What Does My Chapter 13 Trustee Do With My Money?

29 Oct What Does My Chapter 13 Trustee Do With My Money?

Chapter 13 Debtors pay their Chapter 13 bankruptcy trustee each month.  The trustee’s office pays that money out to creditors in a manner that is directed through the order of confirmation.  Usually the trustee first pays administrative expenses, such as attorney fees, and secured creditors.  The secured creditors getting paid by the trustee often include mortgages, vehicles, furniture, and computers.  Generally after the secured creditors are paid in full, the priority creditors (taxes) get paid.  After all the secured and priority creditors get paid, the unsecured creditors begin receiving payments towards their claims.

Each Chapter 13 Trustee office may operate differently.  Some trustees insist that all ongoing mortgage payments get paid through their office.  Other trustees require ongoing mortgage payments to be paid through their office only if the debtor was in arrears on the mortgage at the time they filed their chapter 13 petition.  In the Northern District of New York Utica and Syracuse divisions, the trustee, Mark W. Swimelar, does not require ongoing mortgage payments to be paid through his office.

Trustee Swimelar recently released information showing the payments that came into his office from Chapter 13 debtors as well as where that money went for the fiscal year ending September 30, 2008.  A total of $25,274.989 came into his office from or on behalf of debtors.  Of that total, $8,720,805 went to secured creditors, of which $2,623,962 went for mortgage arrears and $620,824 for ongoing mortgage payments.  Priority creditors received $1,301,715.  Unsecured creditors received $10,010,634 and debtors attorneys received $2,459,859.  The trustees office itself was able to keep $1,770,822 for operating expenses.  The bulk of the remainder of the funds ($917,493) were refunded to debtors for cases that were closed, dismissed or converted prior to confirmation.

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Peter Orville is a bankruptcy lawyer in Binghamton, located in the Southern Tier of New York. He is a member and New York co-chair of the National Association of Consumer Bankruptcy Attorneys.
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