- Good News for Secured Creditors and Commercial Lessors in Chapter 13 Cases
- August 26, 2015 | Author: Jason W. Johnson
- Law Firm: Lowndes, Drosdick, Doster, Kantor & Reed Professional Association - Orlando Office
- A new administrative order was entered by Chief Judge Jennemann in the Middle District of Florida on August 10. The Middle District of Florida stretches from Jacksonville on the east coast, through Central Florida and down the west coast through Fort Myers. The new procedures affect all Chapter 13 bankruptcy cases filed in the Middle District of Florida on or after September 1, 2015. It impacts both debtors and creditors in a number of ways. Importantly, it affects secured creditors and commercial lessors in the following ways:
Being Paid “Outside of the Plan” - Previously, these proposed payments were commonly provided to be paid outside of the plan, sometimes to escape scrutiny. These may no longer be made at the whim of the Debtor. Only secured creditors who have loans not in default and for which no arrearage is to be cured under the plan may be paid outside of the plan. If the Debtor intends to make such outside payments, they must be made to the creditor via automatic debit/draft from a bank account.
Amount of Proposed Plan Payment when Mortgage Modification Mediation Sought - With the value of many Florida properties not rebounding to pre-Great Recession levels, Mortgage Modification Mediation is one of the big reasons for Chapter 13 filings. When a filed Chapter 13 plan proposes to modify a mortgage through the mortgage modification mediation process, the plan must provide for minimum payments to such creditors, pending potential modification. For homestead property, the plan must propose payments equal to the lesser of: (a) 31% of the gross disposable monthly income (after deduction of HOA fees) of the Debtor and any non-filing spouse; or (b) the monthly mortgage payment under the contract. For non-homestead, income-producing property, the payment must be at least 75% of the gross rental income generated by property.
Availability of Distribution of Adequate protection Payments Pending Confirmation - An adequate protection payment made by a Debtor to a Chapter 13 Trustee pending confirmation may be disbursed by the Trustee to the secured creditor only if: (a) the plan provides for payment of the creditor’s claim; (b) a Proof of Claim has been filed for the creditor; (c) no objection to the creditor’s claim is pending; and (d) if mortgage modification mediation is sought for the claim, the creditor has obtained an order authorizing the disbursement.
Payment Address for Secured Creditor - If a secured creditor wants a plan or adequate protection payment mailed somewhere other than the address included on the creditor’s filed Proof of Claim, the secured creditor must file a Notice of Payment Address Change with the clerk and provide written notice to the Chapter 13 Trustee.
Relief from Automatic Stay for Certain Creditors - In a big win for secured creditors and commercial lessors, where the Chapter 13 plan: (a) provides for surrender of the collateral; (b) provides for payments outside of the plan; or (c) fails to provide for the claim; affected secured creditors and lessors are granted relief from the automatic stay without further order of the Court to pursue their remedies against the collateral (and against any co-debtor, personally).
There are other provisions that affect secured and other creditors. Consult a bankruptcy attorney for full details.