The plan provides for the direct payment of a secured claim. The debtors default; motion for stay relief is filed and by agreed order, the future payments will be made by the trustee. The trustee office has no problem with that; in fact, we insist on it. The “miss” comes in the order.
- Some orders give the debtors 30 days to amend their plan/file a motion to modify the confirmed plan to provide for the claim to be paid through the trustee and thereafter the creditor has 30 days in which to file an amended proof of claim, which will include the post-petition arrearage on the loan.
ISSUE: The claim will be at least 90 days further in default by the time an order is entered to authorize the trustee to pay the claim. If the plan is not confirmed, the filing of an amended plan shouldn’t take the full 30 days, and the filing of the amended proof of claim shouldn’t take a full 30 days, but the amended plan must go out on notice and be set for hearing. If the hearing is set and held before the amended proof of claim is filed, the hearing will need to be continued and the claim, particularly the arrearage claim, won’t be paid until the plan is confirmed.
If the plan has been confirmed, then a motion to modify is filed. Creditors are given an opportunity to object and a hearing is set. This claim isn’t going to be paid until the modification is approved.
- Some orders correctly bypass the above scenarios and state that the entry of the order amends/modifies the plan and authorizes the trustee to pay a post-petition default in the amount of $X and to make payments on the ongoing obligation in the amount of $Y for the remaining months of the plan.
ISSUE: These orders state that the trustee will calculate the increased plan payments and notify the debtors. My office will do that and we file a Notice of Increased Plan Payments and Increased Gross Base, but we may not have the money to make payment on the added claim until the increased payments are made.
Best solution: Instead of the paragraph that the trustee will calculate and let the debtors know, substitute the following:
Plan payments will increase to the sum of $_____________ beginning with the (month) payment and continue for the remainder of the plan. If plan payments are made by wage withholding, debtor’s counsel is responsible for amending the wage withholding. Debtors are responsible for making the increased plan payments to the trustee pending the employer adjusting the wage withholding.
Meagan or I will fill in the blanks before we sign off on the proposed order and send it back to you.
A form order has been added to the WHERE.
The form order is not written in stone. We encourage you to make the necessary changes that suit your particular case. We do ask that you include the blanks for the plan payments and start date as we think this will be more efficient for all parties, and we ask that the last paragraph regarding the material default be included in the order as well.