Your creditors are people or companies to whom you owe money. There are three general classes of creditors: secured, priority, and unsecured. These terms are used throughout your Chapter 13 case. It is important that you understand these different classifications. You should discuss these with your attorney if you have any questions.
A secured creditor is one to whom you have pledged property or collateral to secure the debt. Most house and car loans have the house or car pledged as security or collateral. These debts are secured.
Examples of priority creditors include those you owe money for income taxes, payroll taxes, sales taxes, and past due child support. Your Chapter 13 plan must prove that all priority creditors will be paid 100% of the debt owed to them.
General unsecured creditors are those whom you owe but who have no property pledged as security or collateral. Generally the loans were made solely on the basis of your promise to pay. These types of creditors include credit cards, signature loans, medical debts, store charges, student loans, etc. Generally, the Trustee will make payments to the secured and priority creditors before making any payments to the general unsecured creditors. The payments to the general unsecured creditors are made on a pro rata basis. It is often months before a general unsecured creditor will receive any payment.
Within general unsecured creditors there may be a subclassification where there is a co-signer or other special classes of general unsecured debt that the Court allows to be paid differently from other general unsecured creditors. If you have a co-signer or guarantor for any of your consumer debts, you may want to classify such debt for 100% repayment if permitted by the Court. If you do not fully satisfy any debt that is co-signed or guaranteed, the creditor may ask the court for permission to pursue the co-signer or guarantor for the difference.
There are some debts that are not discharged at the end of your Chapter 13 plan unless they are paid in full. These may include student loans, child support, alimony or maintenance, some types of tax debt, and money owed because of death or personal injury you caused in the operation of a motor vehicle while under the influence of alcohol or drugs. Some of these debts may be paid in full during your Chapter 13 plan. Others may not be paid in full. Others may not be paid in full unless all of your general unsecured creditors are paid in full. You may still owe some of these debts after you make all the payments required and your bankuptcy case is complete. You should discuss this issue with your attorney.
All creditors must file a Proof of Claim with the Bankruptcy Clerk in order to receive distributions from a Chapter 13 plan. Unsecured creditors have ninety (90) days from the Section 341 First Meeting of Creditors within which to file a claim. Governmental agencies have up to 180 days from the filing of the case to file a claim.
The Trustee may not pay creditors who have not filed claims. You may wish to file a proof of claim for creditors who have not done so. You should contact your attorney to discuss whether you should do this.
The Trustee will pay the creditor based on the confirmed Chapter 13 Plan. If a claim is filed and you disagree with the amount claimed, the type of claim, or both, you should contact your attorney. Your attorney may decide to objection to certain claims. The written objection must be filed with the Clerk of Bankruptcy Court and must be served on the creditor/creditors attorney. If you find a creditor you forgot to include in your bankruptcy, contact your attorney immediately.
Unless your plan permits the Trustees office to pay certain creditors, the Trustees Office may not pay any claims until your case is confirmed by the court. The plan payments that you are required to make to the Trustees office before your case is confirmed are either held by the Trustee for future disbursement or paid to creditors as stated in your plan.
After the court signs the order confirming your Chapter 13 plan, the Trustees office will begin distributions to your creditors. These distributions are made once a month.
The Trustees office will send you a periodic report of disbursements to creditors. If you disagree with disbursements, contact your attorney immediately. You should be aware that creditors have the right to transfer their claims to other creditors. Many times there will be a transfer of the claim to another creditor.
You should make sure that you have provided your attorney with a complete list of all creditors. Creditors you fail to list when you file your bankruptcy case can cause you substantial problems. If you discover that you have failed to list a creditor to whom you owed money at the time that you filed your bankruptcy case, you must let your attorney know the details immediately so that your attorney can correct the situation immediately. Your attorney can try to include the creditor in amended schedules and plan and protect you. Time is important, so make sure to contact your attorney as soon as you realize that you have not listed all of your creditors. Any delay could cause you a significant problem with successful completion of your Chapter 13 plan and receipt of your discharge.
If the creditor is someone you did not owe money to at the time you filed bankruptcy, but whom you owe money after the filing, that creditor is generally referred to as a post-petition creditor. Of course, you should not have many post-petition creditors because you are not permitted to incur debt while you are in a Chapter 13 without the written approval of the Trustee or the Court. You should tell your attorney immediately about any post-petition creditor so that your attorney can review your plan and make any modifications to your plan that may be necessary to protect you.