Dismiss or take $15K

[justbroke]

What you want to do makes no sense at all unless and until you FIRST have your case dismissed and closed. Your case seems to have all sorts of issues. You obtained a loan and brought your home current? Did you discuss this with your attorney? Was the plan not amended? Did you obtain permission from the court?

I would not do what you are trying to do. You want the court to "Trust" you but you don't trust the court/Trustee to take the same money and pay the creditors?

I am lost. If you have a windfall in a Chapter 13, you just let the chips fall where they lie. That means, surrender to the Trustee and let the case be administered by the Bankruptcy Estate. It seems as though you want to step into the shoes of the Trustee and administer payments to the creditors. Those creditors would be foolish to except payments directly from you. The Trustee, at the objection hearing, would just claw it all back, take his commission, and then, probably, force a conversion to Chapter 7.

[griffin]

We notified our attorney of the loan, I think he failed to notify the trustee.

No, that's not it. I will always have a student loan-it cannot be discharged like other unsecured debt as I'm certain you know. It's more like I wouldn't pay $89K on my student loans when we only have one car that's borrowed, my well is barely functioning, my water heater leaked and ruined my kitchen and living room floor and will probably only get one-two more years out of my roof. So, I could find more important things to put $89K on. And I'm not some swindler who wold take that money and run. For the first time in my life I could be on an even keel. The bk just put another bandaid prolonging us being able to take care of these other problems.

And I don't understand how it would be foolish accepting payment. They're getting what they want, paid. Honestly, the bk has no benefit to us. The trustee didn't care when my wife wasn't working and the only way to make house payments was from family and by the time the court got around to giving us any relief on our payments would have been several more months while accruing another arrearage. That's when my wife out about this federal program.

So, there is no way around it?

Well, then since the court does allow people loans for cars and such. Why couldn't we ask the judge to use that money to fix the house and our car situation?

And I guess you can voluntarily enter a CH13, but not just walk out of it.

[justbroke]

It's foolish to accept the payment because, when you do this outside the boundaries of the confirmed plan, you undermine the distribution. The Trustee could get "upset" and then force you into a case conversion to Chapter 7. In the Chapter 7, the Trustee would then claw back everything you paid the creditors outside the confirmed plan, and then make a pro rata distribution based on the allowed claims filed. That is why it is foolish for an unsecured creditor to take a payment outside the confirmed plan. (I'm not sure that would happen, but it's just one of those interesting side-affects of paying outside the Plan.)

You can voluntarily dismiss a Chapter 13. However, there are some caveats, as you are finding out. If you were just exciting Chapter 13 because you can't budget or refuse to budget, then they'll let you go. If you have some sort of windfall or inheritance, you are not walking away. The entire purpose of the Chapter 13 Reorganization is to confirm such a plan of reorganization, is to be shielded from these creditors you're trying to pay off. It's a technical process and the technicality is that unless you are (confirmed) in a 100% plan you pledged all disposable income to the custody and control of the Trustee (period) and in return, the federal court system shields you from the creditors that are included in the Plan.

When it comes to secured debt, you must make payments (period). If you can't afford the payments, the only alternative is to surrender the property. That the Trustee would not allow you to "not" pay a secured creditor, your mortgage on your home, is not any indication that the Trustee did not "care". The Trustee is following the law; remember, the Trustee works on behalf of the creditors, not the debtor. The Trustee supervises, so to speak, the case on behalf of the creditors. The Trustee is not your friend.

As you mention, there are many things you can ask for. You could certainly ask the Trustee if you could keep some to make necessary and reasonable home repairs and other things for the health and safety of your family. (Our District does that for Tax Refunds every single year in Chapter 13 cases.)

I'm actually not too happy that your attorney dropped the ball on the loan to bring your home current. The lender should also have known that you were in Bankruptcy and should have sought a court order granting approval. Your attorney should have filed a Motion to Modify Confirmed Plan as well. If you obtained the loan before talking to your attorney, then that may make me less unhappy with the attorney. When attempting to "change" things in a confirmed Chapter 13, you always seek approval first. I know it's Monday (literally) evening QBing, but you always get approval before you do anything. There are people who did similar things, like trying to get out of a Chapter 13 early by paying the "base plan" to the Trustee... only to have the Trustee say "thanks" keep sending payments! It's an unfortunate thing to learn when it is you that is stuck with "more" payments.

I have always believed that you wanted to do the right thing. I don't think you are going to take the money and run, but outside court enforcement, that's probably what the court and the Trustee would "think".

[griffin]

I appreciate your time to spell this out. Thanks!

[LadyInTheRed]

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.

Even if you could successfully get your case dismissed in this manner, I think you could still have a problem. Your creditors are giving you a payoff amount based on the fact that you are in an active Chap 13. Even if you paid that amount while you still have the protection of the BK, once your case is dismissed, those creditors may come back and insist you pay accrued interest and late penalties because the debts were not discharged.