Why did my Chapter 13 plan payment go up so much?
I probably would have to practice law anymore if I got a dollar for every time I’ve asked this question: “Why did my Chapter 13 plan payment go up so much?”
It’s actually pretty simple, but there’s no solace to client to find out that they’re going to have to spend a significant amount more money than they expected on a Chapter 13 plan. Unfortunately, there are some rare cases where the Chapter 13 plan payment goes up so much that it makes the Chapter 13 plan unfeasible and destroys the client’s bankruptcy case.
This is why it is important to be straight with your attorney. You hired this man or woman to represent you in your bankruptcy case and help save your home, so there is no reason to hide anything from them.
Before I file a Chapter 7 or Chapter 13 bankruptcty case I pull a credit report for my client. These credit reports come from the three main credit bureaus TransUnion, Experian, and Equifax. Most information on a credit report doesn’t change monthly, so it’s usually accurate, however occasionally a credit report item can lag several months in reporting. One of those things that can lag is the amount of the mortgage and how far past due a client is. In a perfect world I’d be able call the mortgage lender and find out exactly how much my client is past due on their mortgage, however reasons I cannot explain, mortgage lenders often need 30 days to get a payoff balance and sometimes cannot tell the exact amount past due on the phone.
This is the one situation where I rely heavily on the candor of my client, and I have seen where a client not telling me that your actually cost them their home.
Lets assume that when we file your Chapter 13 bankruptcy case we determine that you are $9000 past due on your mortgage. The numbers are never that simple for this example we will use them. In a 60 month chapter 13 plan (most go 36 to 60 months) your monthly payment on the past-due mortgage would be $150 per month. The remainder of what is paid in your Chapter 13 plan goes to your unsecured creditors. There is a very detailed expense calculation that attorneys must go through in order to determine what should be proposed in a Chapter 13 plan, which we will discuss at another time. For the purpose of this example let’s suppose your Chapter 13 plan calls for a payment of $250 per month over the course of 60 months to your various unsecured creditors. That makes your Chapter 13 plan $400 per month.
Shortly after Chapter 13 bankruptcy cases filed mortgage lender will file a proof of claim. The proof of claim is not the time for your attorney to find out that you’re actually $30,000 past due on your mortgage. In a 60 month chapter 13 plan, the rear is on your mortgage will cost $500 per month. When you add that to the $250 already proposed in the Chapter 13 plan for your unsecured creditors, your monthly plan payment goes from $400-$750 month and a change in payment that large could make your Chapter 13 plan infeasible. If your plan is infeasible, the Chapter 13 trustee is required to dismiss your case, and that is how a chapter 13 case can be destroyed.
More often than not Chapter 13 plan payment goes up after your 341 meeting of creditors. Once in a while it goes down but that is the exception rather than the rule. There is no Chapter 13 bankruptcy attorney who can guarantee (if they do, don’t walk, run away) what your Chapter 13 plan payment will be prior to filing, however reasonable amount of preparation by your attorney should avoid surprises.
The bottom line is there is absolute no reason a hide anything from your attorney, even if you are woefully behind in your mortgage payment. Let him or her know everything so they can properly navigate you to the right solution to save your home. If you’re interested in having a free no obligation consultation regarding your financial worries please call me at 484-661-2891 or e-mail me at jim@padebt911.com and we can start putting your financial house back in order, starting with your number one financial worry, keeping your home.
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Comments
Attorney Kutkowski,
This article is well written. I draft petitions for lawyers and have never witnessed the Mortgage’s Proof of Claim what the Debtor says it is. This is indeed the number one reason why Chapter 13 plan payments increase, whether by $6.00 or $400.00.
Great Article!!!
Best Regards,
Annette M. Harris
Bankruptcy Paralegal Services, LLC
Senior Bankruptcy Paralegal
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