What happens to the Chapter 13 money if you convert to a Chapter 7?

[espo1357]

Have made several payments into a 13, but may need to move to a 7.

what happens to the money I put into the 13, if I convert?

Thanks.

[SMinGA]

Gets paid to creditors... First to secured & atty, with the trustee taking his/her cut. If you have not been confirmed - I don't know that the unsecured would be able to get anything?

[justbroke]

I can answer this question specifically. (Please note that some Districts may behave differently.) When I converted, I had about $8K balance in my Chapter 13. On the day that I filed my Notice of Conversion, the Trustee's office was contacted to produce what needs to be paid. They are only allowed to pay everything due on secured debt up until that date (of conversion).

I received a refund check of over $11K. I had payroll deduction and they had kept deducting the amounts post the conversion, so that's why mine was $11K.

There's a slight twist on what SMinGA wrote. I about a $4K claim from the IRS that wasn't paid off and it was a priority claim. The Trustee did not pay this. The reason is, the priority claim was paid through the plan monthly, so the Trustee could only pay a pro-rated portion of the monthly amount based on the date of conversion.

[espo1357]

Thanks for the replies.

If I lose my job (good possiblity in my industry), I am going to convert to a 7, because this home is just not worth keeping, its over 100k under and getting worse.

[justbroke]

Yuck! Best of luck to you.

[catleg]

I am in a ch13 in NJ, the trustee makes little micropayments to unsecured creditors each month (like for example, Discover is getting around $30 a month on an $18k debt). So I don't think there's any way to get the money back. Obviously, secured debt and priority are taken care of first by the trustee, if inside plan.

[espo1357]

I can answer this question specifically. (Please note that some Districts may behave differently.) When I converted, I had about $8K balance in my Chapter 13. On the day that I filed my Notice of Conversion, the Trustee's office was contacted to produce what needs to be paid. They are only allowed to pay everything due on secured debt up until that date (of conversion).

I received a refund check of over $11K. I had payroll deduction and they had kept deducting the amounts post the conversion, so that's why mine was $11K.

There's a slight twist on what SMinGA wrote. I about a $4K claim from the IRS that wasn't paid off and it was a priority claim. The Trustee did not pay this. The reason is, the priority claim was paid through the plan monthly, so the Trustee could only pay a pro-rated portion of the monthly amount based on the date of conversion.

so, they do not give out the money during the 13?

in my situation, it looks like I will have to convert soon, to a 7. However, if they give out the money DURING the 13, how would they get it back, if I convert to a 7?

Am I making sense?

Thanks

[catleg]

What does your account ledger page (or claim summary page) say on the 13datacenter.com website?
Is the money being paid out?

[SMinGA]

I don't think that is what justbroke meant.

He was paying by payroll deduction, and by the time they canceled the deduction they owed him $11k. After the plan was converted, any payments made into the plan were refunded. What was in the plan account up to conversion got paid to creditors. His priority claim was not paid in full, instead it received a portion of payoff based on how far along he was in the plan.

(IF I'm wrong, Justbroke will correct me. )

[justbroke]

so, they do not give out the money during the 13?

This is District specific. Some Trustees won't pay the unsecured creditors until the end of the Plan. Any payments that have not been made and not "due" to be paid, are no longer property of the Chapter 13 bankruptcy estate and not property of the Chapter 7 estate (see below).

in my situation, it looks like I will have to convert soon, to a 7. However, if they give out the money DURING the 13, how would they get it back, if I convert to a 7?

When the court issues the Order Converting Case, it will instruct the Chapter 13 what to do with the money. Usually, it goes to your attorney to give to you. If you filed without an attorney (pro se) it will go directly to you. The Order will also instruct the Trustee what they are to give back (a total dollar amount).

Some Chapter 13 Trustees "think" that the money belongs to the Chapter 7 bankruptcy Estate, but it doesn't! it's post-petition and the Chapter 7 bankruptcy estate is created pre-petition! Most practicing attorneys will, if the Chapter 13 Trustee is giving it to the Chapter 7 Trustee by order or by "practice", will immediately a "Motion to Compel Turnover of Property" when the notice of conversion is filed.

What was in the plan account up to conversion got paid to creditors.

This is not what happens in my District. The Trustee can only pay what's due at the time of conversion. In my case, I converted mid-month. The Trustee was only allowed to pro-rate the payments for that particular month to the secured creditors. The unsecured creditors got nothing. You are right about the second part though, the payroll deductions sucked another $5.2K out of my paycheck before I got the payroll deduction stopped.