The Power of Zero

On Tue, 10/28/2014 - 13:48

By admin

Zero is simply amazing. Zero multiplied by any number remains ZERO.

I point this out because many debtors and their attorneys appear to think a Chapter 13 plan can work with Zero as a plan payment. I frequently see debtors miss the first and second plan payments with excuses ranging from “I didn’t know when my payment was due” to “It’s wage withheld, and my employer didn’t withhold it.”

Counsel: The Code requires payments to begin within 30 days of the filing of the petition. It is your responsibility to tell your clients this when you file the petition. Both my staff attorney and I ask about payments at the 341, and will remind debtors that the first payment WAS due by a date 30 days after the filing. You probably don’t want to ask me when that changed—since it changed with BAPCPA in 2006!

There is one legitimate wage withholding excuse—when the debtor can show on the paystubs that the employer withheld but did not transmit. Otherwise, the debtor knew that the plan payment was not withheld and should make those payments directly.

Most plans include one or more secured claims, frequently including a mortgage for a house which the debtor purportedly wants to save. The debtor’s action in paying the trustee the same amount he/she has been paying the mortgage company (Zero) doesn’t bode well for the debtor keeping the house.

Counsel: Attorney fees paid through the trustee require that I have funds on hand at confirmation with which to pay those. Not that a plan is likely to be confirmed if the debtor has not made plan payments or missed more than he/she has made; but a common request at the confirmation hearing is that the debtor be deemed current as of confirmation and the arrearage in plan payments be added to the end of the plan. Secured claims which were entitled to adequate protection payments prior to confirmation will be “caught up” before attorney fees are paid, so for each month the debtor pays Zero, there are at least 2 months--but probably longer--before fees will be paid. There isn’t enough money to go around when Zero enters into the equation.

There’s a reason that Zero is called the “empty set.”