Who is the Chapter 13 Trustee in Jacksonville, FL?

WHO IS THE CHAPTER 13 TRUSTEE?

When any potential Chapter 13 client speaks to our office about modifying a mortgage through a Chapter 13 filing or saving other assets, we always talk to the client about making payments through a Chapter 13 Trustee. But who is the Trustee and what are his duties in the case?

GENERAL DUTIES OF THE CHAPTER 13 TRUSTEE IN JACKSONVILLE CHAPTER 13 CASES

The most basic duty of the Chapter 13 Trustee is to collect the monthly Chapter 13 payments from the filer and disburse that money to the creditors based on the Chapter 13 Plan and claims filed. It is the steps prior to the disbursement of the money that are really critical to the filer.

Initially, a Chapter 13 Plan is filed by the Debtor. That Plan is typically an estimate of what the Debtor thinks the payments will be in a future Confirmation Order to be signed by a Judge. The Plan is based upon the expected mortgage payment, car payments, tax payments and the left over money to the unsecured creditors. Normally, secured debts such as mortgage payments, property taxes and car payments are verified by the secured creditors. So, if the mortgage payment in the Plan does not match what is called for in the note and mortgage, then the secured creditor will file an objection to the Plan and have the amount corrected.

It is the unsecured creditors who rely upon the Chapter 13 Trustee to watch out for their interests during the course of the Chapter 13 case. There are several ways that the Chapter 13 will seek to maximize recovery for the unsecured creditors:

INCOME MINUS EXPENSES

The Chapter 13 Trustee will do a basic review of the Schedules to determine if the Debtor’s budget appears to include too little income or expenses that are too high. If the Chapter 13 Trustee feels that either income or expenses are not correct, he can file an objection to the Plan and ask the Judge to increase the Plan payments based upon the objection. This review is different from the means test review below. The budget prepared by the Debtor is a “snap shot” of the current actual income and expenses, not the formula utilized by the means test.

CHAPTER 13 AND THE MEANS TEST

The Chapter 13 means test is similar to the Chapter 7 means test in that it sets up the income in the exact way of the Chapter 7 test – 6 months of household income averaged to a monthly amount. Then, expenses are subtracted from the income figure to determine a net disposable income. The left over figure is used to determine how much money (if any) needs to be paid to the unsecured creditors in a Chapter 13 Plan. Unsecured creditor are such bills as credit cards, stripped off second mortgages, medical bills, etc. that have been included in a bankruptcy filing. In a Chapter 13 filing, you generally cannot deduct future expenses for property that will be surrendered in a Chapter 13 case. That is a big difference from a Chapter 7 filing, where you can deduct future payments if you are contractually obligated but going to surrender the property.

OTHER AREAS TO INCREASE UNSECURED DISTRIBUTIONS

The Chapter 13 Trustee will also seek to review the yearly tax return. If the tax return shows a refund or increase in income, the Trustee will seek to modify the Plan to recover the refund or increase future payments based upon the increase in income. Additionally, settlements of lawsuits which result in a monetary award to the debtor generally result in the Chapter 13 Trustee attempting to recover the proceeds of the suit to distribute to the unsecured creditors. If the Debtor inherits any type of monetary award, the value of the inheritance may be recovered by the Chapter 13 Trustee and distributed to the unsecured creditors. The same is true for sales of property during the Chapter 13 Plan.

WHY DOES THE TRUSTEE TAKE MONEY AFTER THE FILING OF THE CASE?

All of the above are examples of monetary changes that occur after the filing of a Chapter 13 case. Unlike a Chapter 7 case, the Bankruptcy Code requires that all “disposable income” be paid to the unsecured creditors. That disposable income may come in to the case two or three years after the case had been filed. Normally, in a Chapter 7 case, the money would belong to the debtor as long as the right to receive the funds did not exist on the petition date. However, in Chapter 13, the funds belong to the unsecured creditors if they are considered disposable income.

CONCLUSION

Determining disposable income is an ongoing process in Chapter 13. What about future medical expenses due to the car accident suit? What about burial expenses related to an inheritance? All sorts of issues come up when trying to determine what income is truly “disposable”. At Mickler & Mickler, we attend Court and see the bankruptcy trustees and judges in action several times a week. We have the experience to guide you to the right decision about whether to file a case, and if so, what Chapter to file.

Please contact Mickler & Mickler at 904.725.0822 or bkmickler@planlaw.com. We will be happy to set you up a free appointment to discuss your situation and potential solutions.