Kentucky Bankruptcy Law

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Curing Post-Petition Arrears and Other Fun Stuff

Last Friday I posted about the ability to cure post-petition arrears that may arise on a secured debt paid outside the Chapter 13 plan, such as falling behind again on house payments. It can be done, but there are a couple of things you and your attorney need to keep in mind.

First, if you are raising your plan payments in order to effect the cure of the new arrears, there should be no problem. However, if you are attempting to keep your plan payments the same but just force unsecured creditors to receive a smaller pro-rata share of the plan’s distributions, you may have a fight on your hand. The creditors or the trustee will likely look at the whole picture and see what exactly caused the new arrears to determine whether or not to fight the matter.

Second, and this is important, the trustee is still only going to distribute to the creditor what their last claim lists as the arrears. If you get the modified plan approved, but the creditor never amends their claim to show the new arrears amount, it will not get paid. You really do not want to pay extra into your Chapter 13 plan to cover arrears only to end up arguing at the end of the bankruptcy as to whether they are still owed or not. So, your attorney will have to follow-up with the creditor to make sure the claim is amended or, eventually, file an amended claim for them (which is not preferred).

December 3, 2012 Posted by | Bankruptcy, Chapter 13, Plan, Plan payments, Secured loan arrears | , , , , , , , , , | Leave a comment