Bankruptcy expert Leon Bayer answers real-life questions.
I like this blog. I find it interesting and helpful. I could use some help. I filed Chapter 13 bankruptcy in December 2009. I have a five-year repayment plan.
Here’s my problem. I have not been able to live very well on my Chapter 13 budget. I always come up short by around $500 per month. To make up for the shortage I have not been paying my property taxes, and I now am about $20,000 behind.
I spoke to my mortgage company. They will probably be willing to modify my loan to advance enough money to bring my taxes current. But that will make my house payment go up. My Chapter 13 will be done in December, 2014. If I get a loan modification that increases my house payment, do you anticipate that the trustee will reduce the amount I pay into my plan by the amount that my mortgage payment increased?
I really do like my house and would like to keep it. I have a way to make and extra $400 to $500 per month but it will take about one year for it to get it to the point where I have money coming in.
Any suggestions or thoughts? Thanks again,
Thank you for the kind words about the blog. Your question is about seeking to reduce your Chapter 13 monthly payments.
Your property taxes were probably included in your original Chapter 13 budget for normal living expenses. If so, that money was already deducted from your monthly income and included in the money that you are supposed to spend on normal anticipated living expenses, such as your property taxes.
It may be possible to reduce Chapter 13 monthly payments if an extraordinary expense comes along that was never budgeted for. However, in your case the property taxes standing alone are not anything new or unexpected. Do you have some other unusual expense that was not budgeted for (for example, supporting another family member)? If so, maybe you can get your payments reduced for some other reason.
Unless you can prove some new unexpected and necessary expense, a trustee will probably oppose your effort to reduce your Chapter 13 plan payments. I expect the trustee will tell the court that you wound up spending your tax money on something that the money was not intended for; and thus the creditors should not be penalized. (You can learn more in Nolo’s article Modifying Your Chapter 13 Plan Payments.)
I do think you should find a way to generate some extra income immediately. It sounds like you are approaching a “fiscal cliff.” You may be running out of time to get your income and expenses under control.
Leon Bayer is a Los Angeles bankruptcy attorney. He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy. The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo. By answering a question on this blog, Mr. Bayer does not become your lawyer.