Ch 13, a hypothetical question.

[tigergem]

I read something somewhere with regard to Chapter 13 that said "pay early and pay often". So I'm just wondering... Let's say circumstances allow me to make two of my regular payments to my Trustee in September. Theoretically I am a month ahead, right? Then say a few months down the road I get in a bind, and have to skip a payment. Will having made that extra payment earlier cover the missed payment without the need for a plan modification? or will I be in trouble with the Trustee anyway for missing a calendar month? or - - is this question Trustee specific?

(Not getting into why they didn't bank that money for the future emergency in the first place. I know that is an option, but this is strictly a hypothetical question.)

[frogger]

You should not have a problem, however I would mark each payment for the month that it is intended to pay. The trustee then has the money for each and every month, so there is no way you can be late by missing or skipping a payment if you're already ahead.

[Pandora]

it was my understanding that you cannot mail payments ahead of time, trying to get 1 month ahead. We were told if we sent in any extra $ that the trustee would just consider it "extra" and would apply it towards the balance on-hand in account but that a payment must be received every single month no matter what.

Des... HHM... JB...?? Can any of you clarify how this would work?

[frogger]

it was my understanding that you cannot mail payments ahead of time

Interesting.....

Someone else should be along to enlighten us all.

[karm43]

Thought they didnt leave u with extra money????

[Pandora]

Interesting.....

Someone else should be along to enlighten us all.

God I hope so LOL! I mean...it would make sense to be able to pay-forward and have trustee put it on hold, then apply to appropriate month. What if you decide to have extended vacation or something? (hmm then again... who in the hell has an extended vacation in a Ch. 13 plan?!)

I know that our payment is paid 2 weeks ahead of time to the trustee; so our July payment was received in full by trustee on 19 June (paid out on 15 June by employer) and our trustee just holds everything until the end of the month when he pays creditors. I would imagine it could be the same if you paid a month ahead of time... but.....

[Pandora]

I just copied this from our trustee's website:

23. PAYING MORE THAN REQUIRED: If you are ever in a position where you wish to pay more to the Trustee than is required by your Plan, you are always welcome to do so. Many Debtors finish their Plan ahead of schedule, and that benefits both the Debtors and the creditors. You are free to pay extra each month, or to make occasional additional payments of any amount at any time. Although paying more than is required per month reduces your time in the Plan, you are still required to make the minimum payments when due each month thereafter. Please advise the Trustee’s office if you are sending more than is required, as the increase may affect the payment to certain creditors proposed by the Plan.

I'm thinking this is what our lawyer is referring to; that any payments made ahead of time will count as "extra" vs. the following months. I can see where it would get complicated for the trustee's books... It is interesting to note that nowhere on the entire site does it state the debtor must pay back 100% of unsecured claims to pay off early... it merely states your plan can end early if you pay off the total required by your plan using the base gross payoff.

*holds head* now I"m confused

Hmmm....

[tigergem]

This is a great discussion, thanks. I suspect that Pandora's answer is probably the most accurate. An additional payment without a modification to account for it, will probably only "count" when the base amount is paid in full. I think I am going to make a phone call to my accounting clerk in my Trustee's office to get her take on it, and will report back what she says.

[tigergem]

lol.... eeeeeeeeeew....Don't mess around in Texas lol! If the debtor does send in a lump payment that either purports to pay off the plan or makes a larger than normal payment, the debtor will need to be prepared to respond to an inquiry from the Trustee on the source of the funds used to make such a payment. Yeah, I think I knew that! I've been in this relationship with my Trustee for how long now? Yeah, he be that way lol.

Now, as to the other question you asked, Pandora. There may be ramifications in paying off the plan base early. The Court may require a debtor to continue to make plan payments for the balance of the applicable commitment period of the debtor’s plan in spite of the debtor’s attempt to pay off the plan base early.

But the way I understand it, if one is under means, then one is only obligated to a 36 month plan. It might take more than 36 months to pay off the secured obligations plus Trustee, so the plan for someone under means can be longer than 36 months. But I believe that with a modification, the number of months of the plan can be reduced to Not Less Than 36 by a lump sum payment AND the total percentage amount to the Unsecureds must also not reduced by the plan. When I did my last modification, I had to make sure that the Unsecured were not adversely affected by the percentage. (How adversely can you badly impact someone who is getting less than 1%?)

SO I guess that whatever I read about "pay early and pay often" was really bad advice, possibly pre-BAPCA information. Sorry, I really don't remember the source of this "advice", although that might not be such a bad thing.

[99lawdog99]

I would never pay in advance. It would appear to me if I was a trustee that if you can make extra payments , then have additional money avaiable to make a even greater payment then you were first ordered to make.

[tigergem]

I would never pay in advance. It would appear to me if I was a trustee that if you can make extra payments , then have additional money avaiable to make a even greater payment then you were first ordered to make.

I agree. Without a modification to explain it, it would be a bad idea.

[jacko]

Why not put the extra payment towards a ROTH IRA and fund a dividend stock portfolio?

I read something somewhere with regard to Chapter 13 that said "pay early and pay often". So I'm just wondering... Let's say circumstances allow me to make two of my regular payments to my Trustee in September. Theoretically I am a month ahead, right? Then say a few months down the road I get in a bind, and have to skip a payment. Will having made that extra payment earlier cover the missed payment without the need for a plan modification? or will I be in trouble with the Trustee anyway for missing a calendar month? or - - is this question Trustee specific?

(Not getting into why they didn't bank that money for the future emergency in the first place. I know that is an option, but this is strictly a hypothetical question.)

[Pandora]

lol.... eeeeeeeeeew....Don't mess around in Texas lol! ......makes a larger than normal payment, the debtor will need to be prepared to respond to an inquiry from the Trustee on the source of the funds used to make such a payment.

Now, as to the other question you asked, Pandora.

But the way I understand it, if one is under means, then one is only obligated to a 36 month plan. It might take more than 36 months to pay off the secured obligations plus Trustee, so the plan for someone under means can be longer than 36 months.

Good Googly moogly - guess that "everything's bigger in TX" saying is right on the money eh? LOL Daaaaaamn! (yes..humor me and use the southern drawl to draw it out..so you know how I said it outloud when I read your response!)

Save the $ tiger for those "rainy days" .. no way would I open that can of worms!

Yes, you're right on the 36/under means or 36/longer payment (ch. 7 liq. test applied) as thats what we've had to do in order to keep assets we couldnt exempt. The thing that was curious to me was that nowhere on our Trustee's site nor in our confirmation order (I double checked last night) does it state unsecured creditors must be paid @ 100% in order to pay off early; it merely states your base plan must be met (essentially). There isn't any way for us to pay off early but wow - sure is nice to think about *sighs*. Which brings up another area that seems screwed up to me: you strip your 2nd mortgage as there is nothing to secure it with in a 13, yet they get 34% payback. Ugh - seems to me if its wholly unsecured, and you're stripping it..they should get nothing LOL! Meanies.. :P

C'mon lottery! LOL

[tigergem]

I think they mean 100% of claims, not 100% of debt, and even then I think that only being required to remain in the plan a minimum of 36 months, probably trumps that 100% requirement. Also it depends on where the source of the money comes from. And then, too, there is that little bug that states "The Plan Modification does not adversely affect any of the unsecured creditors." I haven't seen anything that says you are obligated to further enrich them.

On the coattails of this conversation, I ran some figures through Best Case, and it looks like by paying just $140 more than my regular payment for three months, ($420.00) it says I can shave another 3 months off of the end of my Plan, which is a savings of $570.00. That's some fancy ROI, doncha think? I need to look at that again, and make sure there isn't an error because it looks skewed to me, but that IS what it says, preliminarily.

To my way of thinking, freeing up months at the end of my Plan, is almost like money in the bank, because I can use those extra months to request a moratorium on payments in an emergency. Kinda like banking vacation time away from my Trustee lol. Getting out from under this ball and chain earlier would be worthwhile to me. I'm handling it ok, but I'm just a little tired of being in justification mode for every little thing I do and knowing somebody is going to be looking over my shoulder.