"The Bassel Wilcox Report"
  • PRO-RATA PAYMENTS
    9/12/2011 12:00:00 AM by Pam Bassel

        The term "pro-rata" is used in a Chapter 13 Plan to describe how a creditor will be paid. What it means is delay in getting paid as a secured creditor.  All priority claims, administrative claims and claims listed as being paid in a specific amount will be paid ahead of the pro-rata secured creditor. This could mean the debtor’s attorney’s fees, the I.R.S. and domestic support obligations, among others, could be paid in full before the secured creditor gets any disbursement post-confirmation. Except in the Southern District of Texas (see below), if you are listed to be paid pro-rata, it generally means that the debtor’s attorney will be paid, in full, before you get any disbursement at all as a secured creditor. In these difficult economic times, many debtor’s attorneys are getting little or no down payment on their fees and most of those fees are paid through the Plan, creating a lengthy delay before payments to creditors begin. You are entitled to equal payments beginning month one after the Plan is confirmed which you ...  see more at The Bassel Wilcox Report
  • COLLATERAL SURRENDERED, BUT NOT TURNED OVER
    12/2/2011 12:00:00 AM by Pam Bassel

    This is a frustrating problem for you. You get a Plan or a Plan modification that states that the debtor is going to surrender your collateral. After the Plan is confirmed or the modification is approved, you find out the vehicle was wrecked or impounded and is now worthless or that there are repair or storage charges against your vehicle and it is not cost effective to take possession of it because you won’t recoup your costs in a sale or that the debtor gave/sold your collateral to someone else and will not tell you where the vehicle is located. What do you do in this situation?

    We recommend filing an objection to the Plan or the Modification when you do not know who has your vehicle and it has not been turned over to you. The objection, pre-confirmation, is that the Plan should not be confirmed unless the vehicle is delivered to you, the creditor. Post-confirmation, object to the modification on the grounds that it should not be approved unless the debtor delivers the vehicle to you and, also, that the debtor pays you the remaining balance owed on your allowed sec...  see more at The Bassel Wilcox Report

  • The New Requirement for Proof of Claim
    12/9/2011 12:00:00 AM by Stephen Wilcox

    Generally, in order to be paid in a bankruptcy case, you have to file a proof of claim. Bankruptcy Rule 3001 sets out the specific requirements for a proof of claim. This Rule was amended effective December 1, 2011. Not only did the requirements for what must be included in a proof of claim change, but the rule also provides for bad things to happen if you don’t do it right. The new requirements apply in cases where the debtor is an individual, even in a Chapter 11 proceeding.

    First, a proof of claim "shall conform substantially to the appropriate Official Form." The official form is available at www.uscourts.gov and the official proof of claim form is form B-10. If the claim is based on a writing, then a copy of the writing (such as the note and deed of trust or certificate of title) must be attached to the proof of claim.

    If you are claiming amounts other than the principal amount of the debt, like interest or attorney...  see more at The Bassel Wilcox Report

    

What to Look for in a Chapter 13 Plan

There is always a limited amount of money in a Chapter 13 case and everyone wants their share first - that is the nature of the beast. Here is a generic list of things to look for in a Chapter 13 Plan that may trigger the need to object to the Plan. We have developed lists specific to each District in Texas based on the model Plans in each District which we can send to you. Just contact us at inquiry@basselwilcox.com. Below, though, is the generic list:
  • The debtor's attorney always wants to be paid quickly. This sometimes means that your payments will be delayed, perhaps substantially delayed, until the attorney is paid, unless you object. If you see any of the following in a Chapter 13 Plan, it is probably to delay paying you:

    • You are being paid pro-rata;
    • You are being paid an "average" payment;
    • You get adequate protection payments until the debtor's attorney is paid;
    • The debtor's attorney is being paid from "first funds";
    • The debtor's attorney is being paid "according to the local rules";
    • Payments on your claim are listed as delayed and begin in any month other than month one;
    • You are getting step payments that start out low and build up at some point;
    • As a variation on the step payment problem, the debtor is making "step" payments to the Trustee (rather than to you) that start low and depend on an increase, such as payments of $50.00 for the first six months, increasing after that. This is a way to buy time and will not create enough payment to the Trustee to reach your claim, thus delaying payment to you.

  • If you have a lien on recently purchased collateral, you may have special rights that are well worth asserting. If these claims are not being treated correctly, you may need to object. If there is a value given for these assets, you may also need to object. That value may be binding on you if the case gets dismissed and the debtor files another case or if there is a dispute over insurance proceeds at some point. If the value is too low, you may be stuck with it. We suggest objecting to a low value so that it is not binding on you even if you have a 910 or Hanging Paragraph Claim, which is what these claims are called.
  • If you do not have a 910 or Hanging Paragraph Claim, the value on your collateral must be as high as possible. Remember, the lower, the better for the debtor. The higher, the better for you. You recover more. To maximize recovery, you may need to object to a low value.
  • If your collateral is valued at the amount of your debt but is actually worth more, you may still need to object. That low value may be binding on you if the case gets dismissed and the debtor files another case or if there is a dispute over insurance proceeds at some point. In the case of a later bankruptcy, you may not be able to recover the full amount you are owed if your contractual rate of interest increases your debt amount - a very common scenario. We suggest objecting to a low value so that it is not binding on you, even if the debtor values your collateral at the same amount as the amount you are owed.
  • The interest rate is too low. All courts in Texas calculate the Plan interest rate at the prime rate plus a factor for risk. If the Plan lists you at 3% interest because that is your contract rate, for example, you are entitled to more interest.
  • You cannot be required to release your lien before the time you are paid in full per your contract or the time the debtor gets a discharge. The Bankruptcy Code no longer allows this. Along these same lines, make sure the Plan does not require you to do anything, like send payment reminders or billing statements.
  • In the Northern District of Texas, there is a special concern with domestic support obligations (DSO claims). A DSO claim is usually back child support. If the DSO claim is listed as "pro-rata", it will be paid in full before you are paid anything at all. If the DSO claim is $4000.00 and the Debtor is making a Plan payment of $400.00 per month, once the Trustee's commission is calculated, it will be over 11 months before you get any money from the Trustee.