax returns but only about half of our unsecured creditors filed for their share consequently, the ones who did are ending up gettin paid 100% Why do I still have to surrender my tax return if I'm paying 100%???

Because your tax refund is disposable income and you have to pay all of your disposable income to the plan. Once all secured claims are paid, your plan will end. So, depending on the size of your refunds, your plan could end several months early.

[alli]

How does this affect my situation? I am 25 mths into a chap 13. I was ordered to surrender my tax returns but only about half of our unsecured creditors filed for their share consequently, the ones who did are ending up gettin paid 100% Why do I still have to surrender my tax return if I'm paying 100%???

[tigergem]

Well. It is not very well written, and confuzzles my brain to ponder the verbage as written, although I grasp the idea thanks to your explanation. I thought it just worked out perfectly that 100% of my DMI just happens to = my secured and the only reason my unsecured are getting >0 but <1% was for my convenience of keeping my payment an even dollar amount that is easy for me to remember every month. If I had rounded down to the next even dollar, my plan would have been underfunded, so I had to round up lol - - I'm good with that!

[justbroke]

Oh, I think a lot of people, including myself, were under the misconception that you have to pay in 100% of DMI. But I also think that a lot of plans probably wouldn't work without it. Thanks for clearing that up JB.

The truth is that many Trustees, and even attorneys, read the BAPCPA bankruptcy and decided, somehow, that if you're in less than a 100% plan, then you must commit all of your disposable monthly income (DMI). It actually reads as follows;

11 USC 1325 (b)
(1) If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan—

(A) the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim; or

(B) the plan provides that all of the debtor’s projected disposable income to be received in the applicable commitment period beginning on the date that the first payment is due under the plan will be applied to make payments to unsecured creditors under the plan.

The problem is that everyone skips 1325(b)(1)(A) and go right to paragraph B and think that you can't confirm a 100% plan, unless the entire DMI is paid.

However, reread paragraph (A) and it reads that if you're paying 100% of the allow unsecured claim, then the court can confirm the plan!

[tigergem]

Oh, I think a lot of people, including myself, were under the misconception that you have to pay in 100% of DMI. But I also think that a lot of plans probably wouldn't work without it. Thanks for clearing that up JB.

[justbroke]

yet i read again and again from the vets on this board that even in 100% plan ALL dmi should be turned over to the trustee. that just makes no sense to me.

I will repeat here that it is District dependent! The Trustees prefer that you pay 100% of your disposable monthly income (DMI) even though you would payoff a 5 year plan in 2 years. This "preference" can be overridden by just fighting the Trustee at confirmation. The problem is that most people allow a 100% DMI payment to be confirmed when they may have been able to do 50% DMI and still pay 100% of the allowed unsecured claims.

You need to have the right attorney that will fight over this and/or pay an attorney to litigate this.

[tigergem]

Right, I get your concern about making the month to month for the duration - emergencies and what not. A skillfully crafted and confirmed plan is fully do-able. The art is in the I & J.

[Cgriswold]

I appreciate your feedback. I am not actually looking to change a THING personally(even if recent events might have warranted it) and I was more interested in the hypothetical here, but I thank you for your thoughts.



Cheers,
C

[tigergem]

Well, here's the deal. Just because you get a raise and report it properly, doesn't necessarily mean the Trustee is going to demand a modification of your plan. And I'm not 100% positive, but I don't think you "have to" modify the plan, just because you can. I've reported all kinds of changes in my income and expenses in the form of amended schedules I & J... with no demand from the Trustee that I modify my plan. So, if you have done your duty and reported a raise dutifully, just leave it at that unless the Trustee demands a modification. If he does, then you be sure to equally scrutinize all of your expenses for the modification... follow me? And, if you are expecting an income tax refund, make a motion to retain and spend it, if it is stipulated in your confirmation order that you are supposed to surrender it. On the basis of unexpected necessary expenses not stipulated in your schedules. Be sure to note that your request is not to the detriment of the creditors.

[Cgriswold]

Right, I get it...but again, my question is...if my plan as constituted gets the unsecureds, the trustee, the lawyer, the pope and his minions everything that is claimed, every red cent...what advantage to me is there to end the plan early by turning over extra income, especially if that extra income would make finishing the plan as confirmed much easier? I mean, my world is effed for 7 years no matter what from a credit standpoint so why NOT use the full 5 years to my advantage? Does my question make sense? You read on this board of people who are trying to build that cushion when something happens and maybe if they had been allowed to keep that last raise and/or refund or whatever they would have a sufficient cushion to make it through the plan as confirmed and there would be WAY less dismissals for non-payment? again, why take MORE from a person in a 100% plan than what is needed to complete that plan in 60 months??

[tigergem]

Well, the reason the percentage matters in your case is because you are already confirmed in a 100% payback. It is my understanding that only a drop in your DMI that renders the current plan unfeasible would warrant a modification that will allow for a reduction of that percentage to the unsecureds once 100% is confirmed. I could be wrong about that, but I don't think I am. But for sure I do understand that when the % does not matter is in the beginning, when you first file, so long as DMI is sufficient to pay the secureds and priority claims... the % allowed to the unsecureds, really does not matter. Full payment of DMI does matter, in every case. But if your 100% DMI can pay off those claims at 100% at say... 49 months instead of 60, then you might want to modify your plan to reduce the number of months.