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socrateaser
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34623
Experience:  Attorney and Real Estate Broker -- Retired (mostly)
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We have been in chapter 13 bankruptcy for 19 months. We are

Customer Question

We have been in chapter 13 bankruptcy for 19 months. We are at 100 percent of the plan. In addition we have received unexpected inheritance from the sudden death of a parent. We made payments of 55,000.00. Our home is not included in the bankruptcy. We make our monthly payments outside the plan. We have an escrow. Earlier this week we received notice that our PMI was no longer needing to be paid. Today we received a check for 700.00 and a notice that our house payment will be decreased by the PMI. The check was for escrow surplus we had paid on our mortgage. Our PMI was 99.41. Will we be allowed to keep the escrow surplus. The check was sent to us. We are up to date on our house payment.
Submitted: 1 year ago.
Category: Bankruptcy Law
Expert:  socrateaser replied 1 year ago.
Hello,

If you are paying a 100% plan, then you can keep anything that's not necessary to repay your creditors, because once the plan is complete, you will have paid each unsecured creditor everything that they are due -- leaving anything else to you.

Hope this helps.
Customer: replied 1 year ago.
Just one more question if I may? I was at 100 percent before I paid the inheritance then why did I have to give our inheritance? My mom did pass away within 6months of filing. The other question is whether you expect they will raise our plan payment because of the decrease in our house payment. We have been told that the inheritance should allow us to pay off about 16 months early.
Expert:  socrateaser replied 1 year ago.
Just one more question if I may?

A: You mean two more, right? Cool

I was at 100 percent before I paid the inheritance then why did I have to give our inheritance?

A: Postpetition inheritance vested within six months of filing is the property of the bankruptcy estate. Bankr. Code 541(a)(5)(A). You had, and you still have, the option to ask the court to modify the plan, in consideration of the additional funds, which would pay off some of your debts, and thereby lower your payments. The trustee is just sitting on the money, because he can't distribute it, as it's not in the plan to do so (presumably).

The other question is whether you expect they will raise our plan payment because of the decrease in our house payment. We have been told that the inheritance should allow us to pay off about 16 months early.

A: I think that the trustee doesn't want to modify the plan, because that costs him time and money in court. So, he's going to fudge the system, and leave everything as is, until that 16 month date comes round. Then he will probably tell you to stop paying, and he will make the remaining payments from the inheritance, so it looks like you are paying according to the plan.

Ordinarily, you cannot pay off a Chapter 13 early. The plan must run its course.

Hope this helps.
socrateaser, Attorney
Category: Bankruptcy Law
Satisfied Customers: 34623
Experience: Attorney and Real Estate Broker -- Retired (mostly)
socrateaser and other Bankruptcy Law Specialists are ready to help you
Customer: replied 1 year ago.
I regularly check the national data center website. I noticed I had a plan base of about 130,000 and when we sent the lump sum for inheritance the plan base suddenly increased. I definitely didn't owe that much in unsecured debts. My secureds are all paid already. The plan base after much research was a total of my regular plan payments for 60 months plus the lump sum for inheritance. My claim summary shows my amounts of student loans but no principal or amount owed as these are not paid in the plan. We then have a few creditors that never filed proof of claim I assume because though they show on the claim summary they also show no amounts owed. Will I just be paying the remainder of the plan listed as owed in my unsecureds or will be paying the plan base which is about 70.000 more than the total of the debts being payed through the plan.
Expert:  socrateaser replied 1 year ago.
Will I just be paying the remainder of the plan listed as owed in my unsecureds or will I be paying the plan base which is about 70.000 more than the total of the debts being payed through the plan.

The minimum amount that you must pay is the amount that unsecured creditors would have received had you filed Chapter 7. In most Chapter 13 cases, there is a large difference between what the debtor actually owes and what creditors would have received in Chapter 7. A 100% plan is usually confirmed when a debtor has no choice, because of having too much in income and assets, but the debtor needs the bankruptcy for some ancillary purpose (such as to stay a foreclosure). At discharge, you are only liable for your planned debt repayments. If you have paid everything that you would have owed in Chapter 7, then the trustee must return the remaining funds to you, because the bankruptcy estate dissolves, and all unadministrated property revests in the debtor.

In my opinion, the trustee is holding the money: (1) because it's his obligation to do so as the manager of the bankruptcy estate; and (2) because it guarantees that your creditors will get paid if you default during the plan, and the case is converted to a Chapter 7, or you request a Chapter 13 hardship discharge (which is similar to a Chapter 7 conversion).

Hope this helps.

Hope this helps.
Customer: replied 1 year ago.
So when I look at my claims summary at the national data center and it shows my claim amount and my principal owed and amount paid that shouldn't change just because I made the lump sum amount. They shouldn't change the plan a year and a half in. Once the amounts on the claim summary are paid to zero then my psyments should stop no matter what the plan base says?
Expert:  socrateaser replied 1 year ago.
The trustee cannot unilaterally modify your plan. The trustee must file a motion with the court to modify the plan, and the court must approve. I don't know why the trustee would want to modify the plan, because there's no additional money for him to acquire. He can't apply your inheritance to anything, because you're already paying your debts in full.

You, on the other hand, have a good reason to modify the plan. You have an inheritance which could be applied to your debts, and which would presumably lower your monthly payments over the remaining plan duration. The only question is whether or not that would be worth the legal expenses. If no, then leave it be -- otherwise, ask your lawyer to modify the plan.

Hope this helps.
Customer: replied 1 year ago.
When I last spoke to the paralegal on my case she had received a letter from the trustee asking if I wanted the lump sum to be credited toward my unsecureds. The reply I believe was yes. But I was also told my plan would be paid off in 26 more paywments. I have read that if you are at 100 percent you could pay out early but I don't know if I can trust that information.
Customer: replied 1 year ago.

Me again. I remembered a question that I wanted to ask. I typically use the national data center website. My plan base was equal to the total payments I would make over a 60 month period. When I paid the extra money from inheritance the plan base increased by that amount. When I add up my remaining unsecured debts ( all secured have been paid) I don't even owe close to that amount. Am I only responsible for the remaining unsecureds or am I overpaying to meet the plan base amount?

Expert:  socrateaser replied 1 year ago.
You're only responsible for what the plan requires you to pay. The trustee must return to you anything not used to pay creditors when the bankruptcy case is finally closed.

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socrateaser
socrateaser
Bankruptcy Lawyer
34623 Satisfied Customers
Attorney and Real Estate Broker -- Retired (mostly)