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Who retains the chapter 13 paYments?

Phoenix, AZ |

I filed a chapter 13 in Arizona, made payments for 13 months, the bk was never confirmed by the trustee, I became ill and couldnt continue to make the payments so I reverted to a chapter 7. Who gets the money I paid in over 13 months?

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Attorney answers 7

Posted

Because the plan was not confirmed the plan payments were not dispersed to your creditors. The chapter 13 trustee should release the money back to you - in Oklahoma it usually takes about 30 days. However, I agree that the plan payment refunds may not be exempt property in the chapter 7 and the chapter 7 trustee may want you to turn over the funds to be distributed to your creditors. You would want to make sure you talk to your lawyer or the chapter 7 trustee before spending the money.

DISCLAIMER: David K. Hilbern 405-213-1919 is licensed to practice law in the State of Oklahoma and this answer is being provided for informational purposes only because the laws of your jurisdiction may differ. This answer is based on general legal principles and is not intended for the purpose of providing specific legal advice or opinions. Under no circumstances does this answer constitute the establishment of an attorney-client relationship.

Posted

If the Plan was never confirmed by the c ourt, the payments were held in trust by the Trustee, and will be released on conversion.

Best wishes for a favorable outcome, and please remember to designate a best answer.

This answer is offered as a public service for general information only and may not be relied upon as legal advice.

Posted

My experience is that you will likely receive something in the way of a refund after the trustee administrative costs are deducted and pre-confirmation payments to secured creditors have been distributed.

Please consult an attorney who is licensed in your state to evaluate your case if you have any questions at all. This communication does not in any way create an attorney client relationship.

Posted

The money you paid into the chpt 13 prior to converting to a 7 is not exempt, and can be taken by the chpt 7 trustee to pay to your creditors. Some chpt 7 trustees do so, others let it get refunded to you. If it does get refunded to you, I suggest you do not spend it until the trustee files a notice of abandonment and the court closes the case. Few things are more painful than having the trustee claim money you've already spent and cannot easily repay.

The general advice above does not constitute an attorney-client relationship: you haven't hired me or given me confidential information by posting on this public forum, and my answer on this public forum does not constitute attorney-client advice.

Lonnie K McDowell

Lonnie K McDowell

Posted

I should correct my answer based on the language of the statute. I think my answer above is correct if the money held by the chpt 13 trustee came from liquidation of a non-exempt asset (like selling a quad or paying your monthly payment out of your savings or money market account), but my answer is wrong if the money came from post-petition earnings. Section 348(f)(1)(A) of the Code says, "property of the estate in the converted case shall consist of property of the estate, as of the date of filing of the petition, that remains in the possession of or is under the control of the debtor on the date of conversion." So if you sold a non-exempt quad during the 13 months to pay the chpt 13 trustee, the chpt 7 trustee could claim that portion of the money held by the chpt 13 trustee (assuming he/she could convince the judge that the money held by the 13 trustee was actually "in your control" once you converted to a 7). But if you paid for all 13 months entirely out of your post-filing wages, those wages would not be part of the chpt 7 estate.

Asker

Posted

thank you for the clarification.

Posted

I have seen the trustee return the money to the petitioner in 7 cases. You should ask the 13 trustee what is his intention are with the money collected.

Asker

Posted

so its optional for the trustee, isint there guidlines to the process?

Posted

From your question I assume you are not represented by an attorney. If so, please talk to them.

You can see from the answers that some conflict with others. The correct answer is that most of the funds you paid to the chapter 13 will be returned to you. The trustee will retain certain funds depending on what has been paid out (adequate protection payments) and may submit pre petition assets (such as tax refunds) to the chapter 7 trustee.

Arizona has a self help center at the Bankrupty Court. Contact them for an appointment.

This firm is in the business of helping people and companies file for bankruptcy protection. Therefore, the bankruptcy code requires that we call our firm a "debt relief agency." This information is provided for general information purposes only and is not intended to be a legal opinion, legal advice or a complete discussion of the related issues. Nor is this advice intended to create a client - attorney relationship. Every individual's factual situation is different and you should seek independent legal advice from an attorney familiar with the laws of your state or locality regarding specific information.

Asker

Posted

who is considered a secure creditor to recieve payment, I did have any attorney he withdrew leaving me in a big mess, he was the only secure creditor and he recieved the money, is that legal!

Diane L Drain

Diane L Drain

Posted

Once again - make an appointment to talk to the attorneys in the Self-Help Center at the Bankruptcy Court.

Posted

Diane Drain is correct, entirely.

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