In a 100% plan - are the trustee payments “on top of” or “part of” the 100% to creditors?
I have a ‘friend’ who is nearing completion of a 100% plan - The trustee is threatening dismissal because the plan payments will not total 100%. This is the first time the trustee has brought up this deficit (with ~6 months remaining). As it stands, the plan would currently pay back 94% with no changes.
Based on ‘back of the envelope’ calculations - it would appear that the trustee is attempting to “not include” the trustee payments in the 100% total. Meaning the debtor would be effectively paying 103.3% of the allowed claims.
I have a lawyer - I am not seeking legal advice - I just want a factual answer as to the initial question if possible while I wait for the lawyers to argue amongst themselves.
Your details are sketchy, but for all intents and purposes, the Trustee is a creditor. He gets paid his percentage for administering the Estate, like any fee a financial/legal professional would receive when they provide services. So of course his fees are included in the payment plan, not as some kind of extra outside of the credit cards.
Not sure why dismissal would be threatened - is it already a 60 month plan? If not, your friend should be able to just tack on another few months of payment to bring it to 100%. If so, they may need to increase their payment for how ever remaining months there are left in the plan.
It is a 60 month plan - The total allowed claims is “x” - within the ‘allowed claims’ there is not a line item for the trustee fees - my understanding is that the trustee gets their fee from the total collected to be paid out - so - functionally - in a 100% plan, the 100% is the “total claims” - and then the creditors get 100% minus trustee fees.
To make it simpler - is it
Trustee fees is 5%
OR
The problem is the trustee waited until the 11th hour to claim that there was not enough funds to cover the 100% - and depending on if trustee fees are 'a percentage of what is collected" or ‘tacked on top of’ makes a world of difference in the ability of the debtor to successfully complete the plan (for example, a$1200 dollar difference or a $7000 dollar difference with ~6 months to go).
Commenting on why the dismissal is threatened, etc would take this out of GQ - I just want to be sure I have a correct understanding that option a is how it is supposed to work -
Do you have a cite for that? Everything I can find suggests option A is correct.
If a debtor files a “75%” plan - then the trustee fees are part of the 75% - I don’t see why that should be any different in a 100% plan - unless the trustee adds on the fees as a line item (similar to the way the debtors attorney files a claim).
Secondly - it seems entirely incorrect for the trustee to wait until the 11th hour to pull this - they should have been able to determine after the period for filing claims was complete that the proposed payments would/would not equal 100% (regaurdless if the trustee fees were part of/on top of).
But now, I fear we’re getting out of GQ territory.
A hundred percent is a hundred percent. So it doesn’t really matter if the Trustee fees are separated out - it’s all the same total.
Your friend needs to talk to their lawyer. I will just add that, if they’re been problems with plan payment being made in the past, it’s not unusual for something to happen at the end. It’s been my experience that a Debtor misses payments, and then acts all surprised when it doesn’t end the way they thought it would. Not always surprising, seeing as how bankruptcies generally come about in the first place.
The Trustee isn’t “pulling” anything - it’s all just math.
We’re veering off into IMHO territory here - I just want a cite that shows definitively how the trustee is paid - the cites I have found so far indicate that the trustee takes thier part “of the agreed payment” before dispersing to creditors. The trustee “handbook” I found (pdf) simply says “5% of all payments recieved” - IMHO - that says 5% of the plan payments go to the trustee - 95% goes to the creditors (according to whatever schedule may exist).
FYI - no payments have been missed, additional money came thru turning in tax refunds.
For it to be “just math” - we still need to know if the 100% is 100% of the claim total or 100% of the claim total PLUS trustee fees - having reviewed the plan paperwork - it should be 100% of the creditor claims - no more, no less - the trustee is adding their fees on top of that total.