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Trustee retroactively adjusts Chapter 13 payments

Florida residents might like to know about the events in Texas that led to a court decision stating that a bankruptcy trustee cannot retroactively adjust Chapter 13 payment plans for home-mortgage claims. In 25 cases, one trustee adjusted confirmed plan payments to retroactively accommodate home-mortgage claims filed after repayment plans were approved. The court ruled that the trustee did not have the authority to do this.

When filing for Chapter 13 bankruptcy protection, debtors agree to pay creditors out of future income. The court approves a repayment plan while a bankruptcy trustee uses a portion of a debtor’s earnings to make payments. When it comes to home mortgages, trustees can distribute money for allowed claims instead of the planned amounts. If an allowed claim and the amount in a repayment plan differs, the plan stays the same while the payment is adjusted to the allowed claim.

The trustee in this case paid allowed claims filed after plan confirmation and applied the difference between the plan amount and claim both prospectively and retroactively, which sent many debtors into default. The trustee then filed motions to dismiss cases with payment delinquencies. The court said it is impermissible to retroactively alter confirmed plan payments because of a mortgage claim filed after plan confirmation. The amount should only be adjusted when moving forward. The court ordered the trustee to restore payments to the amounts set in the confirmed plans.

When having trouble making mortgage payments or owing other debts, bankruptcy is one option that could provide relief from creditors and result in a more manageable repayment plan. When filing for Chapter 13, a three- or five-year repayment plan is created. After this period, some unsecured debts may be discharged. An lawyer can provide more information about how this chapter works.

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