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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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I just had a phone conversation with the Trustee for my Chapter

Customer Question

I just had a phone conversation with the Trustee for my Chapter 13 Plan. The trustee says the issue with my plan is that my most recent pay stubs seem to indicate I will earn more than the median income this year. Last year I filed income tax just under the median income. The trustee referenced the tax returns for years earlier than 2011 that seem to indicate I might earn more than the median income. I explained my company plans to hire more people and plans to cut back on overtime. Overtime has been the main reason my pay has been over the median income in years past. That is going away so I don't believe I or the trustee should forecast my pay to be over the median income. The prior six months pay stubs add up to $27,340.00 net times two is $54,680.00 estimated annual. This is $7720.00 less than the $62,400 I estimated my net to be this year which I used as my net income in my Chapter 13 Plan. The trustee said they would look at my pay stubs if I want to send them over. However the trustee indicated the September layoff does skew the net income estimate. They see the layoff as a one time event. The trustee said they can look at other things like tax returns and recent pay stubs to determine my estimated net annual income. The trustee seems to believe I will earn over the median income. I really wanted to make the plan for three years and it looks like the trustee believes I will be over the median income and therefore I would have to amend my plan to be a five year plan. Who is correct about whether my Chapter 13 plan net income should be estimated below or above the median income me or the trustee? Should I just concede and amend the plan to be for five years or should I maintain my assertion that I will earn less than the median income?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.
Hi JACustomer,
Whether a Chapter 13 plan will be 36 months or 60 months depends on the average gross monthly income for the 6 months before the Bankrutpcy was filed.
If this figure puts you over the state median, it may be beneficial for you to dismiss your Chapter 13 and then to re-file later, when the 6-month-before-filing gross average income will be below the state median.

I think this is what you wanted to know. If not, please let me know.
Thank you.
cfortunato and other Bankruptcy Law Specialists are ready to help you
Customer: replied 5 years ago.
I looked at my schdule 22C statement of current monthly income and calculation of commitment period and disposable income and found that I had entered $5200.00 per month. I went through the pay stubs for the six months prior to filing and added up the gross taxable income amounts. There are non-taxable reimbursements listed on my pay stubs, (per diem and other out of pocket expenses and I did not add up these gross pay amounts) I added up gross taxable income only. The average monthly gross should have been entered on schedule C as $5271.05 as the six month total is $31626.32 which is $63252.64 annual. Just under the State of VA gross median of $64288.00. I assume I should amend the plan to show the $5271.05 is the actual amount.

Am I correct that I added up gross taxable income only and that non-taxable reimbursements gross income should not be part of the gross income to report during the six months prior to filing? Non-taxable Per diem, etc.

If so, then based on my pay stubs the trustee can't compell me to submit a plan for longer than 36 months. Yes? or No?
Expert:  cfortunato replied 5 years ago.

Yes - you are not supposed to include re-imbursements for out-of-pocket expenses, as those are not income.

If your 6-month-before-filing average gross monthly income is less than the state median, the trustee cannot force a 5-year payment plan on you.

Customer: replied 5 years ago.
My pay stubs show gross income with some non-taxable per diem and other reimbursements. I added up the gross taxable income only. I did not think the non-taxable reimbursements should be included in the Chapter 13 schedule C. Am I correct? Six months prior taxable gross is $31,626.32 which is a monthly average of $5271.05 or $63,252.64 annual. This is just below the $64,288.00 median income for a family of two in VA. So based on the above the commitment period is determined to be 36 months. Can the trustee use other proofs to require or compel me to amend my plan and commit to a longer repayment period than 36 months?
Expert:  cfortunato replied 5 years ago.

That is correct. Schedule 22C specifically asks for "gross wages, salary, tips, bonuses, overtime, commissions" only. Re-imbursements for job-related expenses are not any of these.

The only other thing trustee can ask for is your bank statements for the past 6 months. However, paystubs are the only thing he can demand for showing your income.