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Trustee Disbursements in Chapter 13 Cases

Published June 2, 2014 by Sasser Law Firm

Once a chapter 13 plan is confirmed, disbursements from the Chapter 13 Trustee commence. Adequate assurance payments made on vehicle loans are an exception to the normal rule and other deviations are sometimes permitted for certain secured creditors. In the Raleigh Division of the Eastern District of North Carolina the Chapter 13 Trustee typically disburses on the 25th day of each month. The common timetable for confirmation is 3-12 months after the case is filed. In a chapter 13 case where the ongoing residential mortgage payments are being paid through the Chapter 13 Trustee, it may be the case that the filing of the case straddles the tax year where confirmation / disbursement occur and for that reason the debtor’s 1098 mortgage interest statement will be artificially low since the funds are bottle-necked with the Chapter 13 Trustee prior to confirmation. The solace that can be taken in that situation is that the 1098 mortgage interest statement for the year of confirmation may be artificially high because it combines mortgage interest paid for multiple years. An example would be a case filed in August of a particular year that does not confirm until January of the subsequent year. The payments made to the Chapter 13 Trustee that are allocated to the September – December mortgage payments will not be credited until the January disbursement occurs.

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