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Trustee not permitted to alter payments

On Behalf of | May 11, 2017 | Bankruptcy

Virginia homeowners who are in arrears and who are considering filing for bankruptcy may be interested in the outcome of a bankruptcy case in Texas. A judge from the United States Bankruptcy Court for the Southern District of Texas ruled that a trustee had no authority to retroactively adjust Chapter 13 payments.

The trustee had retroactively amended Chapter 13 payment plans after they were confirmed so that mortgage claims could be satisfied. There were 25 cases in the Brownsville, Corpus Christie and McAllen Divisions in which the trustee adjusted bankruptcy plan payments that had already been confirmed.

Individuals who file for Chapter 13 protection under the bankruptcy code are required to adhere to a court-approved payment plan to pay their creditors with their future income over a period of three or five years. While under the payment plan, debtors pay a portion of their income to the assigned bankruptcy trustee who will supervise and allocate the payments to the creditors.

The bankruptcy trustee in Texas used a clause included in the district’s standard Uniform Chapter 13 plan that compelled trustees, with regards to home mortgage payments, to allocate the payments to the amounts for allowed claims instead of the amounts in the approved payment plan. The court ruled that the trustee is supposed to pay the amount that is in the allowed claim for the home mortgage, even if it differs from that in the confirmed payment plan. However, the trustee is not permitted to retroactively change the payments for the confirmed plan for the allowed proof of claim for the home mortgage.

Individuals who have substantial debt should consult with a bankruptcy attorney to determine their options. Bankruptcy may be used to pay off creditors, help with non-dischargeable debt, reorganize debt into affordable payment plans, and stop creditor harassment.