Trustee wants to raise payments

[Anonymous]

Hello, I am a fairly long time reader, 1st time poster here (newbie) - I did due diligence trying to find the answer to my question but didn't see it here, I apologize if this has been addressed in the past.  Here goes: short story is I am 6 months into a Ch13 (filed Dec 07, sent 6 pymts already) - I am co-signer on my fiancee's car, but we have that listed in the BK paperwork as being paid by her money, which is how it is, it just had to be listed as an obligation as I'm on the lease papers.  I remember at the initial hearing that the trustee had thought (incorrectly) that I was paying for 2 vehicles, that she needed to make the payment, not me.  My lawyer and I corrected him, explained that it was being paid for outside of my finances, which it is.  I thought all was well - then today I got a letter from my lawyer requesting financial papers (tax filings, paystubs, etc) for my fiancee, which I know was requested by the trustee.  Called lawyer, he confirmed my suspicions that they're still wanting more money from me.  I guess the assumption is that I have more money to give per month (which would be the case if I was actually making 2 car payments, but I'm not) and he wants to nail me for it.  Not sure what to do here, any advice would be greatly appreciated.

[ReVeLaTeD]

Under the Bankruptcy law, the trustee does have the right, and in some cases is obligated, to inquire about your financial situation at any time. Depending on when you filed, the trustee may be required to perform regular recurrent reviews of your income and this is one such review. Previously (prior to 2006), the trustee rarely employed this option though. Nothing you can do about it but provide the documents.

If your statements substantiate that your income did not increase from the date you filed, you should be fine. If you got a raise or other increase in your income, the court can absolutely compel an increase in your monthly payment amount. Likewise if there was unreported monies that you didn't have to pay and thus ended up with more free money that you *could* be paying towards the BK, they have every right to have you pay more.

Message Edited by ReVeLaTeD on 06-19-2008 01:13 PM

[Anonymous]

Thanks very much ReVeLaTeD - just to be totally clear - my monthly payment can be changed at the whim of the trustee during the remainder of my 5 yr repayment and will never be set in stone?  Kind of disheartening, makes me want to not work hard for any raises   All kidding aside, BK is not pleasant and (I thought) is supposed to help you make a fresh start - if they keep raising my pymts what was the point to file?

I also have seen a lot of people posting that they were able to pay more than the payment amount to finish early - seems a bit illogical, I had asked that of my lawyer when filing.  His response, as expected, was something like "if you can pay more than the payment amount, you're admitting that you haven't been honest about your income since it's supposed to take away all your disposable income, etc" - I'm a bit curious how people are paying extra to be done early (I have a 5 yr pymt plan.)

Flip side of the coin - if I am going to make less money this year than last (and I will, my employer was acquired and my new income has been adjusted downward due to less OT/bonuses), is there a way I can petition to have the payments reviewed and adjusted downward?  Only seems fair if they can keep raising it at any time over the next 4.5 years til I finish.

Thanks again

[granny031350]

It sounds like you and your SO are living together.  As a result, her income is counted in your chapter 13 filing as the payments are based on "household" income.  So your "disposable" could indeed be higher with her income added.  They will take her bills and subtract them out of her income but it could result in an increase in your payment.

[ReVeLaTeD]

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@Anonymous wrote:

Thanks very much ReVeLaTeD - just to be totally clear - my monthly payment can be changed at the whim of the trustee during the remainder of my 5 yr repayment and will never be set in stone?  Kind of disheartening, makes me want to not work hard for any raises   All kidding aside, BK is not pleasant and (I thought) is supposed to help you make a fresh start - if they keep raising my pymts what was the point to file?

I also have seen a lot of people posting that they were able to pay more than the payment amount to finish early - seems a bit illogical, I had asked that of my lawyer when filing.  His response, as expected, was something like "if you can pay more than the payment amount, you're admitting that you haven't been honest about your income since it's supposed to take away all your disposable income, etc" - I'm a bit curious how people are paying extra to be done early (I have a 5 yr pymt plan.)

Flip side of the coin - if I am going to make less money this year than last (and I will, my employer was acquired and my new income has been adjusted downward due to less OT/bonuses), is there a way I can petition to have the payments reviewed and adjusted downward?  Only seems fair if they can keep raising it at any time over the next 4.5 years til I finish.

Thanks again

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Mind you, the monthly payment is a percentage of what you make each month. It'll never be 100% of your monthly income; the law allows for basic necessities and accounts for those accordingly, it should be in your paperwork. If the income reported when you filed has not changed, you can absolutely over pay. The problem comes when people are throwing tons of money at the BK. But some people take out loans or get settlements or other "non-income" sources and use that to pay the BK down or off.

To your other question, your income should have considered based on your base gross, not gross + bonus/OT, because those aren't guaranteed. If your base income decreases, you can have your attorney file a petition to lower your monthly payments due to unforeseen hardship (lower income). However, you have to justify why you can't pay the monthly amount AND maintain the basic necessities. Meaning for example, if you take home $2000 gross every month and your BK monthly is $500, you'd have to almost go down to half that income in order to make a justified case. Your attorney would have to assess your individual case, of course.

[Ljeen]

Does the trustee look over your financials like that if you are paying back 100%? I don't see why he would.

[ReVeLaTeD]

Again, the new bankruptcy law requires that the trustee perform regular (and I do believe it's at 6 month intervals) review of the filer's income and current status to ensure that they're paying what they should, considering any additional income the filer may have taken. It's a requirement, to make sure people aren't gaming the system, because a lot of people were filing Ch. 13 with a certain income, then got massive raises or job changes to increase salary, or took another job, but were still paying a paltry sum to the BK.

Under the old bankruptcy law, the trustee was NOT REQUIRED to do it, but some did anyway. Most ignored it. In my case for example, I got 5 raises over the 3 years it was active, and I never got reviewed.

[Anonymous]

Thanks granny - clears up my question about co-habitating and income for calculations.  We are getting married this year actually, hopefully that isn't going to make things even worse than they are.

One more question I thought of - I've seen a lot of discussion regarding the trustees taking tax returns.  I was told by the attorney since I was filing in Dec that it was likely they'd take the next tax return coming to me (they didn't.)  Now I have seen several people stating that all of their returns were taken (at least anything over $500) for each year they were in the plan.  Anyone have any hard/fast rules on this?  I am in Ohio if it makes any difference.

Thanks as always, this is a great site!

[TigerCat]

Drcauser,

I filed a 13 just over 2 years ago and I have not had the Trustee take any of my tax returns, even though they were a little more than $500.00 I am also in OH, by the way. Hope that helps.