The math involved in a Chapter 13 is not only complicated, but it is ever-changing claims Downers Grove bankruptcy attorney. Creditors, once they receive proof of the bankruptcy, have the opportunity to file a proof of claim to be part of the payout. Under the model plan and under the bankruptcy laws in the Northern District of Illinois, the plan will govern how people are paid. Thus, if someone has mortgage arrears of $10,000.00 and the plan calls for a repayment of $5,000.00, that amount is going to stand unless the creditor files an objection to confirmation. In every single bankruptcy case involving mortgage arrearages, there should be an objection to confirmation. The reason why there needs to be an objection to confirmation is because the debtor does not know the exact dollar amount owed to the mortgage company. The mortgage company knows the exact amount owed to the mortgage company, and they file a proof of claim bankruptcy. When the proof of claim does not match the amount in the model plan, the creditor needs to bring an objection to confirmation; otherwise, the amount in the model plan will govern. So in every single Chapter 13 bankruptcy case involving mortgage arrearages, the mortgage company is required to file a proof of claim and likely an objection to confirmation, which will I class the amount that the debtor has to pay overall in terms of fees.
This system was put in place several years ago, and it flip-flopped the way that bankruptcy Chapter 13 cases were handled. In the older days, it used to be that the creditor would file a proof of claim and the trustee would pay out pursuant to that proof of claim unless the debtor filed an objection to the claim. That way in my opinion made more sense because the creditor knew exactly what the dollar amount was, the trustee knew whether or not it had the ability to pay out that amount based on what the plan was providing for, and the debtor’s attorneys basically did not object to the claim because they don’t have access to the information that the mortgage company does regarding the debt. Under the new system, the mortgage company files a proof of claim, and the plan governs. So if the plan doesn’t match the exact proof of claim, the creditor has to file an objection to the plan to get the debtor’s attorney to change the dollar amount to match the exact proof of claim. This creates an unbelievable amount of work on everybody. The creditor has to file an objection; the debtor’s attorney has to file an amended plan; the court and the court administration have to deal with both the paperwork on the objection and the amended plan. The old bankruptcy process worked perfectly well; the trustee paid pursuant to the proof of claim, which was filed under all penalties of perjury by the mortgage company, and the debtor’s attorney filed a plan dictating how much would be paid, for how long, and to what percentage people would be paid. If there was not enough money in the plan to pay all of the creditors, then it was the trustee who would bring a motion to either dismiss the case, or to have the plan payment increased, or to object or not confirm the plan in its entirety. That seemed like a reasonable responsibility to me on the part of the Chapter 13 trustee, because the trustee is getting paid four to six percent as an administrative cost of handling the Chapter 13 bankruptcy case. It only makes sense that the Chapter 13 trustee has the software required to analyze whether or not the dollar amount being paid by the debtor or sufficient to pay all the claims pursuant to the filed plan. Somehow, though, everything got turned on its head, thanks to the bankruptcy judges. The bankruptcy judges in this area decided that the reverse way was the better way; thus, this is the system that we are stuck with, this is the system that we have to work within, and we are going to do just that as attorneys who file Chapter 13 bankruptcy cases.