Local Rule Rule 3091-1: Disbursement of Insurance Proceeds

Rule 3091-1. Disbursement of Insurance Proceeds A. No Court Approval Needed. If the Debtor suffers a casualty loss and that loss is covered by insurance, the debtor does not need the approval of the Bankruptcy Court for the insurer to pay funds directly to the loss payee or trade vendor for the repair/replacement of the property pursuant to the terms of the insurance contract.

B. Court Approval Needed. If the Debtor suffers a casualty loss, the loss is covered by insurance and proceeds are paid to the debtor, debtor shall not pay such proceeds to the loss payee or trade vendor for the repair/replacement of the property or otherwise dispose of such proceeds without an order of the court.

C. Plan Repayments Continue to Loss Payee. If any creditors being paid through the trustee's office is the loss payee on the insurance policy and funds are distributed to that creditor from the insurer or the debtor, the trustee shall continue to disburse payments to that creditor pursuant to the terms of the confirmed plan or shall continue to make adequate protection payments unless:

1. The debtor files an objection to the proof of claim and the Bankruptcy Center enters an order directing the trustee to cease making payments to the creditor or the order reduces the allowed amount of the claim (any such objection should state with specificity the treatment of both the secured and unsecured portions of the claim);

2. The creditor withdraws its claim or amends its claim; or 3. The creditor notifies the Chapter 13 trustee in writing that its claim has been paid in full.

D. Excess Insurance Proceeds Received by Debtor. If the debtor receives any insurance proceeds in excess in $3,500, after payment of the loss payee or in excess of funds paid to trade vendors for the repair/replacement of the property, the debtor shall not dispose of such excess proceeds without an order of the court.