Dismiss or take $15K

[griffin]

My wife and I filed for ch13 Jan. of 2011. She had a personal injury claim that hadn't settled. She was made an offer of $98K and I'm aware we are allowed $15K.

My question is: Our mortgage is current and we now only have approximately $200K in unsecured debt ($178K in student loans) so what is the harm in voluntarily dismissing our BK and paying the $22K off and use the $76K as we see fit? (We can't lose the house because its current)

I look at it this way, our student loans will be with us the rest of our lives so why not just pay the other debts and set up automatic payment to the gov. for our student loans?

Our attorney said that the judge would probably not allow us to withdraw/dismiss (don't know the correct term) since there is a settlement offer. I don't understand why, yet know that the trustee is allowed 10% of all the money he handles. So I can see that he has an interest in not letting it be dismissed. Plus, all of the unsecured debt will be paid off minus the student loans. In my mind I don't see where the problem lies.

Please enlighten me!

[woeisme]

Chapter 7's can't be dismissed by the petitioner once confirmed, but it was my understanding that a CH 13 could be. Heck, just stop making your CH 13 payments and the trustee will file a motion to dismiss fairly quickly, at least in my state they would! But I'd tell your lawyer to make sure he isn't confusing the CH 7 and the CH 13 laws, because from everything I've ever read, CH 13 is a voluntary reorganization of debts, not mandatory.

[keepsmiling]

Sounds like the logical answer to me!

[griffin]

Thanks woisme and keepsmiling!

It's just so frustrating when your attorney is scaring you into thinking all of these other creditors will come crashing down on us once the stay is removed from the bk court. The whole point of the ch13 is to pay off your debts and that's what we will do.

Part of me thought that my attorney was working for the trustee instead of me!

[despritfreya]

Your attorney may have a valid point since, in light of the Supreme Court's decision in Marrama v. Citizens of Massachusetts, 549 U.S. 365, 127 S.Ct. 1105, 166 L.Ed.2d 956 (2007), the Debtor's right to dismiss is no longer an absolute right. It is subject to review by the Court for bad faith conduct.

Des.

[griffin]

Thanks despritfreya! Do you know how we could satisfy the unsecured debt ($23k private businesses) while assuring the court that those debts will be paid and keep the remainder?

I don't know who wouldn't gladly pay that and have approx. $75k left over! It would seem paying those companies would be good faith. Yeah, I'm not a lawyer and the law can be interpreted many different ways.

So, why couldn't the judge have freedom to make a special circumstance that would allow something like this?

[despritfreya]

So, why couldn't the judge have freedom to make a special circumstance that would allow something like this?

Years ago I had a 7 client who, shortly after filing, came into a large sum of money (inheritance) There was more than enough to pay all creditors in full outside the context of the bk. We tried to get the case dismissed. We indicated that the debtor, now having the resources to deal with his creditors, wanted to do exactly that. The Judge said "no". Had to turn over sufficient funds to pay the creditors and the Trustee's fee. Court claimed such was in the best interest of the creditors - something about whether or not the debtor would actually pay the creditors or take the money and run. But, my guess is that the Judge was just protecting the Trustee's fee. This is different than your situation since dismissing a 7 is typically not allowed on the Motion of the debtor - but I just wanted to mention it.

You can always file the Motion to Dismiss. If it is not granted, so be it.

Des.

[griffin]

Much appreciated!!

[justbroke]

I was going to suggest the same thing as Des and that is just file the Motion to Voluntarily Dismiss and see what happens!

[griffin]

1) What could happen if we stop paying the trustee? (With a PI settlement near)

The settlement offered would satisfy all of the non-secure debt minus student loans held by US dept of Ed.

3) What is the likelihood that the govt would do nothing and we resume paying them, if we stopped our repayment to the trustee? Or what could happen?

4) If your brother told you this is my situation, what would you tell him?

[justbroke]

1) What could happen if we stop paying the trustee? (With a PI settlement near)

If the Trustee "knows" about this lawsuit, as they should know, then they could hold your case open to see what happens in the pending case.

3) What is the likelihood that the govt would do nothing and we resume paying them, if we stopped our repayment to the trustee? Or what could happen?

Refer to how I responded to #1 above. The question is, would an informed and "good" Trustee allow you to (voluntarily) dismiss your Chapter 13 without checking on that pending lawsuit.

4) If your brother told you this is my situation, what would you tell him?

Be above board. Work with your attorney. Find the best solution which may be making a deal with the Trustee (which still needs approval of the Court).

At least, that's my opinion.

[griffin]

Unfortunately, it seems my attorney makes it appear that there is no way to "make a deal" with the trustee and that if we do request a dismissal the trustee will object. But didn't go any further. So, does the objection by the trustee automatically mean that there is no way we could dismiss? (I thought deals were made all the time between lawyers)

It just seems odd that my attorney keeps saying we won't get a dismissal. I wonder how close a relationship my firm has with the trustee. If my attorney would have said, "sure, we'll send this to the trustee and see what happens" then I wouldn't be wondering what's going on behind the scene.

[griffin]

despritfreya,

1) What could happen if we stop paying the CH13?

2)Would we be able to take the settlement money and pay off the unsecured debt on our own (minus the student loans)?

3) I don't see the logic in that our attorney said that we should be able to end our CH13 early at 36 months (Jan 14) because the settlement money would have paid all the debt back except the student loans. Since there is no way to pay off the student loans in 60 months, then why wait until the 36 month mark to dismiss?

(It seems that we would be doing essentially the same thing if we could take the settlement money and pay off the unsecured debt ourself)

4) Our house was caught up in AUG, but the trustee is still sending payments to the mortgage company instead of the other unsecured debt?

Thanks!

Years ago I had a 7 client who, shortly after filing, came into a large sum of money (inheritance) There was more than enough to pay all creditors in full outside the context of the bk. We tried to get the case dismissed. We indicated that the debtor, now having the resources to deal with his creditors, wanted to do exactly that. The Judge said "no". Had to turn over sufficient funds to pay the creditors and the Trustee's fee. Court claimed such was in the best interest of the creditors - something about whether or not the debtor would actually pay the creditors or take the money and run. But, my guess is that the Judge was just protecting the Trustee's fee. This is different than your situation since dismissing a 7 is typically not allowed on the Motion of the debtor - but I just wanted to mention it.

You can always file the Motion to Dismiss. If it is not granted, so be it.

Des.

[despritfreya]

What could happen if we stop paying the CH13?

Normally, the Trustee will eventually seek the dismissal of the case due to failure to make payments. However, if your Trustee is aggressive and thinks the reason for the failure to pay is your hope that the case gets dismissed, he could seek to convert it to a Chapter 7 instead.

Would we be able to take the settlement money and pay off the unsecured debt on our own (minus the student loans)?

Not if you are in the bk.

I don't see the logic in that our attorney said that we should be able to end our CH13 early at 36 months (Jan 14) because the settlement money would have paid all the debt back except the student loans. Since there is no way to pay off the student loans in 60 months, then why wait until the 36 month mark to dismiss?

I am not following this question. In general terms. . . If you were an above median income filer you cannot complete your Chapter 13 in less than 60 months unless you pay all allowed claims in full. An "allowed claim" covers all claims that were filed and not objected to. Not all creditors file claims but the ones that due must be paid in full if you want to get out in less than the commitment period of 60 months. Maybe you did not understand what the attny told you. Go back and get clarification.

It seems that we would be doing essentially the same thing if we could take the settlement money and pay off the unsecured debt ourself

True but the Trustee would not make his fee. Bottom line is “greed” pushes the system along.

Our house was caught up in AUG, but the trustee is still sending payments to the mortgage company instead of the other unsecured debt?

This you would have to discuss with your attny since I am not privy to all of the details of your case.

If the mortgage arrears have been cured through the Plan then the Trustee should not be sending additional sums unless your regular monthly payment also goes through the Trustee.

If you cured the arrears outside the Plan (say through a loan modification) the Plan needs to amended to remove the funding that was earmarked for the lender. The Trustee cannot just stop paying because he is bound by the Court Order confirming the Plan - unless of course, the lender amends its claim and refuses the $$.

Des.

[griffin]

Okay, I had a talk with our attorney and felt he understood what we wished to do as far as: walking out of the bankruptcy(stop paying); taking the full amount from the settlement and paying the unsecured creditors listed. Then by the time the objection hearing came we would have statements that the creditors were paid and there was no attempt to avoid paying them(bad faith). If we stayed in the plan our student loans would be the only thing left to pay on for the remaining 2yrs of the plan.

Last week, I contacted all of the creditors to get a current payoff amount that I could speak with. None of them added any interest or late fees and found out we could just resume making regular payments on our student loans with no penalties.

I forwarded our atty those numbers and get an email back saying my wife can't just take the entire settlement. This contradicted what was said in our meeting. He said he had never came across this situation before. I believe he either doesn't know how to proceed and wants us to just turn the money over, because to me turning the money over means we do voluntarily and finish the plan. Or, I think he might not have made the trustee aware that we secured a loan through the federal government and brought our house current because the plan has not been adjusted when the arrearage was paid up in August. So, we are now paying twice on our mortgage, once through the trustee who's paying on a balance that no longer exists and then our regular monthly payment too!

1. Can my wife obtain the entire settlement?

2. Then be able to prove to the trustee that everything has been paid of or is current(student loans) at the objection hearing requesting a discharge?

Honestly, I feel like I'm speaking another language when I talk our atty. We understood him perfectly when he said the judge would probably not allow us to dismiss and then wanted to then pay things of ourselves.

Please chime in!