Legal Question in Bankruptcy in Indiana

Losing home after 3 1/2 years of chapter 13

We filed chapter 13, 3 1/2 years ago. The trustee told us what our payments were to be and said we would be in this for 3 years and then it would be done. At the time we were about 3 payments behide on our house.

Two monthes before we were to be done, we recieve a letter from the trustee saying we were underfunded and our payments were to go up 250.00 a month and we would have another 2 years in this. We didn't seem to have any choise but to go along with the plan. A month ago the trustee had our case dismissed because we didn't send our tax papers to her in time. To make a long story short, our mortgage company now saids we have to pay them 14000.00 or they will foreclose on our home!!! None of this makes sence. We didn't owe that much when we filed bankruptcy. In looking at the 6 month status report, the only people getting a payment were the trustee, the lawyer (which we don't know why) and our house. No other people we owed ever got anything. We are at a lose on what to do. We don't have that kind of money since everything had been going to the trustee. Our mortgage company is willing to take 1/2 the amount owed but we still have no savings to do this. Is there any other avenue we can try???? Please help!


Asked on 5/14/04, 10:55 am

1 Answer from Attorneys
John Cook Dunn & Cook

Re: Losing home after 3 1/2 years of chapter 13

If you have the facts down correct, then it seems strange for the Chapter 13 trustee to wait until the end of your plan to tell you it is underfunded. Here in the Indianapolis division, the trustees object to the plan right away if they perceive that a plan is not feasible or is underfunded.

To me, your starting point is the plan itself - what does it say? It has to list the estimated amount in arrears for the mortgage, plus any other debts that have to be paid through the plan, such as priority taxes, trustee's fee, unpaid attorneys fees, and other secured debt that is in arrears and will be paid through the plan (such as car loans, etc.).

You then have to compare what your plan says to the claims that were filed in your bankruptcy. It is possible that one of your creditor's that was to be paid in full through the plan had a much larger claim than what you estimated. If that happened, then the plan became underufnded because what you were putting into it was not sufficient to pay what you had to. However, since the creditors have to file their claims within a certain period, it is unlikely that the chapter 13 trustee would not have known about this problem within months of you paying into the plan, rather than at the end of it.

As for the attorney being paid through the plan, this is not unusual, as many debtors do not have the cash upfront to pay the attorney for his services. However, this should have been in the plan, and should be one of the first items mentioned in the plan. It is considered an unpaid administrative expense and gets paid first.

I am also puzzled that your attorney did not contact you regarding any of the new problems with your plan. He/she has the responsibility to keep you updated on new issues unless he/she has withdrawn from your case. Also, since a chapter 13 plan can go for as longs as 60 months, I do not know whether your attorney or the trustee looked at the option of extending the plan in order to keep the monthly payment the same.

I suggest you see another attorney regarding the viability of filing another chapter 13 to clean up this problem.

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Answered on 5/15/04, 2:42 pm


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