% Payback (it doesn't matter)

[tigergem]

I worked my plan very carefully. My budgeted expenses allow me to put 10% of my income in savings and my plan allows for less than 1% repayment of the unsecured. It's a thing of beauty. A true work of art. I'm so proud.

That is partially because I did not skip one single ANNUAL expense in my budget. And part of that 10% right now is actually going toward court fees and the cost of printing or copying and mailing stuff for my BK, amendment costs, etc and gas to the court house.

[flyinbroke]

You have to remember, that under a Chapter 13, your creditors can't even call you, much less harass you. Also, you don't pay interest. There's no way most folks could pay off their debt in 5 years with the current interest rate structure. No way.

You have to look at the power of the automatic stay and the no interest period as a tool.

And that is ultimately why I will file. However, I need to have an emergency fund just in case this plan is the best anyone can do. I am going to have to seriously look at my miscellaneous expenses and see if it can be improved...first one leaves me with 700-800 max for all expenses.

(And I really hate to be paying on my five year old car for another five years...it may not outlive the payments. Note to self: longer pay terms are also not a great deal.)

[justbroke]

You have to remember, that under a Chapter 13, your creditors can't even call you, much less harass you. Also, you don't pay interest. There's no way most folks could pay off their debt in 5 years with the current interest rate structure. No way.

You have to look at the power of the automatic stay and the no interest period as a tool.

[flyinbroke]

Well, I have absolutely no property and my first attorney quoted a payment somewhere in the 90 percent payback range. Does not sound like such a good deal to me lol. I guess they don't figure living expenses in very well. If I could afford to pay 90+ percent back to all my creditors, I would do that. I will be researching more attorneys though.

Am tempted to wait, pay the IRS with money I am not using to pay the largest minimums, stockpile an emergency fund and retainer, and drop the bomb when the car is paid (almost) off. That would be 12K less I would have to pay back (the BK rate for the car was the same as my rate now.)

Here's hoping for no lawsuits till then though.

[bklawn]

I'll leave you with this. Sometimes, the Trustee's (and creditor) objection to confirmation is all bark with no bite. A skilled lawyer can usually defend you or get the Trustee to blink and make some sort of stipulated agreement. It is never cut and dry.

Exactly! (However, I moved back into my primary residence and decided that fighting with the Trustee over equity and payments and the like for my investment property was just not worth it. It was empty, I was having trouble renting it (at the amount I absolutely had to have in order to cover principal, interest, taxes and insurance), and was just frustrated by the Trustee wanting 100% to the unsecured creditors. So, I gave it up.)

Well, that's what they would want... the $314 being contributed to the unsecured creditors. You wouldn't need to give it up, only you'd need to contribute at least $314/month more to the unsecured creditors. They think of it this way... you have $314/month to spend on that which is not necessary for an effective reorganization but want the unsecured creditors to suffer? If you put an additional $314/month on top of the DMI... then that would quiet any objection to confirmation due to bad faith.

lol... that sounds much better.. Thanks for the info.. that is what I'm looking at doing I will pay that.. but not 100% payback,, they can have everything if that is the case... i will be staying in the 2 bedroom house that is about 500sqft. That makes more sense, they know you can't pay 100% back if you could, you would be doing it now.. plus the bank has more houses than they can handle now.. so I think it will be ok.. I will let you know how it turns out..I'm planning on filing like in oct or Jan.. trying to see if I can get my 6 months income down.. cause we are not getting anymore overtime.. that ectra 24000 to 30000 helped to pay the creditors.. it will nevr happen again if I or we get out if this.. live off what we make or even less.. I hope the trustee is a good one. We are in the northern district in Georgia..

[justbroke]

O ok I see, so they can make you pay 100% of you unsecured debt to the creditors even if they get $0 out of it.. I see now how it works.. looks like they will be getting it then.. i have about 149K in unsecured.

I'll leave you with this. Sometimes, the Trustee's (and creditor) objection to confirmation is all bark with no bite. A skilled lawyer can usually defend you or get the Trustee to blink and make some sort of stipulated agreement. It is never cut and dry.

You are saying that you have 150k in usecured and you had to pay 100% back even if your NDI does not cover it..

Exactly! (However, I moved back into my primary residence and decided that fighting with the Trustee over equity and payments and the like for my investment property was just not worth it. It was empty, I was having trouble renting it (at the amount I absolutely had to have in order to cover principal, interest, taxes and insurance), and was just frustrated by the Trustee wanting 100% to the unsecured creditors. So, I gave it up.)

I will pay the market value if that is what it takes.. I have no problem, but the codes are not clear.. If I give it up they get $314 more, which is the payment on the House..

Well, that's what they would want... the $314 being contributed to the unsecured creditors. You wouldn't need to give it up, only you'd need to contribute at least $314/month more to the unsecured creditors. They think of it this way... you have $314/month to spend on that which is not necessary for an effective reorganization but want the unsecured creditors to suffer? If you put an additional $314/month on top of the DMI... then that would quiet any objection to confirmation due to bad faith.

[bklawn]

It does protect you. There are exemptions but I don't understand what you really want to do. The way exemptions work is the same no matter which chapter of Bankruptcy. However, the way that certain things work in a Chapter 13, are very different than a Chapter 7. Because Chapter 13 is a pending bankruptcy (and pending for 3-5 years), income and expenses are treated much differently in the Chapter 13 context.

As I eluded to above, much of the Code is shared between the Chapters, but Chapter 13 (and Chapter 11 and 12) are very different in how you apply the code.

Think of Chapter 13 as a Chapter 7, only you are asking the court to protect you from creditors for 3-5 years... before you get your discharge. That's very powerful. However, there are certain things that go on during a Chapter 13 that are necessary to administer the case fairly to the creditors.

In a Chapter 7, valuation on the date of the case starting makes complete sense, because a Chapter 7 is over rather quickly (discharged in 90-120 days), and you need something set.

In the Chapter 13 context, homesteaded (primary residence) property is treated well and in that context, your exemptions are in tact and any equity gained during your "pending" bankruptcy, is not property of the estate.

However, for investments and spending money on things that are to the detriment to your creditors, the Trustee can complain and file an Objection to Confirmation if they don't feel you're dedicating money to your Plan to pay unsecured creditors. Whether it's Chapter 7, 9, 11, 12 or 13, you must file a petition that is in good faith. The same thing goes for your Chapter 13 Plan -- it must be in good faith.

Many Trustees don't think it's good faith to pay very little to unsecured creditors, while you continue having an investment property while it is gaining equity (through appreciation and/or payments). In those cases, they will file a "bad faith" objection to confirmation because the creditors suffer while you get to keep that property. Yes, it makes no sense at all when there is no equity, the place pays for itself, and you have no money to contribute to the unsecured creditors.


Your mileage may vary. I'm only pointing out the hurdles that you may go through.[/QUOTE]

If you give up the car, and already had a positive DMI (which I think you said it was liek $2,063/month), then your DMI would increase to $2377/month..

no the car is a cram down from 605 a month to $353..


[QUOTE= I'm just saying that it's within the unsecured creditors and trustee's right to file such an objection based on your circumstances. Whether they will get you to pay the market value of the property into the plan to the unsecured creditors... is anyone's guess. In my District, they did this same thing to me. Required me to pay 100% of $150K in allowed unsecured claims to the unsecured creditors, if I kept the investment property! ..[/QUOTE]




O ok I see, so they can make you pay 100% of you unsecured debt to the creditors even if they get $0 out of it.. I see now how it works.. looks like they will be getting it then.. i have about 149K in unsecured. You are saying that you have 150k in usecured and you had to pay 100% back even if your NDI does not cover it.. I will pay the market value if that is what it takes.. I have no problem, but the codes are not clear.. If I give it up they get $314 more, which is the payment on the House..

[justbroke]

Ok say I give it up.. what do the creditors get? the extra 314 a month that I was paying on it? It is property period right I'm just trying to see what are the options..? I'm confused.

If you give up the car, and already had a positive DMI (which I think you said it was liek $2,063/month), then your DMI would increase to $2377/month.

I thought chapter 13 protects you.. based on exempts.. If that is the case you just need to say you have no exemptions in a chapter 13 and you do have exemptions in a chapter 7.. now that does not make sense..

It does protect you. There are exemptions but I don't understand what you really want to do. The way exemptions work is the same no matter which chapter of Bankruptcy. However, the way that certain things work in a Chapter 13, are very different than a Chapter 7. Because Chapter 13 is a pending bankruptcy (and pending for 3-5 years), income and expenses are treated much differently in the Chapter 13 context.

O and the code does say that it is the property value at time of filing.. So why would it matter what the value is over years after filing..

As I eluded to above, much of the Code is shared between the Chapters, but Chapter 13 (and Chapter 11 and 12) are very different in how you apply the code.

Think of Chapter 13 as a Chapter 7, only you are asking the court to protect you from creditors for 3-5 years... before you get your discharge. That's very powerful. However, there are certain things that go on during a Chapter 13 that are necessary to administer the case fairly to the creditors.

In a Chapter 7, valuation on the date of the case starting makes complete sense, because a Chapter 7 is over rather quickly (discharged in 90-120 days), and you need something set.

In the Chapter 13 context, homesteaded (primary residence) property is treated well and in that context, your exemptions are in tact and any equity gained during your "pending" bankruptcy, is not property of the estate.

However, for investments and spending money on things that are to the detriment to your creditors, the Trustee can complain and file an Objection to Confirmation if they don't feel you're dedicating money to your Plan to pay unsecured creditors. Whether it's Chapter 7, 9, 11, 12 or 13, you must file a petition that is in good faith. The same thing goes for your Chapter 13 Plan -- it must be in good faith.

Many Trustees don't think it's good faith to pay very little to unsecured creditors, while you continue having an investment property while it is gaining equity (through appreciation and/or payments). In those cases, they will file a "bad faith" objection to confirmation because the creditors suffer while you get to keep that property. Yes, it makes no sense at all when there is no equity, the place pays for itself, and you have no money to contribute to the unsecured creditors.

I'm just saying that it's within the unsecured creditors and trustee's right to file such an objection based on your circumstances. Whether they will get you to pay the market value of the property into the plan to the unsecured creditors... is anyone's guess. In my District, they did this same thing to me. Required me to pay 100% of $150K in allowed unsecured claims to the unsecured creditors, if I kept the investment property!

Your mileage may vary. I'm only pointing out the hurdles that you may go through.

[bklawn]

I thought I responded to this, but I was having trouble with the site on that day.

Anyhow, it has nothing to do with the equity right now. In a Chapter 13, you are paying things over a period of time. So, you are diverting money to a non-homestead (primary residence) to pay for an investment.

It's not an equity question in the present tense. You are still keeping a property that has a particular value... whether it's encumbered or not. You are paying that property while the unsecured creditors are penalized while you enjoy actually paying down the property (gaining equity) and any other equity gained by appreciation over that period.

If you are able to have a plan confirmed, where you're paying 0% to the unsecured creditors, while you're keeping an investment property and paying it down... let us know. This will be the first reference case for me to use as caselaw. I just haven't seen it. it makes no sense, and there is nowhere provided for it in the code.

Huh? If you're referring to how the plan works in 11 USC 1325, then I don't think you understand it correctly. The disposable monthly income (DMI) is calculated based on, first, your current monthly income (CMI). From your CMI, allowable expenses are deducted, these are known as the IRS Allowed Expenses (Allowances). Aftery our allowances, you then deduct your Additional Expenses (Additional). After that, your Debt payment is figured (Debt Service). Your debt service is then also deducted from your CMI. What is left over, is known as the Disposable Monthly Income (DMI).

The Debt Service amount includes payments on secured debt including arrears. It also includes the Trustee payment as well.

The DMI is the DMI and nothing else. The entire purpose of the DMI, is to be submitted to the custody and control of the Trustee... and paid to the unsecured creditors.

I don't understand the misunderstanding. If you cramdown a car, it will likely NOT change your DMI.

Ok say I give it up.. what do the creditors get? the extra 314 a month that I was paying on it? It is property period right I'm just trying to see what are the options..? I'm confused.. I thought chapter 13 protects you.. based on exempts.. If that is the case you just need to say you have no exemptions in a chapter 13 and you do have exemptions in a chapter 7.. now that does not make sense..

O and the code does say that it is the property value at time of filing.. So why would it matter what the value is over years after filing..

ok the bottom line is I would have to pay the value which is about 32000 over 5 years correct to not have any problems?

[justbroke]

ust notice this statement above.. You can't cram down a house payment in a chapter 13 right? also that property value is less than the balance, which is with GMAC.. The payments are on time.. There is no equity in the property... So how can the trustee make me pay more if the creditors will not get anything out of it if I gave it up. GMAC will be the first. They have the loan.

I thought I responded to this, but I was having trouble with the site on that day.

Anyhow, it has nothing to do with the equity right now. In a Chapter 13, you are paying things over a period of time. So, you are diverting money to a non-homestead (primary residence) to pay for an investment.

It's not an equity question in the present tense. You are still keeping a property that has a particular value... whether it's encumbered or not. You are paying that property while the unsecured creditors are penalized while you enjoy actually paying down the property (gaining equity) and any other equity gained by appreciation over that period.

If you are able to have a plan confirmed, where you're paying 0% to the unsecured creditors, while you're keeping an investment property and paying it down... let us know. This will be the first reference case for me to use as caselaw. I just haven't seen it. it makes no sense, and there is nowhere provided for it in the code.

Reading the law it states basically that what ever the NDI amount is, everything is paid out of that even, the non exempt amounts if any. Like the forum says if all of those amounts are more than you NDI then your plan will not pass and be discharged is that correct.

Huh? If you're referring to how the plan works in 11 USC 1325, then I don't think you understand it correctly. The disposable monthly income (DMI) is calculated based on, first, your current monthly income (CMI). From your CMI, allowable expenses are deducted, these are known as the IRS Allowed Expenses (Allowances). After your allowances, you then deduct your Additional Expenses (Additional). After that, your Debt payment is figured (Debt Service). Your debt service is then also deducted from your CMI. What is left over, is known as the Disposable Monthly Income (DMI).

The Debt Service amount includes payments on secured debt including arrears. It also includes the Trustee payment as well.

The DMI is the DMI and nothing else. The entire purpose of the DMI, is to be submitted to the custody and control of the Trustee... and paid to the unsecured creditors.

I don't understand the misunderstanding. If you cramdown a car, it will likely NOT change your DMI. Here's why. Suppose you're paying $450/month for your car and the balance due is $21K. Let's say the cramdown value of the car is $12K and your plan is 60 months. Your payment, in Plan, will be $200/month. While y ou may think that the difference ($450-200 = $250) would go to the DMI, it does not.

This is because the "Allowance" -- as I talked about above -- include a $489/month car ownership allowance. You get to take $489 less the car payment. So, earlier, your allowance would have been $39.00 ($489-$450). Since you cram the car down, your allowance increases to $289 ($489-$200). This is counterbalanced in your debt service, because the payment on the car would decrease by the same amount. This would NOT change your DMI at all.

The only case in which your DMI might change, is if the car payment was more than $489 to start with.

I know that's pretty detailed, but I think it deserved a deeper explanation.

[bklawn]

When you cram down, you no longer have the associated "car payment" that you were making. In a cram down scenario, a good attorney will eat up the amount in other expenes (if possible), but yes, the NDI covers the cram down, but realize, the car payment you "were" making (prior to the 13) is usually added to the NDI.

Ok Maybe you did not understand what I was saying..

1. 2063 NDI
2. amount of car in cram down $21919 which is $365 for 60 months
3. attorney fee $4000 which is $67
4. plus trustee fee..

So if you add up the amounts above is the car payment part of the $2063 which is including in the plan or is it added to the $2063.. I know the trustee fee is added back because it is part of your deductions.. number 50 of your
B22c form... of a Chapter 13..

Reading the law it states basically that what ever the NDI amount is, everything is paid out of that even, the non exempt amounts if any. Like the forum says if all of those amounts are more than you NDI then your plan will not pass and be discharged is that correct.

[bklawn]

when you cram down, you no longer have the associated "car payment" that you were making. In a cram down scenario, a good attorney will eat up the amount in other expenes (if possible), but yes, the ndi covers the cram down, but realize, the car payment you "were" making (prior to the 13) is usually added to the ndi.

thanks hhm

[HHM]

Does the (NDI) pay for a cram down car loan? What I'm saying is say you have a NDI of $1000.. Do the trustee take the secured cram down car payment out of it or is it added to the $1000 to make your payment be say $1350 plus atty and trustee fees?

When you cram down, you no longer have the associated "car payment" that you were making. In a cram down scenario, a good attorney will eat up the amount in other expenes (if possible), but yes, the NDI covers the cram down, but realize, the car payment you "were" making (prior to the 13) is usually added to the NDI.

[bklawn]

Overall looks good to me. Looks like you may have to pay the "non-exempt" value of those cars into the Plan. If you're in Florida, and filing together, you'll only get $2K exemption for the cars. That's like $18K exposed (about $20K in equity less the $2K exemption). Remember, I'm talking Florida.

That means $20,000 / 60 or about an additional $333/month you'd have to pay into the plan. If you say your payment is about $800, it would now be $1,333/month.

You might also have trouble with the rental you're keeping. The Trustee may require you to pay that value to the Plan as well. Since you'd need an appraisal, we'll just say it's $30K. So you'd need an additional $500/month in your payment. You're now at $1,833/month.

You might consider paying off Mom's (rental) home during the life of the plan and cramdown the value and the interest rate since it's not your primary residence.

In the end, I think your problem is going to be keeping all those assets, without contributing (more) to the Plan.

Just notice this statement above.. You can't cram down a house payment in a chapter 13 right? also that property value is less than the balance, which is with GMAC.. The payments are on time.. There is no equity in the property... So how can the trustee make me pay more if the creditors will not get anything out of it if I gave it up. GMAC will be the first. They have the loan.

As for keeping the assets, I have no equity in anything except about 14000 in the cars, which equal to $233 over 5 years.. Even if I could do a chapter 7.. the creditors could not get anything except the $14000. I think they have no argument.. They get more with me just paying $1000 over 5 years.

Thanks
O and I'm in Georgia..

[bklawn]

Ok...many people are getting hung up on the percent payoff in a chapter 13, meaning the percent that is being paid to unsecured creditors.

Let me say this crystal clear....

The % you pay to your unsecured creditors DOES NOT MATTER.

There is no minimum and it isn't even a factor of your plan. The % payback is a flexible number, it is merely informative. There is not even a reference in the BK code to the % payback. The ONLY numbers that matter in a chapter 13 plan are...
1. Net Disposable income (on the means test, referred to as Disposible Monthly Income, DMI).
2. Liquidation value of your BK estate.

Your net disposable income (NDI) is simply your Gross Income minus your allowed expenses. That is how your plan payment is calculated. If your NDI is $100, then you are paying back $6,000 over 60 months, if your NDI is $1000, you are paying back $60,000 over 60 months. What ever percent payback that equals is what it is; but the % pay back is merely "informative", but has NO legal significance. For example, if you are paying back $100 per month, but you get a $1,000 tax refund, that will necessarily change your % payback.

Liquidation value is simply the value of your non-exempt assets, if any. In a chapter 13, you are required to at least pay the value of non-exempt assets. In many cases, the liquidation value is 0; so your chapter 13 plan payment is simply based off of your NDI. However, if your liquidation value is $50,000, then your chapter 13 plan must "at least" pay back $50,000 over the course of 60 months. Caveat, your plan payment is still going to be based on your NDI so if your NDI would exceed that $50K, you will be paying back the larger amount, where people run into trouble with liquidation value is if they don't have enough NDI to cover the non-exempt equity, in which case, your chapter 13 would be dismissed.

Bottom line, your % payback to unsecured creditors has absolutely, positively, NO legal significance. It is merely an informational number subject to change based on your true NDI over the course of the plan and the creditors that actually file claims.

Does the (NDI) pay for a cram down car loan? What I'm saying is say you have a NDI of $1000.. Do the trustee take the secured cram down car payment out of it or is it added to the $1000 to make your payment be say $1350 plus atty and trustee fees?