What happens to the money paid into an UNAPPROVED Chapter 13 Plan.....

[gman]

Assume this scenario:

1. A debtor files a Chapter 13 and starts making payments of $1,000 a month
2. The attorney fees in the plan are $3,000
3. The Trustee fees in the plan are $4,000
4. The plan includes an auto loan cramdown where the old payment was $250/mo and the new payment is $100/mo.
5. The plan gets denied by the Trustee (the Trustee questions that amount of day care expenses as a child enters kindergarten this fall)
6. The debtor continues to make $1,000 monthly payments while trying to restructure the plan to get it approved - but fails
7. The debtor decides to withdraw from the Chapter 13 and instead seeks to settle the debts directly with the creditor(s)
8. To date, the debtor has been doing this for 9 months and has paid $9,000 into the plan

Questions

1. How much of the $9,000 goes to the Attorney?
2. How much of the $9,000 goes to the Trustee?
3. How much of the $9,000 goes to the auto loan?
4. How much should the debtor expect to receive back, if anything?

Thanks for your help!

[justbroke]

[*]How much of the $9,000 goes to the Attorney?[*]How much of the $9,000 goes to the Trustee?[*]How much of the $9,000 goes to the auto loan?[*]How much should the debtor expect to receive back, if anything?[/LIST]

There is absolutely NO way to tell without knowing how much the Trustee has distributed during the pendency of the approval and confirmation of the plan. If you are unsure, you would check the 13DataCenter Website to determine what distributions the Trustee has made.

For some sense, let's speak of the "balance" on the date the case is dismissed. First, your attorney would be paid what is due. Second, the Trustee would receive any commission earned. Anything left would be returned to the debtor. However, if the Trustee has been doing their job, they would have been making disbursements to the creditors during this pre-confirmation period. This may have depleted the debtor's payments to the Trustee for purposes of the "un-confirmed" plan.

When the case is dismissed, the Order dismissing the Chapter 13 case will typically include the balance on hand with the Trustee and what the distribution would be. Again, this really is about the ledger balance that the Trustee has for the debtor's specific case at the time the order dismissing the case is issued.

[gman]

There is absolutely NO way to tell without knowing how much the Trustee has distributed during the pendency of the approval and confirmation of the plan. If you are unsure, you would check the 13DataCenter Website to determine what distributions the Trustee has made.

For some sense, let's speak of the "balance" on the date the case is dismissed. First, your attorney would be paid what is due. Second, the Trustee would receive any commission earned. Anything left would be returned to the debtor. However, if the Trustee has been doing their job, they would have been making disbursements to the creditors during this pre-confirmation period. This may have depleted the debtor's payments to the Trustee for purposes of the "un-confirmed" plan.

When the case is dismissed, the Order dismissing the Chapter 13 case will typically include the balance on hand with the Trustee and what the distribution would be. Again, this really is about the ledger balance that the Trustee has for the debtor's specific case at the time the order dismissing the case is issued.

Thanks.

familiar with the 13DataCenter website. can you possibly share some information?

[tobee43]

gman?? i'm sorry i can't help answer you question since i was a 7...but .. is that you?? it's been so long! hope all has been going well for you.

[justbroke]

familiar with the 13DataCenter website. can you possibly share some information?

Just go to https://www.13datacenter.com/ and register.

[gman]

gman?? i'm sorry i can't help answer you question since i was a 7...but .. is that you?? it's been so long! hope all has been going well for you.

Yes, it is me...back from the BK dead...LOL. ;-)

A friend of my girlfriend has found herself in a Chap 13 that cannot get approved and is wondering what her options are. I ran her numbers and she seems to be a slam dunk for a Chapter 7 (but her attorney seems to have screwed up her I & J.... go figure!)

Anyway, we are trying to figure out what things will be like if she withdraws the 13 and files Pro Se as a 7. Glad to see the boards here are alive with people who can help!

I am still debt free (I have 2 credit cards with $500 limits and kid you not I pay any charge the day after it posts...I do not even wait until the statement generates to pay my bill.) I have loved the new life of cash only and have socked away my fair share since the BK. I even bought another car for cash the other day - over $18,000. For sh*ts and giggles I applied for a car loan with my CU expecting a rate in the 20's. Guess what? Approved for 3.99%. Not kidding. I may take the loan out after the fact and invest the proceeds in gold and silver! LOL

Anyway, cannot thank you and others out here for all the help and support. I am hoping to "pass it along" by helping out my local friend here. Hope she can get to see the other end of the tunnel soon.

[justbroke]

You can try to have her convert to a Chapter 7, have her lawyer seek to be removed, and then proceed in forma pauperis. At least she'd save the $$$ to refile and need to worry about "first day motions" and other procedural items related to a serial filing. She would also need to deal with the car, since she would be in arrears. I had this problem and ended up redeeming the vehicle.

[AngelinaCat]

You might want to invite your friend to join the forum herself. Sometimes there are differences in the way you and she may perceive the same question, or answer. If you accompanied her to any of the meetings with her attorney, you may well have different memories of the same event.

'Hub and I found this out when we both joined in 2008. We each had different memories and perceptions of the same event. Our different recollections and perceptions have ended up helping people...

[karm43]

Don't do it keep fighting mine was turned down 4 times until confirmation. Stress yes but look at the end of the tunnel debt free, start a new. I think I cried for a year. Its tough try to get through it.

[gman]

You can try to have her convert to a Chapter 7, have her lawyer seek to be removed, and then proceed in forma pauperis. At least she'd save the $$$ to refile and need to worry about "first day motions" and other procedural items related to a serial filing. She would also need to deal with the car, since she would be in arrears. I had this problem and ended up redeeming the vehicle.

Justbroke - as always you have great insights.

Clarification questions:

1. I did my Chap 7 in 2010-11 Pro Se so I did not have to dismiss a lawyer. Is it as simple as telling him/her you no longer want representation OR does one have to inform the BK courts? In this case, the Debtor has filed a Chap 13, had the Trustee object, then she divorced and the lawyer was attempting to resubmit the 13. (Note: The attorney has her PASSING the MEANS TEST (her income is $71k/yr) but FAILING the I & J. He missed simple things like her freaking auto loan payment ($632/mo). I know my way around these forms (thanks to the crew here) and my friend can easily do a 7. Why the attorney missed this and/or is pushing the 13 at this point is beyond me. She will literally be paying unsecured creditors around 85-90% in his filing. She has no assets. It's nuts! She could do better by simply negotiating a settlement vs. the onerous 13 he has.

2. I see that she can proceed in forma pauperis. I Googled this and see its a way for the court to waive filing fees essentially. She may or may not get a judge to agree but its worth a try. Exactly WHEN in the process and HOW does one do this?

3. Not familiar with "first day motions". What do you mean?

4. She is planning to reaffirm the car and working on the "cure" amount she has accrued. It's FORD CREDIT if that matters. I know they had a reputation back in 2010...not sure if that has changed.

5. Finally, her Chap 13 filing paperwork (I have a copy) is going to show a very different Schedule J than her (new) Chapter 7 will. Why? Three main reasons: 1. Divorce and the changes in insurance costs especially (she was filing 13, ex-hubby was NOT filing as debts were hers - she was the bread-winner) ; 2. Her attorney flat out missed things (no car payment!) and 3. She vastly underestimated some expenses, well below the Federal (IRS) allowable limits that one would see on the B22A. As an example, total food and clothing were around $700 (I bet it was her guess) vs. the Fed limit on the means test of $1,227 for her zip code and # of dependents. Because of these changes - is it cleaner (better seen by the Trustee) if she withdraws the 13 and then a few weeks later files the 7 OR is it better to "convert" the 13 to a 7. My gut says withdraw - wait - and then file a new 7 - but I figured you may have insights I don't.

You guys are the best! Thanks for being patient and answering in detail!

G-Man

[justbroke]

1. I did my Chap 7 in 2010-11 Pro Se so I did not have to dismiss a lawyer. Is it as simple as telling him/her you no longer want representation OR does one have to inform the BK courts? In this case, the Debtor has filed a Chap 13, had the Trustee object, then she divorced and the lawyer was attempting to resubmit the 13. (Note: The attorney has her PASSING the MEANS TEST (her income is $71k/yr) but FAILING the I & J. He missed simple things like her freaking auto loan payment ($632/mo). I know my way around these forms (thanks to the crew here) and my friend can easily do a 7.

A couple of observations. First, yes you could ask the attorney to withdraw, but they need to formally withdraw by filing an notice with the court. The car payment could be problematic, but that depends on a bunch of other things. (The vehicle ownership allowance is $489 per vehicle, so that's a $143 difference right there in DMI.)

2. I see that she can proceed in forma pauperis. I Googled this and see its a way for the court to waive filing fees essentially. She may or may not get a judge to agree but its worth a try. Exactly WHEN in the process and HOW does one do this?

If she is not below 150% of poverty, then don't even try.

3. Not familiar with "first day motions". What do you mean?

If you file a serial bankruptcy petition, then you need to file "first day" motions to extend the automatic stay. If you are redeeming property, you may also want to file "redemption" related motions as well.

4. She is planning to reaffirm the car and working on the "cure" amount she has accrued. It's FORD CREDIT if that matters. I know they had a reputation back in 2010...not sure if that has changed.

They will probably want the car reaffirmed with the payments current.

5. Finally, her Chap 13 filing paperwork (I have a copy) is going to show a very different Schedule J than her (new) Chapter 7 will. Why? Three main reasons: 1. Divorce and the changes in insurance costs especially (she was filing 13, ex-hubby was NOT filing as debts were hers - she was the bread-winner) ; 2. Her attorney flat out missed things (no car payment!) and 3. She vastly underestimated some expenses, well below the Federal (IRS) allowable limits that one would see on the B22A. As an example, total food and clothing were around $700 (I bet it was her guess) vs. the Fed limit on the means test of $1,227 for her zip code and # of dependents. Because of these changes - is it cleaner (better seen by the Trustee) if she withdraws the 13 and then a few weeks later files the 7 OR is it better to "convert" the 13 to a 7. My gut says withdraw - wait - and then file a new 7 - but I figured you may have insights I don't.

First, it would be a different Trustee. Second, the new Trustee might look at the old petition anyhow. I can not tell you what they could/would do. If she has the money to refile, then just start over with a dismissal and refile. Otherwise, I have no experience on these types of changes. I did get married while in an active Chapter 13, before confirmation, but that is different than an unconfirmed plan with a divorce.

You guys are the best! Thanks for being patient and answering in detail!

G-Man[/QUOTE]

[gman]

A couple of observations. First, yes you could ask the attorney to withdraw, but they need to formally withdraw by filing an notice with the court. The car payment could be problematic, but that depends on a bunch of other things. (The vehicle ownership allowance is $489 per vehicle, so that's a $143 difference right there in DMI.)

Big question here. On the Means Test, I understand that the payment will be limited to $489. But on schedule J, if her reality is a $632/mo car payment, she should still put that down as her reality. Correct?

If she is not below 150% of poverty, then don't even try.

She won't try. Good advice.

If you file a serial bankruptcy petition, then you need to file "first day" motions to extend the automatic stay. If you are redeeming property, you may also want to file "redemption" related motions as well.

I think she will have a short term time lag between the withdrawal of the 13 and the filing of the 7. It sounds like the creditors will immediately start collection and/or repossession actions the moment they get word the 13 is withdrawn. If she can stomach the phone calls and avoid the repo, the moment she files the 7 the actions must stop again. Correct?

They will probably want the car reaffirmed with the payments current.

This one should be interesting. I figure she will have about $3,000 or so in missed payments. I am going to have her call FORD CREDIT and ask what to expect "if" she pulls the 13. Or, alternatively, I can call and ask the "policy" question anonymously and not have it raise a flag specifically on her account.

First, it would be a different Trustee. Second, the new Trustee might look at the old petition anyhow. I can not tell you what they could/would do. If she has the money to refile, then just start over with a dismissal and refile. Otherwise, I have no experience on these types of changes. I did get married while in an active Chapter 13, before confirmation, but that is different than an unconfirmed plan with a divorce.

She has enough money to refile and may or may not do this Pro Se. (Time will tell.)

Thanks again for the advice and ongoing answers.

[justbroke]

Big question here. On the Means Test, I understand that the payment will be limited to $489. But on schedule J, if her reality is a $632/mo car payment, she should still put that down as her reality. Correct?

Yes, you can do that on Schedule J, but will the UST question the amount? That's the real question. Also, you are not "limited" on the Means Test. Under expenses/allowances, you would get the $489 "less" the amount contractually due over the next 60 months. So you take the balance of the car loan and ammortize it over 60 months (at an interest rate of "at least" the Till Rate). Then you take that amount (let's just say it's $632 for argument) and subtract if from $489. Since that is negative, you do not get the vehicle allowance. However, you get to claim the full payment under the secured debt payments. (A little confusing, but that's how it works.)

I think she will have a short term time lag between the withdrawal of the 13 and the filing of the 7. It sounds like the creditors will immediately start collection and/or repossession actions the moment they get word the 13 is withdrawn. If she can stomach the phone calls and avoid the repo, the moment she files the 7 the actions must stop again. Correct?

When the re-files within a year, the automatic stay ENDS afte4r 30 days unless there is a motion granted to extend the automatic stay. This is the "so-called' first day motion.

This one should be interesting. I figure she will have about $3,000 or so in missed payments. I am going to have her call FORD CREDIT and ask what to expect "if" she pulls the 13. Or, alternatively, I can call and ask the "policy" question anonymously and not have it raise a flag specifically on her account.

If she owes a lot more than its worth, and the FORD CREDIT interest rate is in the mid-high teens, a redemption via 722 Redemption Funding, "could" be the better financial option.

Hopefully, she would retain counsel.