ARM decreases during Chapter 13

[chicagoed195]

I am just interested in hearing of any experiences people might have had with their trustees when their ARM loan adjusted downwards.

My ARM payment will be decreasing significantly, since it is based on the 6 month LIBOR rate. I have informed my attorney of the change and was told that in all likelihood the trustee would look to increase my payments once he reviewed my 2011 tax return.

I suggested to my attorney that the trustee might not be vigilant enough to catch it for 2011 at least, since it would only have an impact for half of the year and the change would more or less be buried in itemized deductions and my gross income will probably decrease slightly.

Has anyone had any experience with this issue?

[LadyInTheRed]

My payment decreased by $80 after a reduction in the rate. The bank sent a notice to the trustee of the reduced payment. I never heard anything about it. My trustee doesn't require copies of tax returns. So, it doesn't look like trustee is going to ask for an increased plan payment. My attorney says that our trustee doesn't really care what happens after confirmation as long as I make the monthly payment. That reminds me, I need to go to the post office at lunch time today to get my money order. If it weren't for this forum, I think I might forget sometimes.

[chicagoed195]

Thanks LadyInTheRed

In my case, the mothly reduction is over $1,000. As far as I can tell right now, the mortgage company has not notified the trustee. I certainly hope it stays that way and I am able to stay under the radar. If I ultimately have to make a larger payment, so it goes. The longer it avoids scrutiny, the less I have to pay those d**n creditors!!!

[newbie2]

Thanks LadyInTheRed

In my case, the mothly reduction is over $1,000. As far as I can tell right now, the mortgage company has not notified the trustee. I certainly hope it stays that way and I am able to stay under the radar. If I ultimately have to make a larger payment, so it goes. The longer it avoids scrutiny, the less I have to pay those d**n creditors!!!

I'd be worried because that is a large sum of money that the trustee would probably want to know about. CYA and send your attorney an email once you get verification of the new payment amount, and hopefully he/she will put something in writing about what should be done. The last thing you want is for time to go by and the trustee to bring up "good faith effort".

[chicagoed195]

I verified by email with my attorney that my only disclosure requirement was the provision of my 2011 tax return

[LadyInTheRed]

That is a lot of money for the trustee to ignore. I wonder how closely trustee's review returns. If I were you, I'd put that $1,000 a month in savings. I don't know if the trustee can ask for it after the fact. I suspect they could only increase the payment going forward and can't really do a retroactive plan modification. But, better safe than sorry. Besides, interest rates are going to go up again eventually. It will be nice to have the savings in case you need it to help with an increased payment later.

ETA: Make sure to keep that email from your attorney.

[chicagoed195]

Thanks for the sound advice. I save everything to and from my attorney. Her only comment was to call her before I spend any refund that I might be receiving on my 2011 tax return. Trust me, both my Federal and state returns will reflect a small balance due.

My research of existing bankruptcy cases suggests that the trustee can ask for anything, but doesn't always get what he asks for. The settled opinions I have seen very explicitly support that the modification can only be prospective, not retrospective.

[1dayatatime]

In June of 2010, my arm adjusted downward by $352/mo. The lender sent a notice to my attorney who sent it on to me without any comment. I saved every cent of the difference in case it became an issue. I have sent my 2010 tax returns to both the Trustee, as required, and to my attorney. My ARM will adjust downward by about $30 again next month. I'll save that also.

[jange]

I have a HELCO that decreases every month along with my balance. In Feb, the bank sent a notice to the Trustee, who sent it to my lawyer, who sent it to me, indicating my new payment, about $75 less per month from when I originally filed. I never heard anything else. We are not required to submit our tax returns or any updates. If the trustee is not worrying about neither am I.

[MOMof3]

Our ARM went up after filing to a tune of $300 per month. The trustee increased our payment amount by the same. Our interest rate as subsequently gone down as have our monthly payments ... the trustee is still collecting the extra money. Our attorney advised not to rock the boat, but if you are really talking large sums of money--then I'd probably make a stink!