By Ryan C. Wood
There are many reasons why a Chapter 13 bankruptcy case could be dismissed. But what happens after the case is dismissed before the Chapter 13 plan is confirmed or approved? One of the most common questions is what happens to the chapter plan payments I made to the Chapter 13 trustee’s office? What about my car payment or other people I owe money to after the case is dismissed?
Chapter 13 Trustee Payments
This is probably the most common question because everyone wants to get the money back they paid into the Chapter 13 plan when the case is dismissed. The money you get back depends upon how many months ago the case was filed and the language of the plan and what is going on in your case. If you have provided for pre-confirmation adequate protection payments to a creditor like a car loan company then those payments plus the Chapter 13 trustee percentage will be subtracted from the amount you get back. Some Chapter 13 plans include a provision that your bankruptcy lawyer will receive some of their attorney fees in the event the case is dismissed. So you may have to subtract all or a portion of your bankruptcy attorney fees from the amount you will get back.
Also, as of October 1, 2012, a Chapter 13 trustee is allowed to take a percentage of the Chapter 13 plan payments they return to you for their administrative costs. This is how the Chapter 13 trustee’s office gets paid. They get a percentage of the Chapter 13 plan payments they receive and then pay out. They used to only be allowed to take their percentage on pre-confirmation adequate protection payment and disbursements of funds after the chapter 13 plan was confirmed or approved. The United States Trustee, a part of the Department of Justice, in August 2012 decided it was okay for the trustee’s to also take their percentage from the amount refunded to people who file for bankruptcy in the event the case is dismissed.
Car Loan Payments
This issue was briefly mentioned above regarding pre-confirmation adequate protection payments. Some Chapter 13 trustees will require, or you might be able to cramdown (pay less than what you owe on the loan at the time your case is filed), that your car loan payments be paid inside the Chapter 13 plan. This means instead of making your car payment directly to the car loan company the payment will be made as part of the monthly chapter 13 plan payment to the trustee’s office. If the chapter 13 plan calls for paying pre-confirmation adequate protection payments then the car loan company will receive a car loan payment each month and there will not be a huge amount to catch up on once the case is dismissed. You will have to deduct the payments made to your car loan company if the case is dismissed. What if there are no pre-confirmation adequate protection payments being made? Under this circumstance your car loan company will not have received any payments on the car loan for however many months you were in the bankruptcy case and the chapter 13 plan was not confirmed or approved by the bankruptcy court. If you were in the case for 10 months before it was dismissed and the monthly car loan payment prior to filing bankruptcy was $250, then you will be behind $2,500 in car payments once the case is dismissed.