Trustee not making mortgage payments

[spearmint]

I have a friend who is in Chapter 13. She told me that the trustee did not make her mortgage payments for a year! As a result, she could not itemize on her tax returns and therefore could not get list the mortgage interest and therefore no refund.

Now I am concerned as I was going to raise my withholdings so I do not get a tax refund due to the mortgage interest paid out. If the trustee doesn't make the payments and I increase my withholdings, I could be PAYING OUT at the end of the tax year what I received in increased withholdings!

Any comments about this?

[Flamingo]

Her mortgage payment was apparently included in her Plan (paid to the Trustee and not the mortgagor) so she still was paying her escrows which included her taxes. There must be a problem as to her Plan for the trustee to take so long to pay the mortgage. She should find out what is going on there because if her taxes and insurance are not paid by the insurance company, there could be big problems. She also needs to find out from a tax expert whether or not she actually paid taxes because she, in fact, did via her mortgage payments to the trustee.

This has no effect on you because many people pay their mortgage outside of the Plan and you are worrying about something ahead of time that probably will not happen to you.

[imaloser]

i would have your friend log on to 13datacenter to track activity. the trustee in my district does not send payments every month to my mortgage company. they wait a couple or a few months and send them one check. i am paying arrears through the 13 but make my regular payment outside of the 13. i've benefitted even more tax-wise in the last few years because basically i'm making what amounts to 6 or 7 extra payments a year through the trustee in addition to the 12 monthly payments i make.

your friend should have at least a year's worth of interest for her payments made outside of the plan. that's the way it usually works.

[fltoo]

The tax ramifications are the least of her problems.

Did she ask why the payments are not being made?

[justbroke]

Just my opinion, but I think you can still itemize the interest. There is a box that you check that "the amount claimed is not what is on form 1098"... and you list a reason.

You claim interest in the year that it's paid. Therefore, my opinion is that you chould claim it, as you did pay it. Remember, in a Chapter 13, payments are considered to be made on time when sent to the Trustee, regardless of whether the Trustee delays payment to the creditor.

The flip side problem is this. When the Trustee pays it all in the following year, you'll have to deduct the amount you claimed in the prior year. So as not to double dip.