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Trustee not permitted to make retroactive plan change

When Ohio debtors file for Chapter 13 bankruptcy, they propose a plan to repay creditors over three or five years. The court must approve the plan. The debtor's repayments are then supervised by a bankruptcy trustee. However, in a case in Texas, a bankruptcy trustee retroactively altered the payment plans for 25 cases. In April, a judge on the U.S. Bankruptcy Court for the Southern District of Texas said the trustee did not have the authority to do so.

The alteration put several debtors into arrears. The trustee had used a portion of the district's Standard Uniform Chapter 13 Plan requiring trustees to distribute home mortgage payments in the amounts specified by claims instead of what is in the plan. In a standard Chapter 13 plan, the payment is supposed to be adjusted while the overall plan is not supposed to be amended. However, the adjustment is supposed to be forward rather than retroactive as the trustee's was.

Lenders filed claims after the plans were confirmed, and since there were no objections, their claims were allowed. However, the court ordered the trustee to change the payments to match the confirmed plan.

A Chapter 13 bankruptcy might be one option for people who are struggling with debt and who is concerned about keeping their assets. They must be able to demonstrate that they are able to use their income to adhere to the payment plan. People considering bankruptcy might want to discuss their concerns with an attorney. There are a number of myths about bankruptcy that an attorney may be able to dispel. For example, people can start rebuilding their credit after filing.

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