Plan almost complete but Trustee failed to pay Priority Creditor

[jrcourt]

We filed Chap 13 7/31/06. Confirmed 12/14/06. We have made all of our payments $71K over 5 yrs. When I called the trustee's office to find out what, if anything, I still owed, they referred me to my attny. My attny told me that I still owe approx. $3800 because the trustee apparently paid non-priority creditors with money that should have went to our 1 priority creditor.

Am I liable for this? I made all my payments in a timely manner. I have no control over what the trustee does with the money.

[justbroke]

This sounds like you need to talk with your attorney again. If the Trustee paid the wrong people, that's a problem. The reason I suggest going back to the Trustee is due to the way you wrote your post. Your wording doesn't indicate that the Trustee was at fault, only that the Trustee paid non-priority creditors over a priority creditor. The only priority creditors are the Trustee, your attorney, administrative priority items (usually none of these), and actual "priority" unsecured creditors. Those priority unsecured creditors are usually the IRS and other tax authorities.

I don't know the outcome. I think there was a similar BKforum member about 30 days ago with a similar problem. I don't know how it was addressed.

[despritfreya]

If the Trustee paid creditors not in compliance with the Order Confirming the Plan the Trustee has three choices:

1. Get the money back from the creditor(s) that should not have been paid.
2. Contact his/her insurance carrier - you can demand this by asserting a claim against his/her bond.
3. Kick in his/her own money (not likely).

Des.

[mountanddo]

I'd have a hard time not fighting tooth and nail with a trustee that didn't pay the creditors as they should have been paid after I signed legal papers to a chapter 13 plan. Common sense tells me that would not be something that the OP should be liable for. The response from the attorney doesn't make sense. That statement should of been followed with..."and I'll take care of it for you" Doesn't the attorney have some responsibility here to correct this error for his client? Isn't that why we all hire attorney's to represent us? Otherwise really why bother and just do it yourself.

[HHM]

Desp outlined what your options are. Sounds like an issue with the Trustee. Your attorney, strictly speaking, is correct. I think what should have been said is, "unless the trustee sorts it out, yes, you will be liable for any remaining non-dischargeable priority debt" That is a true statement.

Mountanddo, I will disagree that the attorney is obligated to "take care of it", generally speaking, all that is required after confirmation is monitoring and availability, but if something happens that was not caused by the attorney, the attorney is not obligated to assist and can request additional fees for any post confirmation work.

[IamOld]

HHM forgive me BUT if the atty and/or his office is supposed to monitor the plan - that is they get a copy of at least the every 6 month disbursement summary, if the IRS has to be paid first (which as I understand it does) and if the Trustee (probably due to an administrative error) does not, is it not the job of the atty to pick up on this error?

[justbroke]

I think that Monitoring is over-rated. It is more like a continuing "retainer" that doesn't really pay for anything. The Trustees typically give out statements once a year (every 12 calendar months). I don't know if one would have seen this issue unless they were looking at this issue. Trustees can sometimes keep a lot of money in the account without disbursing it.

In any case, I do agree with Des as well that the recourse is through the lawyer, but seeking to get the Trustee to clarify.

[IamOld]

Thanks justbroke!

And you guys make fun of me for being a PACER troll - well I'm also a 13datacenter troll!!!!!!!!! I print the site each month and keep an eye on what's being paid!

So far Trustee is paying Mort arrears per the plan, and IRS - which is good!!!

TRUST NO ONE!!!! (sorry...is my paranoia showing?)

[keepsmiling]

Thanks justbroke!

And you guys make fun of me for being a PACER troll - well I'm also a 13datacenter troll!!!!!!!!! I print the site each month and keep an eye on what's being paid!

So far Trustee is paying Mort arrears per the plan, and IRS - which is good!!!

TRUST NO ONE!!!! (sorry...is my paranoia showing?)

Yeah, a little . but you know what....
I've found that,in life, being your own advocate is your best bet.

[IamOld]

Yeah, a little . but you know what....
I've found that,in life, being your own advocate is your best bet.

Better to be somewhat safe-ish than sorry(er) :-)

[keepsmiling]

truesies

[mountanddo]

Mountanddo, I will disagree that the attorney is obligated to "take care of it", generally speaking, all that is required after confirmation is monitoring and availability, but if something happens that was not caused by the attorney, the attorney is not obligated to assist and can request additional fees for any post confirmation work.

Ok, well someone has to be responsible. If not the attorney than the trustee. The OP now has to retain his attorney to straighten this out which means paying him extra money, which in reality could be just as much as the $3800 he owes. Can the OP recover his attorney fees from the trustee?

[despritfreya]

Ok, well someone has to be responsible. If not the attorney than the trustee. The OP now has to retain his attorney to straighten this out which means paying him extra money, which in reality could be just as much as the $3800 he owes. Can the OP recover his attorney fees from the trustee?

I believe you are over analyzing this. If the Trustee has paid out funds in violation of the Order Confirming he will seek to recover the funds from the creditor(s) who got money they should not have. Once recovered he will properly distribute them. If, for some reason, he does not recover the funds he has a bond and will contact his E&O provider. This situation, while it does not happen a lot, does happen and is easily resolved by the Trustee - of course, assuming it was the Trustee's mistake.

Des.

[mountanddo]

Well...when statements are made like "the recourse is through the lawyer" that tells me that cha ching the attorney gets more money for something that the debtor was not in control of just to correct it.

Or statements like...

"unless the trustee sorts it out, yes, you will be liable for any remaining non-dischargeable priority debt" That is a true statement.

So I'm not really over analyzing, just seeking to clarify which you did. Thank you.

[lolly78]

I don't know the outcome. I think there was a similar BKforum member about 30 days ago with a similar problem. I don't know how it was addressed.

This may have been me. I had jumped the gun. The trustee did pay off my secured creditor (house arrears), attorney and IRS in the very first group of disbursements. I think this is why it is very important to monitor these things yourself because you can't always assume the trustee is perfect or that your attorney is watching out for you.