§ 123.1     What to Do If Creditor Is Not Receiving Payments
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 123.1, at ¶ ____, LundinOnChapter13.com (last visited __________).

Except in plans paying nothing to unsecured claim holders,1 sooner or later every creditor provided for by the plan should receive payments (or property) from the trustee or from the debtor. If a creditor does not receive an expected payment, the creditor has to figure out whether there has been a default under the plan or whether something else has happened that excuses the missing payment.


The frequency of distributions by the Chapter 13 trustee varies from district to district. Creditors with multidistrict Chapter 13 practices may experience a distribution every month in one jurisdiction and every second or third month in another. The order of payments to priority, secured and unsecured claim holders varies from district to district.2 In some jurisdictions, priority and/or secured claim holders are paid in full before any distributions to general unsecured claim holders. In other jurisdictions, secured and unsecured claim holders receive payments with every distribution—monthly or on whatever basis the district operates. The presence of an alimony or child support claim may completely disrupt the normal distribution of payments to other creditors because, in some districts, support claims are given a first call on available funds.3 Especially during the early months after confirmation, many jurisdictions permit payment of attorneys’ fees and other administrative expenses that prime the payments to other creditors.4 Before filing a motion to convert or dismiss or for relief from the stay, creditors must investigate to determine whether there has been a default or whether the delay in distributions is contemplated by the plan or consistent with local practice.


In most jurisdictions, an inquiry to the Chapter 13 trustee’s office by telephone, mail or computer is the first step to determine why a creditor is not receiving payments. The Chapter 13 trustee has a statutory obligation to provide information to creditors.5 In most jurisdictions, the trustee’s office is set up to efficiently and courteously provide information about payments to creditors under confirmed plans.


Absent local rule or order to the contrary, Bankruptcy Rule 3010(b) instructs the trustee not to make a payment to a creditor in an amount less than $15. The funds not distributed to a creditor are accumulated until they aggregate $15. Especially during the early stages of a Chapter 13 case when priority and secured claim holders are receiving the bulk of payments and the debtor is, for example, paying arrearages on a home mortgage, the amount available for unsecured claim holders when prorated among allowed claims will often be less than $15 per claimant and will not be distributed. Creditors persist in the mistaken belief that they will receive a distribution immediately after confirmation and every month thereafter. This simply isn’t true, especially for unsecured claim holders and especially in cases in which the dividend is small.


Creditors often do not receive payments because they have failed to file a proof of claim or because some untoward event has befallen the claim filed by the creditor. Strange as it seems, a great many creditors, especially unsecured claim holders, fail to file proofs of claim in Chapter 13 cases. Absent the filing and allowance of a proof of claim, a creditor will not receive payments.6 The handling of proofs of claim by court clerks and Chapter 13 trustees inevitably leads to occasional mistakes. In some jurisdictions, proofs of claim are filed with the bankruptcy court clerk; in other jurisdictions, they are filed with the Chapter 13 trustee. When proofs of claim are filed with the clerk, often those proofs of claim are then physically transferred to the Chapter 13 trustee for processing. Proofs of claim are lost, and sometimes the records of the clerk’s office are not exactly the same as the records of the Chapter 13 trustee. The effect can be that a creditor will not be receiving payments even though the creditor has attempted to file a proof of claim. Creditors should determine whether the claim they think was filed was actually filed and recorded properly before commencing attack on the confirmed plan.


In some districts, the Chapter 13 trustee periodically produces a report of receipts and disbursements in each active case. This report may be filed with the court and is typically available for review at the trustee’s office or on-line. Sometimes these reports are kept together in the clerk’s office or in the trustee’s office for easy review by creditors. In other districts, the periodic reports are filed in each Chapter 13 case file. In a few districts, the periodic report is mailed to debtors, to debtors’ counsel and sometimes to the U.S. trustee. A few districts are set up to send periodic reports to creditors upon request. In some districts, the Chapter 13 trustee sells copies of these reports to creditors. In more highly computerized districts, up-to-the-minute information on receipts and disbursements is continuously available by computer access, at the clerk’s office and/or at the office of the trustee.


A review of receipts and disbursements will usually reveal why a creditor is not receiving payments. If the creditor has failed to file a proof of claim, the trustee’s record will indicate “not filed” or a similar designation. If the debtor is not making the payments called for by the plan, the section of the report dealing with receipts will show a deficit. If some creditors are receiving payments and others are not, the coding on the trustee’s report will indicate that there are priority claims to be paid in advance of other creditors, or there may be a large arrearage to a secured claim holder that must be paid before unsecured creditors. The presence of a special claim like child support can explain why other creditors have received less than expected.


In many jurisdictions, secured claim holders are provided for with specific monthly payments through the plan.7 The delay between the filing of the case and the first distribution after confirmation builds into every case a period of months during which money is accumulated by the trustee but no payments are made to creditors. Some creditors will receive payments immediately after confirmation to make up for the months of missed payments, but other creditors, unsecured claim holders in particular, may not receive payments until the secured claim holders are current. Especially in a jurisdiction that routinely pays home mortgages through the Chapter 13 plan,8 the curing of default during the early months after confirmation may exhaust receipts from the debtor, delaying distributions to some other creditors. This delay may be a basis for objection to confirmation,9 but after confirmation this delay typically is not a default under the plan. The expectations of creditors may be to the contrary, and only through some investigation can the creditor identify the cases in which the debtor has not performed.


1  See §§ 195.1 [ Percentage of Payment ] § 108.3  Percentage of Payment and 349.1 [ Claims Not Provided for by the Plan or Disallowed under § 502 ] § 158.5  Claims Not Provided for by the Plan or Disallowed under § 502.


2  See § 113.7  Order of Payments to Creditors before BAPCPA and § 113.8  Order of Payments to Creditors after BAPCPA./p>


3  In Chapter 13 cases filed after October 22, 1994, most claims for alimony, maintenance or support are priority claims entitled to full payment through a Chapter 13 plan. See 11 U.S.C. § 507(a)(7), as amended by Bankruptcy Reform Act of 1994, Pub. L. No. 103-394, § 304, 108 Stat. 4106 (1994), discussedin § 73.2  What Claims Are Priority Claims?, § 73.3  Priority Claims Added or Changed by BAPCPA, § 88.4  Alimony, Maintenance and Support, § 88.5  Domestic Support Obligations Assigned or Payable to Government: § 1322(a)(4) after BAPCPA§ 136.20  Alimony, Maintenance and Support in Cases Filed after October 22, 1994 and § 136.21  Domestic Support Obligations after BAPCPA.


4  See § 73.8  Special Provisions for Attorneys’ Fees, § 73.9  Attorney Fees after BAPCPA, § 136.6  Debtors’ Attorneys’ Fees before BAPCPA and § 136.7  Debtors’ Attorneys’ Fees after BAPCPA.


5  11 U.S.C. § 1302(b)(1) requires the Chapter 13 trustee to perform the duty specified in 11 U.S.C. § 704(7), “furnish such information concerning the estate and the estate’s administration as is requested by a party in interest.” See §§ 58.1 [ Know the Trustee’s Operating Procedures ] § 53.1  Know the Trustee’s Operating Procedures and 66.2 [ Working with the Chapter 13 Trustee ] § 56.2  Working with the Chapter 13 Trustee.


6  See § 288.1 [ Failure to File Proof of Claim ] § 135.5  Failure to File Proof of Claim.


7  See § 78.2  Calculating Payments to Secured Claim Holders, § 80.14  Providing for and Accounting for an Unprotected Mortgage: Modifying, Curing Default, Maintaining Payments and Combinations§ 80.15  Unsecured Home Mortgages after BAPCPA, § 113.7  Order of Payments to Creditors before BAPCPA and § 113.8  Order of Payments to Creditors after BAPCPA.


8  See § 53.10  Make Payments to Creditors Unless Plan or Confirmation Order Provides Otherwise, § 54.6  Compensation on Direct Payments by Debtor, § 74.8  Direct Payment of Secured Claims by Debtor before BAPCPA, § 74.9  Direct Payment of Secured Debt after BAPCPA§ 85.6  Direct Payment of Mortgage or Payment by Trustee and § 89.1  Direct Payments by Debtor.


9  See § 74.12  Lien Retention before BAPCPA§ 74.13  Lien Retention after BAPCPA, Including in No-Discharge Cases, § 113.7  Order of Payments to Creditors before BAPCPA and § 113.8  Order of Payments to Creditors after BAPCPA.