Local Rule L.R. 3021: Distribution on Claims in Chapter 13 Cases.

L.R. 3021 - Distribution on Claims in Chapter 13 Cases. A. Distribution Following Relief from the Automatic Stay. 1. Certain Lienholders Not Entitled to Share in Subsequent Distributions. In a Chapter 13 case, if a creditor obtains an order for relief from the automatic stay of Bankruptcy Code § 362 to foreclose on collateral, the Trustee will cease distribution on the claim of such creditor and cease payment on all claims secured by the property against which relief from the automatic stay is granted (except claims for sewer service or real estate tax debts) until such time as: a. an accounting of the proceeds of the collateral has been filed with the Court and a copy of the accounting has been served on the Trustee; and b. the creditor files an amended claim, stating the amount of any unsecured balance to be paid by the Trustee through the plan. 2. Option to Receive Continued Distributions. A creditor whose claim was secured by collateral on which relief from the automatic stay has been granted may continue receiving disbursements under the confirmed Chapter 13 plan by obtaining an order for continued payment.

B. Distribution on Claims following Relief from the Automatic Stay against Co-Debtor. In a Chapter 13 case, where the debtor's plan provides for payment to a creditor on a co-signed debt, the Trustee will continue distribution notwithstanding relief from the automatic stay to pursue the co-debtor. The creditor who obtains relief from the automatic stay to pursue a co-debtor must account to the Court, the debtor, and the Trustee for all funds recovered from the co-debtor.

C. Post-petition Adjustments on Monthly Payments to a Creditor. Any Chapter 13 plan directing the Trustee to maintain regular monthly, post-petition payments on a claim may provide for the plan payment to the Trustee to increase in accordance with any adjustment in the loan agreement or contract. For the Trustee to adjust the amount distributed to the creditor for a claim not governed by the procedures set forth in Fed R. Bankr. P. 3002.1, either the debtor or the creditor must provide notice to the Trustee describing the adjusted monthly payment. The debtor or creditor must serve a copy on the Trustee if such notice is filed with the Court. Such direct contact by mail from such claim holders for purposes of providing this information will not be considered a violation of the automatic stay. Upon notice from the debtor or a holder of the claim of a change in the amount of a post-petition monthly obligation which the Trustee is paying under a plan, the Trustee will adjust the monthly distribution on such claim in accordance with such notice without the need for an amended plan or notice to other creditors.

D. Payments to Secured Creditors after Minimum Distribution to Unsecureds. If a Chapter 13 plan calls for a debt to be paid in equal monthly payments over a certain period of time, the Trustee will amortize the amount of the claim to receive full payment over the payment period and with the interest specified in the plan, and will pay that monthly amount to the creditor to the extent funds are available. However, the Chapter 13 Trustee may pre-pay future monthly payments to secured creditors prior to making disbursements to priority or general unsecured creditors as provided in the Mandatory Model Plan.

E. Payments to Attorneys upon Disbarment or Suspension. Upon written notice from the Court that an attorney is disbarred or suspended from practice by any court, the Trustee will stop payment of fees to that attorney in all cases in which the attorney is attorney of record. The Trustee will not hold or accrue any amounts of payment of that attorney's fees. The Trustee will send a letter to the attorney stating that payment of fees has stopped pursuant to this Rule. The attorney may file a motion seeking an order directing that payment of fees continue in spite of the disbarment or suspension. Such a motion may not be filed on negative notice and must be set for hearing and noticed to the Trustee and the debtor.

F. Chapter 13 Creditor Disclosure of Real Estate Mortgage Obligations. The holders of claims secured by real estate may provide accurate billing and account information directly to the debtor regarding any post-petition obligation to be paid directly by the debtor pursuant to the confirmed Chapter 13 plan, or to both the debtor and the Trustee when the post-petition obligation is paid by the Trustee pursuant to the confirmed Chapter 13 plan. Such direct contact by mail from such claim holders for purposes of providing this information will not be considered a violation of the automatic stay. It is the intent of this Rule to advise the debtors of their monthly mortgage obligations and to provide debtors with information regarding any adjustments made to the mortgage obligations pursuant to applicable non-bankruptcy law which may arise during the pendency of their Chapter 13 cases.

G. Application of Payments Secured by Real Estate in Chapter 13 Cases. Holders of claims secured by real estate must apply payments for mortgage payments accruing post-petition, whether made by the Trustee or by the debtor to post-petition monthly contractual mortgage obligations, including principal, interest, escrow obligations and other adjustments made to the mortgage obligation pursuant to applicable non-bankruptcy law, if not otherwise noted on the payment. Holders of claims secured by real estate must apply payments made by the Trustee for pre-petition arrearage claims to the balance of unpaid contractual mortgage obligations which accrued prior to the petition date if not otherwise noted on the payment.