Chapter 13 Debtor Can May Make Some Payments Directly To Secured Creditors

The general rule in Chapter 13 bankruptcy is that the debtor makes one monthly payment to the Chapter 13 trustee who then distributes monthly payments to the debtor’s creditors- the trustee is the collection agent for all creditors. Some debtors ask whether they can pay one or more of their creditors directly each month; its called making payments "outside the plan."

Why would a debtor want to make payments outside the plan. Possibly, to minimize the costs of Chapter 13 bankruptcy. The bankruptcy trustee charges a fee to administer a Chapter 13 payment plan. The fee ranging from 6% to 10% is assessed against all plan payments collected and administered. Debtor payments outside the plan directly to creditors are not subject to the trustee fee.

Our bankruptcy court will permit payments to secured creditors outside the plan if the debtor has arranged for automatic payments to the creditor from the debtor’s employer or his bank account. The automatic payments system must have been in place before the debtor filed his Chapter 13 petition.

Comments

[File Personal Bankruptcy]

You can choose to file bankruptcy under the chapter 7 or chapter 13. Chapter 7 bankruptcy is chosen when you wish to pay off all your debts. This may be followed by selling your home or car.

In chapter 13 of bankruptcy you get a choice to repay over a long scheduled time for all your debts.

[carol]

when a person files chapter 13 the trustee is in charge for payments to debitors because of lack of openess in reference to setting up automatic withdrawal for mortgage prior, resulting in extremely high fees being charged by trustee .Is there a way to lower those fees?