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cfortunato
cfortunato, Attorney
Category: Bankruptcy Law
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Experience:  Bankruptcy professor.
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What does it mean when you see a "disbursement of principal"

Resolved Question:

What does it mean when you see a "disbursement of principal" and then a "cancellation of principal" on a Chapter 13 account ledger? What/who would cause this kind of a transaction?
Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.
Hi JACustomer,
Is the plan finished, or has the debtor stopped making the payments?
Customer: replied 5 years ago.

The case began in 2006. The plan will be finished this month. The last payment was just received by the Trustee. The first time the "disbursement principal" and "cancelation of principal" showed up on the ledger was mid-2009. It shows intermittently from then on, but more so in late 2010 through now.

 

Also, if the last payment sent to the Trustee is more than the needed amount to close the case, should a refund be expected?

 

One more question, if the TOTAL balance of the mortgage was say $65k and the arrears was say $12k, wouldn't the arrears be a part of the TOTAL mortgage, therefore making two separate line items to be paid...the regular mortgage @ $53k (total balance minus arrears) and then the arrears @ $12k? The arrears wouldn't be ADDED to what is already the total (the $65k), right?

 

Thanks! Smile

Expert:  cfortunato replied 5 years ago.

1) The disbursement principal is the administrative expenses of the Bankruptcy, which are mainly the trustee fees.

2) Cancellation of principal occurs when a debt is paid in full.

3) Yes - any overpayment gets returned to the debtor(s).

4) The arrears are usually made a part of the Chapter 13 plan payment, and the regular mortgage payment is usually made outside the plan. But other arrangements are possible.

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