Trustee refund after voluntary dismissal

[esmith1515]

We have been in our plan for about 3 years and are thinking about voluntarily dismissing our case. On the NDC website, it says that our trustee has an amount of $4000 on hand and will receive our next $2000 payment in a few days. The disbursement to creditors usually happens at the end of the month. My question is if we tell our lawyer we want to dismiss and he sends the paperwork to the trustee within a few days, will that money be refunded to us or will the trustee continue with the disbursements until our payments stop coming? If we do get a refund, approximately how long will the process take. If anyone has gone through this, I would appreciate some feedback on how it went. Thanks!

[HHM]

Nope, you don't get a refund, any money the trustee has in their account will get disbursed to creditors.

Also, doing a voluntary dismissal at this point, 3 years into a plan, usually doesn't make sense. What is going on, and what kind of debts did you have when you filed. You realize, that if you dismiss, you will be liable for all interest and penalties from the date you filed BK and any remaining balance.

[SinkingFast]

You realize, that if you dismiss, you will be liable for all interest and penalties from the date you filed BK and any remaining balance.

Unless you're in a 100% payback plan, we're not just talking the balance owed in your Ch 13 Plan. We're talking the entire balance owed to each and every Creditor as of the date you filed. PLUS, interest, penalties, fees, legal costs, whatever else your Creditors can tack on.

And your Creditors are not gonna be nice about this either. Once the automatic stay protection lifts, your Creditors are gonna be all over you like flies on road kill in Georgia on a hot summer's day.

Be absolutely sure you know what you're getting yourself into before you proceed with allowing your BK to be dismissed.

[esmith1515]

We are in a 100% plan. I have talked with 3 of my unsecured creditors, two of which were companies that purchased the debt from my original creditors, and I have talked to the company that financed our vehicle and they have all said there there would not be any extra finance charges or fees attached to the balance showing on the NDC website. Except for my vehicle, the creditors also said they would accept an 80% payoff on the balance. More than half of my debt that was part of the plan was student loans and they have said that we can just go back to paying monthly. My wife and I feel like the $62,000 we've paid into the plan the last 3 years has put us back into a position where we can handle our debt on our own again, thereby giving us a chance to improve our credit score sooner and increase our chances of buying a house while it's still a buyers market, which it seems to be right now, at least in California.

[rrockinggramma]

A dismissed chapter 13 is AWFUL on your credit. Why not just finish it out? It is working for you and financially you are recovering. If you dismiss, you might not qualify for that mortgage. A finished plan will HELP your score. A dismissed one will NOT. I understand the urge to get out from under. I am feeling it now also but so close to being done, in my opinion would not be a good idea. Perhaps you can buy your house while in your chapter 13. Many lenders would work with you especially if you have trustee permission and on time trustee payments. Check that out before you dismiss.

[BK'd-Betty]

Hi esmith!

These "companies" that bought the debt from the original creditors are likely Collection Agencies or Junk Debt Buyers.

I want to warn you about a potential pitfall to settling your debt with them for 80% outside of your bankruptcy.

If you do make an agreement with them - make sure you get it in writing and make sure the agreement says that they will not sell the remaining 20% to another Junk Debt Buyer. (they usually do, but fail to mention that to you when your settling with them) They will be all nicey nice to you on the phone because it's in their best interest to get the money from you upfront, but believe me, they don't have your best interest at heart.

Have you looked at your credit report? I bet the Collection Agencies have not reported this as a "collection" account yet because of the auto stay protection of the BK - however, after the stay is gone - they can, and probably will report these as collection accounts. Your agreement with them should say that they will not sell the remaining balance, as well as they will NOT report these accounts to the CRA's, and if they have already, make 'em do a "pay for delete".

If any of the above is not addressed, unfortunately, you'll end up with a double hit on your credit report for all your accounts (one from the OC and one from the CA).

One other thing that is extremely important is what rockinggrandma said. The dismissal is another "major derogatory" on your credit report. It will not show it was voluntary - only that it was dismissed - and you will have another major black mark on your credit report. A dismissal on your report is right up there with BK and foreclosure in terms of what it does to your credit scores.

Just my .02 cents.

I'm very happy for you that you are in a better position financially! Good luck to both you and your wife.

[esmith1515]

Thanks to all of you for your advice. My wife and I have decided that staying in our plan for 25 more months is the best option for us. It does sound like getting out of our plan would introduce many more headaches than staying in the plan does. Hopefully the housing market stays cool here in California for a couple more years. We will probably need a new car within the year. Hopefully we can work that out with the trustee.