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Trustee not permitted to alter payment plan, judge rules

When South Carolina debtors file for a Chapter 13 bankruptcy, they set up a payment plan to repay creditors out of their income over three or five years. The payment plan is approved by a court and administered by a trustee. In some cases, after a payment plan is approved, a mortgage lender might file a claim that lists a different payment amount than what has been approved in the plan. If this is the case, the trustee must pay the amount on the claim and not in the payment plan going forward. However, the trustee is not permitted to make changes to the payment plan itself.

A Texas trustee did make retroactive changes to the payment plan in 25 cases in this situation. A judge with the U.S. Bankruptcy Court for the Southern District of Texas ruled that the trustee did not have the authority to take this action, which put some debtors into arrears.

The trustee filed to dismiss cases that had delinquencies in payment. The judge ordered her to restore the plans to their original amounts.

People who are concerned about their debt and keeping their assets might want to talk to an attorney about their options including a Chapter 13 bankruptcy. If they are facing creditor harassment, the bankruptcy filing will stop any further action on the part of creditors. Debtors may worry that a bankruptcy filing will damage their credit, but failing to pay bills on time, facing a foreclosure and other consequences of debt is also damaging to credit. Filing for bankruptcy gives them a clean financial slate and allows them to start rebuilding their credit.

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