100% Payback

[mlevesque308]

New here, so I'll have a lot of questions. I've been seeing this a lot in other posts. I thought % didn't matter? Also, how are you forced to payback 100%, I thought there were variables involved....my first thought is, why file when you can payback 100%.....sorry........this is overwhelming. LOL.

[justbroke]

Yes, the percentage does not matter, unless you're in a 100% plan. Very very few people end up in a 100% plan. The percentage is a "calculated" value based on your disposable monthly income (DMI) times the number of months you must be in the plan then divided by your total "allowed" unsecured claims.

So, if you had $100,000 in unsecured "allowed" claims and your DMI was $1,000/month, you'd be over the median income and in a 60 month plan. The total paid to "allowed" unsecured claims would be set at $60,000 ($1000/month times 60 months). Your percent would be 60%. The reason the percentage does not matter, is because it is a calculated amount. The only thing you worry about is your DMI, not the percent. (There are some reasons why percentage would matter, but they are more about when you could file a Chapter 7 and receive a discharge of your debts. It's too complex to talk about and the super-majority of cases pay less than a 70% dividend to the unsecured creditors. If you had paid more than 70%, in a Chapter 13, you could file a Chapter 7 in 6 years and receive a discharge; rather than the required 8 years. Again, it is really not a controlling factor on the "percent paid". Your disposable income drives that, combined with any "liquidation" value... which is also another complex subject.)

There are variables involved and, again, the super majority of cases pay no where near 100% with most of them paying less than 70%. In fact, some Districts allow cases in which there is 0% paid to the unsecured creditors. The fact is, you really don't worry about the dividend... you worry about your disposable monthly income, because that is what affects the amount in your pocket each month!

In most cases, a 100% plan is better than being at the mercy of creditors, judgments, settlements, and taxation on settled debt (1099-C debt). In a 100% plan, you are in the driver's seat. The unsecured creditor gets no more interest over the life of the plan (up to 60 months). The unsecured creditor can not tack on any more fees. You can challenge the balance the unsecured creditor claims (especially if there is nothing in the documentation which entitles them to tack on certain fees). You could challenge that a junk debt buyer (JDB or collection agency which purchased the debt) even has standing to collect the debt. It is not a settlement and there are no taxes as there would be in a settlement case (1099-C Forgiveness of Debt).

In a 100% plan, you fight over the claims to make sure no one is paid that does not have a valid claim and is not a creditor! Thereby reducing the "total" amount you shell out... even though you're paying 100%. For example, let's say that you have $100,000 in unsecured debt. You are also required to be in a 100% plan because your DMI is $2,000/month meaning you have $120,000 available to pay, over the life of the plan, to unsecured creditors. Let's say that you police your claims and you have your OBJECTION on the claims for $50,000 of the debt GRANTED. You are still in a 100% plan, but that is 100% of $50,000, which is the "allowed" unsecured claims! You just saved $50K and you can probably be out of the bankruptcy in less than 2 years ($2K x 24 months = $48K)!!!

So, 100% is not bad! It stops garnishments, judgements, collections, evil creditors, aggressive attorneys and down right ceases the phone calls and letters! That is something that debt settlement can't do with certainty and promise.

[alo]

Justbroke - Can you provide an example of an objection to an unsecured claim? What is that and why would it be granted?

[justbroke]

Let's say that an unsecured claim was filed in your case as Claim #1. You do not recognize the creditor or the balance. The company is ABC Company and they simply file a claim, as seen in the Claims Register on PACER, with a single sheet of paper stating that they purchased it from Chase and that you owe $10,000. Since there is not enough information to establish that either you entered into an agreement with them, or that they purchased or was assigned the claim from Chase, you may be able to file an Objection. The court will take the objection, and determine whether your objection is valid. If you had objected on standing, that they are not a "creditor", they can then prove it.

This can go back and forth as evidence is submitted with the claim. I had two claims from American Express with each of them over 20 years old, and I didn't even know what they were for! I objected to them, American Express provided no further evidence of a valid claim, and that claim was disallowed.

In the case of ABC Company, the same would be for them. In many case, these junk debt buyers, such as B-Real, B-Line, LNVN Funding, Roundup Funding, eCast Settlement, etc, will file several months of credit statements showing your balance. They may also file an "assignment of debt" along with that evidence. This would generally be considered evidence of a claim (how would they have your actual statements combined with an assignment of debt).

Well, that's claims objections in a nutshell. There can be more to it than that. I was not in a 100% case, but I still chose to make sure only "creditors" that were allowed and had valid claims, received any distribution in my Chapter 13.

Claims policing in a Chapter 13 is a duty of the Trustee, but the (Chapter 13) Trustee seldom objects to claims! It then turns to the debtor, and/or his/her attorney, to police the claims and file any objections.

[mlevesque308]

It makes sense now. thank you so much. I've done the means test a few times and I'm not coming up with much left over. I guess having a $1000 alimony payment I need to pay for the next 48-months really helps. I need to talk to my attorney about purchasing a car, and if he feels we need to wait to file. i don't want anything crazy. I'm looking at a 2-3 yr old Subaru- something that is good on gas, reliable, they have a good reputation to for higher mileage. I don't want any red flags so I'm trying o keep payments low.

[paulsk]

Good explanation. Thanks. I am in a similar situation and this helped me understand the 100% repayment logic.

Yes, the percentage does not matter, unless you're in a 100% plan. Very very few people end up in a 100% plan. The percentage is a "calculated" value based on your disposable monthly income (DMI) times the number of months you must be in the plan then divided by your total "allowed" unsecured claims.

So, if you had $100,000 in unsecured "allowed" claims and your DMI was $1,000/month, you'd be over the median income and in a 60 month plan. The total paid to "allowed" unsecured claims would be set at $60,000 ($1000/month times 60 months). Your percent would be 60%. The reason the percentage does not matter, is because it is a calculated amount. The only thing you worry about is your DMI, not the percent. (There are some reasons why percentage would matter, but they are more about when you could file a Chapter 7 and receive a discharge of your debts. It's too complex to talk about and the super-majority of cases pay less than a 70% dividend to the unsecured creditors. If you had paid more than 70%, in a Chapter 13, you could file a Chapter 7 in 6 years and receive a discharge; rather than the required 8 years. Again, it is really not a controlling factor on the "percent paid". Your disposable income drives that, combined with any "liquidation" value... which is also another complex subject.)

There are variables involved and, again, the super majority of cases pay no where near 100% with most of them paying less than 70%. In fact, some Districts allow cases in which there is 0% paid to the unsecured creditors. The fact is, you really don't worry about the dividend... you worry about your disposable monthly income, because that is what affects the amount in your pocket each month!

In most cases, a 100% plan is better than being at the mercy of creditors, judgments, settlements, and taxation on settled debt (1099-C debt). In a 100% plan, you are in the driver's seat. The unsecured creditor gets no more interest over the life of the plan (up to 60 months). The unsecured creditor can not tack on any more fees. You can challenge the balance the unsecured creditor claims (especially if there is nothing in the documentation which entitles them to tack on certain fees). You could challenge that a junk debt buyer (JDB or collection agency which purchased the debt) even has standing to collect the debt. It is not a settlement and there are no taxes as there would be in a settlement case (1099-C Forgiveness of Debt).

In a 100% plan, you fight over the claims to make sure no one is paid that does not have a valid claim and is not a creditor! Thereby reducing the "total" amount you shell out... even though you're paying 100%. For example, let's say that you have $100,000 in unsecured debt. You are also required to be in a 100% plan because your DMI is $2,000/month meaning you have $120,000 available to pay, over the life of the plan, to unsecured creditors. Let's say that you police your claims and you have your OBJECTION on the claims for $50,000 of the debt GRANTED. You are still in a 100% plan, but that is 100% of $50,000, which is the "allowed" unsecured claims! You just saved $50K and you can probably be out of the bankruptcy in less than 2 years ($2K x 24 months = $48K)!!!

So, 100% is not bad! It stops garnishments, judgements, collections, evil creditors, aggressive attorneys and down right ceases the phone calls and letters! That is something that debt settlement can't do with certainty and promise.