What if your DMI is $0.00 or negative?

[IBroke]

If your DMI is $0.00 or negative, do you still have a payment plan?
I found an interesting message on a different site and wanted to ask..

We do not owe any priority debt (taxes etc.) and the money we make covers the first mortgage, the car payment and the living-expenses, so what is going to happen? Do we have to make payments to a trustee in the first place?

[HHM]

If you have no DMI, that begs the question of why not file a chapter 7. Even if you are over the median, if you have zero DMI (and the trustee accepts all your claimed expenses as legitimate), then you can still file a chapter 7.

If you have zero DMI and yet need to file a chapter 13 to accomplish some goal, you can do so. Your question often comes up in the context of a 2nd mortgage lien strip. I doubt this idea has been tested in all districts but strictly speaking, you can have a ZERO payment chapter 13. However, you need to write into the chapter 13 plan a clause that should you have DMI in the future, it will be devoted to the chapter 13 plan. And you would need to be in the plan for at least 36 months (if you are under median), and 60 months if you are over median.

There is nothing in the code that makes a $0 payment plan objectionable. The code only requires that you devote all your disposable income too the plan, if you have no DMI, you don't pay anything. But you have to make provision for "if you have DMI", and the BK Trustee will probably want a provision requiring more oversight, i.e. quarterly income statements, etc.

Thus, if you have $0 DMI, but want to do a chapter 13 2nd mortgage lien strip, you propose $0 monthly payments, if you are under median, the plan length is 36 months, and you simply wait it out. However, you can expect the BK Trustee to fight pretty hard to disallow some of your expenses to at least come up with something to pay into the plan.

[IBroke]

If you have no DMI, that begs the question of why not file a chapter 7. Even if you are over the median, if you have zero DMI (and the trustee accepts all your claimed expenses as legitimate), then you can still file a chapter 7.

If you have zero DMI and yet need to file a chapter 13 to accomplish some goal, you can do so. Your question often comes up in the context of a 2nd mortgage lien strip. I doubt this idea has been tested in all districts but strictly speaking, you can have a ZERO payment chapter 13. However, you need to write into the chapter 13 plan a clause that should you have DMI in the future, it will be devoted to the chapter 13 plan. And you would need to be in the plan for at least 36 months (if you are under median), and 60 months if you are over median.

There is nothing in the code that makes a $0 payment plan objectionable. The code only requires that you devote all your disposable income too the plan, if you have no DMI, you don't pay anything. But you have to make provision for "if you have DMI", and the BK Trustee will probably want a provision requiring more oversight, i.e. quarterly income statements, etc.

Thus, if you have $0 DMI, but want to do a chapter 13 2nd mortgage lien strip, you propose $0 monthly payments, if you are under median, the plan length is 36 months, and you simply wait it out. However, you can expect the BK Trustee to fight pretty hard to disallow some of your expenses to at least come up with something to pay into the plan.

Bingo - you hit the nail right on the head! That's why we are looking for 13. We could get rid of an $150K unsecured 2nd Mortgage.

Thanks for your response.

BTW, is it MANDATORY to have your first mortgage under the plan if you are currently behind on your mortgage although you're already working on an agreement with the lender that would make your mortgage current within 3 months?

I'm asking because a 10% monthly fee for the trustee on our mortgage would be VERY hard to swallow ($250/month)..

[justbroke]

HHM, as always, is right on the money... pun intended. I technically have a $0.00 plan, but must pay my secured creditors through the plan. My real DMI is several hundred dollars negative (if you don't do the 6 month averaging). I still have a Plan and it was confirmed. The Trustee is getting over $500/month to monitor manage my Plan payments to the mortgage company, a car company (for two cars), and the IRS.

That still makes me a $0.00 plan (0%) to the unsecured creditors.

However, and as HHM aptly stated, my Plan states that surrender all my disposable income I to the supervision and control of the Trustee for the 60 months of my plan. Should I earn more money... I may have to pay some of it to the unsecured creditors. With my negative DMI now as it is, I don't see paying the unsecured creditors anymore than they are getting now.

[deadbroke99]

I have a question, if your DMI is negative how you can afford the trustee fee?

[IBroke]

I'm in the Florida Middle District, Tampa Division.

I just browsed the web and found a post where somebody stated that a Judge in my district lately approved a strip of an unsecured 2nd Mortgage in a Chapter 7.

Now that would be sweet and much easier...

[justbroke]

I have a question, if your DMI is negative how you can afford the trustee fee?

Mine is negative, because of the Trustee fee. The DMI -- disposable monthly income -- is calculated including the Trustee fee. If I didn't pay the Trustee anything, mine wouldn't be negative.

Even with a negative DMI, the question is, could you sustain a household when you are dedicating part of your allowances to the Plan?

In my case, the answer is yes. In some number of cases, that answer would be no. It all comes down to whether the debtor could actually make it through the Plan. I have high income combined with a family and high mortgage expense, which is contributing to the high debt service and negative DMI. I can "afford" to pay some of my monthly allowance to the Trustee.

The reason for this, is that by the dumb calculation that they use on Form B22C, I have $50+ per month as DMI. However, over $400/month of my income, was from revenue producing rental properties... that I no longer have. Fortunately, Congress used the words projected disposable income when indicating what a debtor had to play throughout the Plan's duration. If it had read calculated disposable income, I would be in trouble!!!

[IBroke]

I have a question, if your DMI is negative how you can afford the trustee fee?

Well, although your DMI might be negative, your DMI might not be what you're really making every month. I could also ask "How could you pay for food with a negative DMI?" guess it also depends on how much your below 0.

But it is a good question! For us, $250 is A LOT OF MONEY and I'd like to know why a Trustee "deserves" $250/month for a single payment. Honestly, we are capable of managing one monthly payment. Ha, maybe they would even dismiss the case because we can't afford the trustee, huh?? This really makes me wonder..

We would be slightly below the Median Income of $54K/year and after deducting almost $2,600 for the mortgage and $300 for the car-loan, there isn't much left for a household of 2.

That leaves us with about $1,400 before utilities, insurances and food. an additional Trustee-Fee of $250 does make a difference (fortunately, we are current on the car so I might avoid the Trustee there..)!

A Chapter 7 would be much easier. I simply continue the mortgage (since they already agreed on a re-structured loan) and the car-payments. No payment plan. No useless Trustee.

[justbroke]

I just browsed the web and found a post where somebody stated that a Judge in my district lately approved a strip of an unsecured 2nd Mortgage in a Chapter 7

Do you have a reference? I haven't heard of any such strips, and I watch the 11th Circuit (Florida especially) alot!

Also, the Supreme court already ruled on this matter, and they just happen to be the law of the land. You cannot lien-strip in a Chapter 7 per a case in 1991, which I forget the name and don't feel like looking it up. (Yes, I'm lazy today.)

[IBroke]

I sent you a PM (I hope you received it) with the link to the site I found. Let me know when you received it. I also stumbled over an article that says that you might not be bound to the 3 or 5-year payment plan if your DMI is $0 or lower. I'll send you that one as well (since I'm not sure if I can post that here).

[justbroke]

I sent you a PM (I hope you received it) with the link to the site I found. Let me know when you received it. I also stumbled over an article that says that you might not be bound to the 3 or 5-year payment plan if your DMI is $0 or lower. I'll send you that one as well (since I'm not sure if I can post that here).

I already read the case on the "applicable commitment period" and it's a good read. I agree with the judge.

I recieved your first (and second) PM, and I responded. I looked at the thread you indicate regarding a lien strip in a Chapter 7. There was no references at all, and the only thing the paralegal did post, was the Tanner case from the 11th Circuit (2001) which is the landmark Chapter 13 lien stripping case.

[IBroke]

I already read the case on the "applicable commitment period" and it's a good read. I agree with the judge.

I recieved your first (and second) PM, and I responded. I looked at the thread you indicate regarding a lien strip in a Chapter 7. There was no references at all, and the only thing the paralegal did post, was the Tanner case from the 11th Circuit (2001) which is the landmark Chapter 13 lien stripping case.

Ah, I got your replies, thanks!

I added a post to the forum about the chapter 7, asking for a case-reference. Maybe I'm lucky and the thread isn't "dead" yet.

[HHM]

Umm, how about sharing in the public forums, after all, this forum is for the benefit of all, why the f-ck does it matter what you pm'd to each other.

[IBroke]

Umm, how about sharing in the public forums, after all, this forum is for the benefit of all, why the f-ck does it matter what you pm'd to each other.

..because almost every other forum I've seen so far has "restrictions" when it comes to links to other websites - don't ask me why??

But since you're the MOD, I guess it's OK to post links..

Well, here they are:

Chapter 7 stripping:

http://www.brokeroutpost.com/loans/brokers/forum/topic.asp?TOPIC_ID=258595

Chapter 13 Payment-Plan:

http://www.************************/...t-part-1-of-2/

[justbroke]

Umm, how about sharing in the public forums, after all, this forum is for the benefit of all...

It was here, but seems to have been edited away. I believe that IBroke just re-posted the information in a separate post now.

It was nothing which couldn't be within this forum, but I think IBroke was trying not to derail the current topic.