Lots of Changes And Some Questions

[imapackerfan]

Background:

First payment made 11/2009 - Payment about $850, Salary ~ 80K with 6% bonus

Job change 1 on 8/2010 - Payment stayed same, salary ~ 103K, 15% bonus

Job change 2 on 3/2012 - Payment still same, salary ~95K, 25% bonus


As you can tell I've had lots of job changes and a bunch of expense changes along the way. I've never done anything shady, my attorney seems to have a good relationship with the trustee or the trustee just doesn't care about all these changes because my payment hasn't moved a penny.

I'm getting ready to receive my bonus for the current job which will basically put my income inline with last year. When I took this job I shared the compensation statement with my attorney and they basically said it's nothing to worry about, you can plan on no changes.

Since I've been in the plan about 3.5 years, have had all of these changes, and no issues with payment changes I guess I have one of those trustees that just doesn't bother as long as you're working your plan.

I've never missed a payment, no issues a long the way, etc.

Just looking for some reassurance that the 25% bonus won't be an issue. When I took this current job the actual wage went down considerably and the bonus is the only reason I was able to make the change. My expenses actually went up, but rather than fight for a lower payment we let well enough alone and just absorbed the change.

Anyone in a similar position?

I know the standard disclaimer of talk to your attorney, and I'm in contact, just like hearing it from others who have gone through it.

Can't wait until this is over. I'd love to just withdraw some money out of my 401K and pay the last 1.5 years off, but unfortunately I can't. BK laws are weird.

[justbroke]

It really depends on the District you are in and the Trustee that you have. Many Trustees believe that, so long as you keep paying on-time and are contributing something towards unsecured creditors, they do not request an increase. I had a bonus and the Trustee didn't care about it, nor a slight increase in income. It just depends on whether it is "significant" and what your Trustee and District do in these cases.

What happened to me would not have any relevance for you unless you were in my district in Florida with my Chapter 13 Standing Trustee. I will say that Trustee usually don't bother people that have been in plan for 3 or more years.

In my District, the Trustee uses the Federal Income Tax return to determine increases. If I made $150K one year (including a 10% bonus) and then moved to another job making $120K with a 25% bonus, making is $150K, they would both show as $150K on my W-2 as earned income. In other words, my income has not changed. Remember, in some businesses, the bonus may actually be part of the salary package. Whether your IRS-1040 (W-2) income is enough change to justify a modification of the plan, is fact specific to your Trustee and your case. If, in my scenario, the difference is less than 10% year over year, then you should have no issues.

[LadyInTheRed]

I got a promotion that came with a 5% raise immediately after my plan was confirmed and I've received 2 annual raises of about 2$ and 4 or 5 small bonuses since. Each time, I send an email to my attorney with the details and his response is "Congratulations. Keep making your plan payment." My trustee doesn't require that debtors send tax returns. So, she will never see the increases. Your increases are larger. But, worse case, your trustee somehow finds out about the increases and you have to submit new schedules I & J that will show your expenses have increased too.

"Talk to your attorney" is more than a standard disclaimer. Without knowing the terms of your plan and the procedures of your trustee and of your district, we can't give you the correct answer. Your attorney can and it sounds like he has. Even if nobody told you they had the same experience, you should trust your attorney with this kind of advice.

I'm 6 months behind you and am antsy too. I also have a 401k that I could take a loan from to easily make my remaining payments, if only it were allowed without paying 100% of unsecured claims. I keep reminding myself that my 401K is earning more than the interest I would pay to myself. A withdrawal would be way more expensive than continuing paying because of the early withdrawal penalty and income tax. Those BK laws are actually doing us a favor by removing the temptation. At least that's the way I'm going to look at it since there's nothing I can do to change it.

We've made it this far. It's all downhill from here!

[andy158]

Our combined income this tax filing was 21k more than last year. And the year before that was 17k more than the previous year. Well above the 10% increase. Turned in our taxes to the trustee as instructed and haven't had any changes in our plan payments.

Our payments are payrole deducted and are on schedule. In fact our plan base will be paid ahead of schedule. We are in a 63% payback.

[spidge]

...... I also have a 401k that I could take a loan from to easily make my remaining payments, if only it were allowed without paying 100% of unsecured claims. I keep reminding myself that my 401K is earning more than the interest I would pay to myself. A withdrawal would be way more expensive than continuing paying because of the early withdrawal penalty and income tax. Those BK laws are actually doing us a favor by removing the temptation. At least that's the way I'm going to look at it since there's nothing I can do to change it.

We've made it this far. It's all downhill from here!

Well said as usual. The biggest regrets I have are when I borrowed or did a hardship withdrawal from my 401k to pay my mortgage. I waited way to long to file bk out of pride.

Your mention of the laws that help protect us a little bit from ourselves is a good point and one that our financial institutions should consider going back to.

[sophieanne]

Just a question...if you are in a 100% payback plan...and you have enough money in your retirement plan...is it ok to make a withdrawal (loan to myself) at that point and pay the plan off? I'm wondering if it would be possible when we're 6-8 months away from completion of the plan. Our plan is currently reduced by 7 months since one large creditor did not file a claim.
Just curious.

Thanks!

[justbroke]

You can payoff a 100% plan in advance. However, before you do ONE SINGLE THING, you need to contact your attorney and make sure that you do it properly. In other words, just don't send the Trustee a check. It must be done according to the local procedure. Unless you're going to payback your 401(k) loan quickly (maybe 2 years), i would be careful. It's speculative either way, but the unearned interest that you would loose, could be more than what you pay back. (You would basically be mortgaging your future to pay for now.) I'm not saying it's a totally bad idea; it's just one that needs a little more thought.

Think about it? Pay the Trustee XXX for the next 8 months or have a payment for the next 24-48 months for your 401(k) loan? I only ask that you look at it from every perspective.

[sophieanne]

Thanks Justbroke...I understand what you're saying. I definitely would look at it from all angles before doing it. And I would definitely contact my lawyer first. And finally, yes, I would definitely pay my retirement account in a year at the most. I always appreciate your responses.

[dmc-2008]

I seems to me that you would be trading one payment for another and extending it!!! Wow, unless you have to I would not do that! You are almost done! 8 mths is so close!

[jange]

Thanks Justbroke...I understand what you're saying. I definitely would look at it from all angles before doing it. And I would definitely contact my lawyer first. And finally, yes, I would definitely pay my retirement account in a year at the most. I always appreciate your responses.

One more angle to think about, you could be paying back pre tax money, with money that is now after tax money and then when you retire, you will be paying tax on it again. If so, you are paying double tax on that money you borrow. It took me a while to understand that one. I took several loans to stay afloat, very glad my 401K loan is paid off. Next time I take money out of my 401K will be to retire!

[sophieanne]

Thank you for your responses....i definately will remember everything i've been told....all makes good sense!