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Keeping Payments Outside the Ch 13 Plan Just Got Harder

Posted by attorney Eric Bolves

Orlando Bankruptcy Court Makes It Harder To Keep Payments Outside The Plan.

One requirement of a Chapter 13 Plan is that all secured creditors are paid through the Plan. That means the payment is sent to the Trustee who then pays the creditor. One problem with that is that the Trustee charges an administrative fee of up to 10%. On big mortgage payment, that can be expensive.

One way to keep the payment outside the Plan is to set up an automatic draft where the creditor automatically takes your payment from bank account or paycheck. Up to now, it was common to set up the auto-draft right before the bankruptcy to keep it out of the Plan. As of March 1st, 2012, the Middle District of Florida has issued a new directive authorizing payments outside the Plan if the auto-draft has been set up no less than six months prior the bankruptcy case being filed.

The Trustee’s office tells me the reason for the change was that many debtors were stopping the auto-draft after the Plan was confirmed by the Court causing the creditors to file motions for relief from stay. Relief from stay would mean that the creditor would be allowed to repossess or foreclose on the property. The motions were taking up a lot of Court time.

The result of this ruling will be that Chapter 13 plans will be more expensive and will pay less money to the unsecured creditors.

Eric L. Bolves, Esq. 407-894-1002. 2110 E. Robinson St. Orlando, FL 32803

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