Commission based income - do they average it out?

[Newday1]

One of us is on a commission based pay. This year "may" end up being better than the previous years. Can our attorney negotiate a lower pay amount by averaging the previous two years income with this year? The past several years income is lower and pretty much the same. This year is different.

Thank you.

[justbroke]

(Trustee thinking)... if it wasn't so low as to warrant a Motion to Modify and cause you trouble because you did some (expected) belt tightening, why is the surplus now not "disposable" monthly income (DMI)?

(Me) While I have never had my Trustee (in 2 years) increase my payment amount, I would say that averaging won't get you there. The only way to prove that your payment should not be increased is to show a change in circumstances (finances). That could mean a new Schedule I/J.

Usually, Trustees are not interested in modifying plans due to increases less than 10%. If the increase is significant (> 10% or higher), the Trustee may be interested in modifying your plan. There's no way to tell unless and until the Trustee looks at your tax returns and decides to motion the court for a plan modification. Ask your attorney what the "norm" is for the Chapter 13 Standing Trustee who is administering your case.

[Newday1]

Thank you JB for your well-thought out reply. Everyone on this forum is so helpful! I wish they would average it out, but it will be what it will be. If we end up in 13, we will just need to make sure our attorney is advocating for a reasonable payment plan.

[dmc-2008]

When a trustee motions the court will this cost you more atty fees?

[justbroke]

A Motion to Modify Confirmed plan initiated by the Trustee should not cause new attorney fees unless you decide to fight it. At that point, the fee agreement that you have with your attorney would dictate. Typically, Chapter 13 attorney charge a standard (district-wide) "no-look" fee to get you through Confirmation and some token amount for "monitoring" the case. The no-look fee typically does not include extras such as lien stripping, adversary proceedings, or other motions such as a motion to modify. If you are not fighting the motion to modify confirmed plan, it should not cost you anything since the Trustee would get a default ruling.

[justbroke]

Thank you JB for your well-thought out reply. Everyone on this forum is so helpful! I wish they would average it out, but it will be what it will be. If we end up in 13, we will just need to make sure our attorney is advocating for a reasonable payment plan.

Thank you. I would add that averaging should have been done when the Plan was initially created. If the swings are so significant, you may want to modify the plan each year. Remember, however, that a debtor moving to modify a confirmed plan, usually draws scrutiny and a new Schedule I/J. If you confirmed at a very high commission and you just experienced a lower commission (or earnings) this year (or any year) -- compared with your confirmed plan and Schedule I/J -- modifying may be the best course.

[momofthree]

Newday, have you filed yet? I was under the impression from your other posts that you had not yet filed. JBs advice pertained to someone who is already in an active ch.13 bk.

[Newday1]

Yes, we filed. We can only go forward from here. I may need more encouragement as the days progress.

[Newday1]

Also, so as not to confuse anyone - we filed for a 7 but "may" end up in a 13. Some days I am more logical than others, some days I forget what direction I just came from.

JB, it sounds like if a 13 is what happens, then "if" that happens our attorney can average out the income?

Thank you again everyone. We will be better for this experience. It is absolutely a scary roller coaster going through it

[Pjmax]

Newday, when is your 341? I know you're concerned about all the what-ifs, but all you can really do is wait and see if there is any problem with your Chap. 7. I'm sure your attorney wouldn't have put you in a 7 if he didn't think it had a chance of flying. Enjoy the holiday, and take what comes one day at a time.

[Newday1]

you sound like the attorney and are so right, I need to relax and enjoy the holidays, and stop with the "what ifs".
It's not until first of the year so we will see what happens. Thanks for being patient with me

[Pjmax]

That's not too far away. I think you'll be fine whichever way it goes. Nothing more you can do now, so think about doing some happy things over the next week or so.

Lots of good folks on here were patient with me when I first found this forum, just knowing there is someone to ask when you have a question, are concerned or just need to vent makes it all so much easier.

Now, go open a bottle of wine and watch a good movie or something fun!

[justbroke]

JB, it sounds like if a 13 is what happens, then "if" that happens our attorney can average out the income?

Just try to relax and enjoy the Holidays. If a Chapter 13 happens, then you will just work with your attorney and inform the attorney of the fluctuating income. The reason Chapter 13s require "regular" income, is why you are finding the process so rigid. There is some flexibility but, as I mentioned, the process would be to modify a confirmed plan. Takes a little extra work, but it can be done.

Here's a thought. If you're 100% commission based, this won't work. However, if you have a base salary plus commission that is paid quarterly or annually, there might be a way to confirm a plan where you pay the normal amount based on your salary and then surrender all commissions (not too unlike surrendering future tax "refunds"). Just a thought. I did something similar where I confirmed my plan payments based on my earned income. The unearned income was from my rental properties. I petitioned the court to allow me to pay those outside the plan and not through payroll deduction. It would have killed me to do payroll deduction (wage order) since both places remained un-rented for months.

[dmc-2008]

Thank you for your response JustBroke!