Low payment on high income?

[Licoriceky2]

Question....we just filed. Of course I am now fairly well verse in this 13 thing, however my atty said something that really made me wonder. We have about 120K that we are running through the 13, which includes one vehicle and about 95K unsecured. Our annual income is approx $99k.

Our DMI and our plan, at the moment, calls for us to pay $570 a month (which includes the vehicle payment). My attorney "forwarned" me that he is of the belief that our plan payment will be more after our 341 as he stated "...thats a very low amount for your income".

Now my understanding is your plan is based on your DMI after your reasonable budget. Why would he believe that our payment would change based on the low payment vs our annual income?

Obviously I can see and expect that the trustee may or will modify our budget, which in turn, will increase our plan payment but I was suprised my attys statment. Any thoughts?

[HHM]

You and your attorney probably created a very aggressive budget. The chapter 13 trustee is likely to object (it is their job to object) to some expenses and therefore, there will be some give an take to get a confirmed plan.

That is how must chapter 13's go.

[momofthree]

I believe you've stated in the past that you're a family of 3? Being a family of 3 with an income of $99k, $570 seems low seeing that it includes your car payment. The trustee may try to pick apart your expenses. But if you have a high mortgage or daycare costs, etc. then you're probably okay.

[sheilaE]

But what about what I keep reading....you MUST pay into your plan what you would have paid if you were filing a 7 (something like that)? That's what confuses me. We're keeping our home (owe $250,000) and 3 used cars.

[HHM]

But what about what I keep reading....you MUST pay into your plan what you would have paid if you were filing a 7 (something like that)? That's what confuses me. We're keeping our home (owe $250,000) and 3 used cars.

What you are referring too is called the "liquidation value" of the estate.

Your "unsecured" creditors must get what they would receive in a chapter 7. For example, if you own a home, have mortgage of $150,000, the home is only worth $170,000, and your states homestead exemption is $30,000; then there is no minimum chapter 13 payment, your Disposable Monthly income will dictate your payment.
However, if your mortgage is only $100,000, your home is worth $200,000, and your state's homestead exemption is $60,000, then the estate has a liquidation value of $40,000. As such, your chapter 13 must pay at least $40,000 over the 60 month plan.

[espo1357]

What you are referring too is called the "liquidation value" of the estate.

Your "unsecured" creditors must get what they would receive in a chapter 7. For example, if you own a home, have mortgage of $150,000, the home is only worth $170,000, and your states homestead exemption is $30,000; then there is no minimum chapter 13 payment, your Disposable Monthly income will dictate your payment.
However, if your mortgage is only $100,000, your home is worth $200,000, and your state's homestead exemption is $60,000, then the estate has a liquidation value of $40,000. As such, your chapter 13 must pay at least $40,000 over the 60 month plan.

good info.
wow, it seems as if it is "better" to file when you are upside down.

[Pandora]

What you are referring too is called the "liquidation value" of the estate.

Your "unsecured" creditors must get what they would receive in a chapter 7. For example, if you own a home, have mortgage of $150,000, the home is only worth $170,000, and your states homestead exemption is $30,000; then there is no minimum chapter 13 payment, your Disposable Monthly income will dictate your payment.
However, if your mortgage is only $100,000, your home is worth $200,000, and your state's homestead exemption is $60,000, then the estate has a liquidation value of $40,000. As such, your chapter 13 must pay at least $40,000 over the 60 month plan.

thats exactly how our 13 is .... except the only value is our vehicles we own - the house is upside down, which is how we're able to strip the 2nd.

[debtinohio]

I heard the same thing. What % payback to unsecureds did you propose in your plan? The % is more of a sticking point than the payment. All I heard from our trustee was "we need a higher % payback for this income" ($140K/year). My payment went up about $140 after my 341. My 2 cars are $1250 of a $2000 payment :-)

[researchnerd]

Regardless of income, your plan payment is supposed reflect the amount you have left over after all your reasonable living expenses are paid. If you have high income and high expenses, you may not have much left. However, the trustee may challenge (or at least question) some of those high expenses if they are over what the IRS considers reasonable and/or do not count as necessities...which may be something your attorney observed in your paperwork. What is reasonable/necessary according to the court may be much lower than what you're actually spending. Just as an oversimplified example -- if you're living in a McMansion, driving a new Mercedes, and paying private school tuition, they might ask you to tone down your lifestyle in order to pay more into the plan.

You can find the IRS allowable amounts for your area here: http://www.legalconsumer.com/bankruptcy/means-test/

[debtinohio]

Trust me, don't go into this driving a Mercedes - I know.

[researchnerd]

Trust me, don't go into this driving a Mercedes - I know.

Ruh roh. What happened? I don't drive a Mercedes but I do have a new-ish Mazda with a high payment due to rolled-over negative equity, and I've been wondering whether that will be a problem.

[SMinGA]

This is just my opinion, so not legal fact, but I think that is a different situation than driving a ritzy, high profile car with an outlandish payment. Unfortunately, 'newish' probably means more recently than 2 1/2 years ago so no cramdown.

Ruh roh. What happened? I don't drive a Mercedes but I do have a new-ish Mazda with a high payment due to rolled-over negative equity, and I've been wondering whether that will be a problem.

[researchnerd]

This is just my opinion, so not legal fact, but I think that is a different situation than driving a ritzy, high profile car with an outlandish payment. Unfortunately, 'newish' probably means more recently than 2 1/2 years ago so no cramdown.

Yep, it's about a year old, too new to cram down But my payment is about $680, which is pretty outlandish.

[SMinGA]

Ouch. Unfortunately limited options on changing that.

If not already filed, ou could try for financing on a different vehicle? (Not likely to go thru, as they would they see you have a $680/mo payment... And saying you're going to default on that loan would not help!) That would be about the only way to get rid of it, just letting it go in the BK, unless you can do without the vehicle. And I'm guessing if you could do without the vehicle you would have already decided to give it up.

Yep, it's about a year old, too new to cram down But my payment is about $680, which is pretty outlandish.

[debtinohio]

Ruh roh. What happened? I don't drive a Mercedes but I do have a new-ish Mazda with a high payment due to rolled-over negative equity, and I've been wondering whether that will be a problem.

I had a 30 min 341 and I heard the 2 words "the benz" about 50 times. It's payment is $600

In the end - no objection to the car though :-)