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How is my chapter 13 payment disbursed to the parties involved?

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  • How is my chapter 13 payment disbursed to the parties involved?

    I am considering ch13 and I wanted to know when and how the parties who should get paid from me - get paid. I am interested in the order of disbursement as well as the amounts. Summing up what I heard from attny consulation and reading, these are the following parties who would get paid in ch13, and this is the order that they get paid. Again, I think I know thte order ( but please confirm or correct this ) , but I dont know the method or way the payments get disbursed - see questios below.

    1. attny (flat fee and paid at 100 pct)
    2. ch13 trustee (pct of amt to creditors; paid at 100 pct)
    3. secured creditor(s) paid at 100 pct
    4. unsecured creditors ...unsure of how they get paid
    4a. unsecured - 'special class'
    4b. unsecured - not a special class

    My questions:

    1) are these the correct parties? if not, what am I missing?
    2) is this the correct order that they get paid?

    3) HOW MUCH does each party get? that is, each month, does 100 pct of my monthly payment first pay off #1 above until #1 is paid? THEN do the same w/ #2 til the end of the parties who are expected to get money?

    OR does a little go to each and every party above each month? That is some pct ( what kind of pct?) goes to #1, #2, ...#4b?

    4) does this method of payment vary by district? I am in zip 60304, northern district of IL.

    5) special class of unsecured creditors - anyone got some 411 on this? I just learned about this from an attny and he seemed to say that these get $ first - w/in the unsecured queue of unsecured creditors. But he did not detail whether they wd get 100 pct of the payment ( when its turn comes) - see above questions. basically he said that the other unsecured creditors wd get paid last, but 'too bad' he said. He was thinking that a couple joint credit cards could reasonably be put into this special class as my spouse is not filing and spouse wd still be on the hook for the debt. We wd have to pay them off anyway, so might as well pay off within the protections of BK as well as not having to pay 1099 on any settlement that is less than what is owed.
    Last edited by rayrod; 09-18-2017, 02:19 AM.

  • #2
    Hi there...very detailed questions. I'm not a BK guru but the list you wrote/and order looks correct. Every trustee does things differently and it is his/her call how it is done. In my case, I had a secured car loan and everything else was unsecured credit cards. For the first 5 months the only people paid were the car dealer and the trustee. Everyone else wait4ef till after that. I've heard others say both secured and unsecured get paid monthly. Totally the call of the trustee. Good luck!
    Filed Chapter 13 - 07/20/12
    Discharged 8/2/16

    Comment


    • #3
      In my case the first to get paid were taxing authorities I owed, which occurred in the first month post confirmation, They got paid off quick because I has six months of payments not yet disbursed by the trustee. Then came the secured creditors (mortgage, heloc, credit union). I think that took over a year to do. After they were paid in full then the unsecured creditors were paid, presumably getting a chunk of my payment in proportion to what percentage of total claims they were. I had one under $100 amount to a cell phone provider that has been getting intermittent payments, but all the other unsecureds are getting paid monthly.

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      • #4
        Other than priority debt (taxes), secured debt (house/car), and administrative fees (attorney/trustee), the Trustee pays the creditors based on their system. In cases where there is significant disposable monthly income (DMI), the Trustee could pay off a car, back taxes, and even attorney fees early without paying a single penny to the unsecured creditors. That describes how my Florida-based Trustee paid. It was strange, but I think that some Trustees like to pay the unsecured creditors at the end to save money and accounting headaches (I'm told it costs the Trustee $1 for each check they send/mail).

        Bottom line is that monthly payments must be disbursed to the priority, secured and administrative creditors. That's typically done in equal installments but the Trustee can make payments larger than the estimated monthly installment.

        As you can see, Trustees vary in how they give money to unsecured creditors. As a group, unsecured creditors are paid last; some unsecured creditors have more priority than others.

        Bottom line, don't worry about how the Trustee pays creditors. They pay according to the law and it has no real impact on you personally. (There could be a positive impact if you have high DMI, the Trustee pays off all the priority debt first (priority, secured, administrative), and you then dismiss your case. You could end up with your car, taxes, and arrears paid off in just months and exit your bankruptcy with only the angry unsecured creditors.)

        So, we just don't question the Trustee.
        Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
        Status: (Auto) Discharged and Closed! 5/10
        Visit My BKForum Blog: justbroke's Blog


        I am not an attorney. Any advice provided is not legal advice.

        Comment


        • #5
          Frankly, your question does not matter. The way the funds are paid out by the trustee has NO BEARING on your monthly payment or what happens in your chapter 13 plan. The distribution of funds is, largely, automatic. As to your curiosity, the first claim paid is your attorney fee, then secured debt arrears (e.g. missed mortgage payments), then priority claims (e.g. back taxes); then secured claims (if any), but they are paid pro-rata based on amount of claim. After that, everyone else is pretty much paid pro-rata.

          As for putting joint credit cards in a special class to be paid ahead of other unsecured creditors, that is very much district specific. In most districts, that wouldn't be allowed.

          Comment


          • #6
            Originally posted by HHM View Post
            As for putting joint credit cards in a special class to be paid ahead of other unsecured creditors, that is very much district specific. In most districts, that wouldn't be allowed.
            Florida doesn't like unsecured creditors with a non-filing co-debtor to be placed into a special class. The Trustee screams bloody murder!

            Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
            Status: (Auto) Discharged and Closed! 5/10
            Visit My BKForum Blog: justbroke's Blog


            I am not an attorney. Any advice provided is not legal advice.

            Comment


            • #7
              thanks all for the input. this was eduational and it looks like it is probably paid out to the parties who are recipients of the payments in order of the priority schedule mentioned in comments above , vs to all each month , a little bit each month..

              The 'special class' was mentioned by an attny to handle the two jt debts first, and this got me wondering just how the payments are distributed. he said that , yes the other unsecured creditors wd not like it, but he literally smiled and said 'so what'. Obviously, he was nt recognizing the trustee in the process , and he-she is the one that decides to accept the debtopr's proposed payment plan. I assume that our district trustee wd allow this , else he wd not have suggested this

              As I said , it is important and not merely of academic interest to me if special class unsecured creditors cd be paid first as it wd save my spouse from consuming the limited cash for debt settlement w/ them that my spouse wd need to expend . it also wd mean that spouse wd not get a 1099 for the forgiveness as this was being paid w/in bk. we're talking 18k in orignal jt debt over two accts. we are below the median w/ little DMI, around 250 ish and about 8-10k in protected assets as a minimum to pay out to creditors ( in total 118k w/ the jt debt).

              Comment


              • #8
                My response was not academic for Florida. The Trustee squawk at that strategy. You can always go before the judge to fight. While I write about Florida, you'd have to see how the wind blows in Illinois.
                Chapter 7 (No Asset/Non-Consumer) Filed (Pro Se) 7/08 (converted from Chapter 13 - 2/10)
                Status: (Auto) Discharged and Closed! 5/10
                Visit My BKForum Blog: justbroke's Blog


                I am not an attorney. Any advice provided is not legal advice.

                Comment

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