Trustee Payment Distribution

Today's blog is posted in response to an email I received asking how a bankruptcy trustee distributes payments it receives from debtors. The answer is that the terms of the Chapter 13 Plan that is approved by the Court control how the Trustee distributes the money.

In a typical Chapter 13 Plan, the administrative costs are paid first. In some districts this means that ALL administrative costs are paid before anything is paid to any creditors. In most jurisdictions, the administrative costs are paid a little bit per month and the remaining money is then divided pro rata among the other classes of creditors depending on priority.

First priority are administrative costs which include things like the Trustee's administration fee, outstanding attorney fees and costs and things like that. Next, secured creditors are paid. If there is more than one secured creditor and the Plan does not specify a "set" payment to a particular creditor, then the secured creditors would share the money that is available after administrative costs pro rata. This means that the largest claim gets a bigger portion of the money. The exact amount is determined by figuring out a ratio of the claim to the total of the claims in a particular class. The creditor then gets that percentage of the debtor's payment each month. The next class of creditors that would be paid are priority unsecured creditors and once those claims are paid in full, general unsecured creditors than begin to get paid, pro rata.

An ex-spouse who is owed child support or maintenance payments is a priority unsecured creditor. This creditor has priority over general unsecured creditors like credit card companies, medical providers, utility companies, etc... There are other priority unsecured creditors, but a detailed discussion of all of them is beyond the scope of this blog.

After all the secured and priority unsecured creditors are paid in full, then general unsecured creditors can start sharing, pro rata the money. In some plans there are separate classes of unsecured creditors, so each class could be treated differently. In the basic case, all unsecured creditors are treated the same and each creditor gets a pro rata share of the money. Remember, pro rata means that each creditor gets the share that represents the proportionate share its total claim has to all claims.

I'll leave you with an example. Assume 3 creditors, A, B and C. Creditor A is owed $5,000, Creditor B is owed $3,000 and Creditor C is owed $2,000. Assume the Debtor's Plan pays $300 per month and that there are no remaining administrative costs. Creditor A will get $150 of the $300 (50% of $300 since its $5,000 claim is 50% of the total general unsecured debt), Creditor B will get $90 (30% of $300, since its $3,000 claim is 30% of the total general unsecured debt), and Creditor C will get $60 (20% of $300, since its claim is 20% of the total general unsecured debt).

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Chapter 7 bankruptcy protection

Gain peace of mind with Chapter 7 bankruptcy protection from Legal Helpers. As the largest and most experienced Chapter 7 bankruptcy firm in America, we have represented over 40,000 clients, helping them eliminate over $500,000,000 in debt.

We concentrate on the field of Chapter 7 bankruptcy law with locations located throughout the country. Our mission is to provide excellent service by highly experienced Chapter 7 bankruptcy attorneys at an affordable fee. Legal Helpers bankruptcy attorneys have the experience and background to explain your alternatives and suggest solutions to your financial problems.

Get a fresh start with Chapter 7 bankruptcy protection.

Legal Helpers offers a free 24-hour Chapter 7 bankruptcy information hot line to answer many of your questions. Additionally, our bankruptcy attorneys answer the phones six days a week and evenings so they are always available to our clients. Legal Helpers can help you stop garnishments, repossessions, foreclosures, lawsuits and creditor harassment.

With our state-of-the-art computer systems, we can have your records on computer within seconds, allowing you the highest level of client service with low flat fees and payment plans. Unlike many other bankruptcy law firms, we offer you a choice of several different payment methods. Our flat fees allow you to pay through a flexible payment plan that suits your budget. When you hire our bankruptcy lawyers we will start working for you right away.

Once you have contacted us, you can stop paying your creditors immediately. We will take all of your creditor calls so you do not have to deal with any more harassment. Our law firm will quote you an estimate of our fee without obligation.

National Reputation for Excellence!

Legal Helpers aggressive representation and extensive experience has earned us a national reputation for excellence in the representation of debtors in financial distress. Our reputation is based upon a combination of affordable fees, highly knowledgeable attorneys and excellent client service.

There is Life After bankruptcy!

Here are some tips on successfully reestablishing your credit.

• Open a checking or savings account. Lenders may look at this to determine if you can responsibly handle money.

• Apply for store and gas credit cards that you would normally pay cash.

• Pay your utility bills and rent on time for at least a year.

• Find a friend or relative to cosign for you on a loan and pay it on time.

• Apply for a secured card where you deposit cash and charge against it. Pay advances back over two months so that they will be reflected as positive marks on your credit report.

Visit our Resource Center for more tips and information for your road to a fresh start. The Resource Center contains, articles on debt related issues, changes in the law, a friendly lenders list, glossary, and information on how to correct your credit report.

Legal Helpers has helped over 40,000 clients eliminate over $500,000,000 in debt. We provide a combination of affordable fees, highly experienced lawyers and excellent client service. Enjoy free consultations with lawyers answering the phones six days a week and evenings.

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Bankruptcy lawyers: experience is the key for selection

For experienced bankruptcy lawyers, call on the Legal Helpers

The bankruptcy lawyers from Legal Helpers have serviced over 40,000 clients and eliminated over $500,000,000 in consumer debt. Our staff represents some of the most experienced consumer bankruptcy lawyers in the country.

An experienced bankruptcy lawyer at a reasonable fee

As the largest consumer bankruptcy law firm in the country, rest assured that each Legal Helper's bankruptcy lawyer has the experience and background to suggest solutions to your financial problems. Our bankruptcy lawyers specialize in consumer Chapter 7 and Chapter 13 bankruptcy law and are available to answer questions six days a week and evenings. In addition, we provide a 24-hour information hot line and answers to common questions on our user-friendly web site.

Click here for Our Free Legal Evaluation Form

At Legal Helpers, consumer debtors don't have to pay excessively for a fresh start. We provide high quality legal representation at a fraction of the cost charged by most other bankruptcy lawyers. By combining the highest levels of technology along with experienced bankruptcy attorneys, we are able to save money and we pass this savings on to our clients.

Unlike many other bankruptcy law firms, we offer you a choice of several different payment methods. Our flat fees allow you to pay through a flexible payment plan that suits your budget.

We provide low flat fees that allow you to pay through a flexible payment plan that suits your budget. Our law firm will quote you an estimate of our fees without obligation. In Chapter 13 bankruptcy case, most of your fees are paid, interest free, through your Chapter 13 bankruptcy repayment plan. Whatever our fee, our priority is get you the debt relief you need.

Visit our Bankruptcy Resource Center

Legal Helpers has one of the most sophisticated bankruptcy and debt consolidation practices because we rely on current information within the industry. Our Bankruptcy Resource Center offers detailed information about the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. The center also offers helpful links regarding rebuilding your credit, protecting your property, articles and a glossary of terms. Everything you need to begin your road to a fresh new start.

Mission to protect the rights of consumers

Legal Helpers' goal is to provide excellent service by highly experienced attorneys at affordable fees. In addition, we offer free consultations and over 60 convenient offices located throughout Arizona, California, Florida, Illinois, Indiana, Michigan, Missouri, Ohio, Oregon, Pennsylvania, Virginia and Wisconsin.

After a vehicle finance company repossesses your car they auction it to reduce their loss. You are still responsible for the balance on the car, called a 'deficiency balance'. Legal Helpers can eliminate your liability for the entire deficiency balance. Remove the risk of lawsuits, foreclosure and garnishments by filing a Chapter 7.

Whether you are trying to stop creditor harassment, eliminate repossession debts, stop garnishments or end lawsuit suspensions, we can help. As the nationwide leader in Chapter 7 and Chapter 13 filings, we can help you deal with your debts and gain a fresh start in life.

Legal Helpers is the largest and most sophisticated debt consolidation law firm in America. We have helped over 40,000 clients discharge over $500,000,000 in debt. By combining a state-of-the-art computer network system with the knowledge of our legal staff, we are able to pass a considerable cost savings on to our clients.

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MAKING ENDS MEET- Stretching Your Income Further

While bankruptcy can eliminate many of your debts, you may still find it difficult to make ends meet, even without all the credit card and medical bills. Sometimes it is tough finding enough money to get through the month. Here are some tips to help make your monthly income stretch a little further:

Home Sweet Home:If you're like most people, housing is your largest single monthly expense. Lowering your housing costs can make a big difference in your monthly budget. Homeowners with a mortgage may find it hard to lower their monthly payment. However, if you rent, consider getting a roommate to share housing costs. Shop around to see if you can get a better deal on an apartment.

Getting Around: Having a car or truck is expensive. On top of car payments, you have to pay for repairs, maintenance, insurance and gas - costs that can really add up. If you live in a large city with public transportation, decide whether you need a car at all. If your family owns more than one vehicle, consider whether you could get by with just one car. Getting by with fewer (or no) vehicles can translate into big savings.

Bright Ideas: Utilities - your gas, electric, cable and telephone bills - are a major factor in any budget, especially in the winter when heating costs are high. Making small sacrifices can result in big savings on your utility bills. Instead of picking up the phone, try writing letters (or using e-mail) to keep in touch with friends and family. Remember to turn the heat down and turn off lights when you are leaving the house for long period of time. You can even conserve energy while you're at home. Try putting on a sweater and an extra pair of socks when you're cold, rather than automatically reaching for the thermostat.

You've Got To Eat: Instead of going out to eat with friends, take turns cooking for each other at home. Pack a lunch for work so you don't have to buy lunch from a restaurant every day. Take your own snacks and sodas so that you can feed yourself without

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First-Aid For Your Credit

One of the best things about getting a fresh start through bankruptcy is it allows you a chance to rebuild your credit rating. However, your credit rating won't improve as long as all your old, negative information is still listed with credit reporting agencies.

All three major credit reporting agencies collected information about you before your bankruptcy, including late payments, charge-offs and judgments. After your discharge, all these debts should be listed on your credit report as "Included in BK." If they are not listed that way, they appear to still be active accounts in collection status, which could limit your ability to get credit.

Unfortunately, creditors rarely report updates in credit records after a bankruptcy discharge. A couple of months after your discharge, you should order credit reports to make sure all your discharged debts are listed as being included in your bankruptcy.

You can contact the three major credit reporting agencies at the following numbers:
Trans Union (800) 888-4213
Equifax (888) 397-3742
Experian (800) 997-2493


Here are some other tips to help you rebuild and improve your credit rating after your bankruptcy discharge:

Give Yourself Credit:
The best way to rebuild your credit after a bankruptcy is to establish accounts that will report positive information on you. Get a single credit card with a small credit limit, use it very sparingly and pay the entire balance every month before the due date.

Read the Small Print:
After your discharge, you may get several offers for credit cards and other loans. Know what you're getting into before you accept these offers. Make sure you understand the interest rate, any other fees and the expected payments before you open a new credit account.

Prove It:
Even after your debts are discharged, you may need proof that you don't owe these creditors any more. Keep a couple of copies of your discharge papers from the court so that you can prove certain debts were discharged if you need to in the future.

Pay on Time:
Most credit cards and utilities report late payments to credit reporting agencies. If you make late payments every month, potential lenders will continue to see you as a poor credit risk. Also, most credit cards add a late fee whenever you're late with a payment. Avoid late fees and reports of late payments by paying your accounts in full before the due date.

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Life After Bankruptcy: Emergency Fund, What is it? Do I need it?

Setting up an Emergency Fund is the first major financial goal individuals emerging from a bankruptcy should strive towards. Lets face it, financial emergencies happen all the time, and if your living paycheck to paycheck and don't have an emergency fund saved up, it's going to be very difficult to stay afloat through the tough times. Unexpected job loss, large medical expenses, additions to the family, unforeseen home and auto repairs are all examples of expenses that can happen at any time. Ideally, you should save at least 3 months worth of your expenses in your emergency fund. This will allow you to avoid having to use credit cards if an emergency does occur and hopefully this fund will allow enough time to reestablish any loss of income.

Opening a separate savings account for your emergency fund is the best way to keep the savings just for emergencies. Saving your money in your regular checking account will make it too accessible and easy to spend. Your money will stay easily accessible in a savings account if you do suddenly need to use it. The emergency fund must only be used for real emergencies, spending the money frivolously defeats the whole purpose. After the emergency fund is established, you can start putting disposable income towards purchases or other investments. Some people find it easier to restrict their access to the emergency fund by not carrying an ATM card with them to prevent impulse buying. Many people find it best to automatically deduct a portion of their paycheck into a savings account that is used only for emergencies.

You're probably asking yourself? "How do I save the money, things are so tight already." Unfortunately, for some people, saving money is impossible and the underlying problems of the budget need to be addressed first. However, the majority of Americans could save a substantial amount of money over time by cutting back on small day to day expenses. Just cutting a few expenses a day can add up over time. Five dollars a day in savings can add up to nearly two thousand dollars after just one year of savings, and the money will only continue to grow in an interest bearing savings account. Five dollars could be saved in many different ways: getting coffee from work instead of the local gourmet coffee shop, carpooling to work and splitting gas money, bringing your lunch to work instead of ordering out, avoiding all ATM service fees by only using your bank's ATMs, or renting a movie rather than a night at the movies. The best way to see were you can cut back on day to day expenses is by making a detailed monthly budget itemizing every single expense, no matter how small the expense maybe. A review of this budget may surprise you, but nonetheless, show you just how much you are spending on small day to day expenses that can add up to a lot of money over time.

When the emergency fund is established, amounting to at least three months of your monthly expenses, you will have the completed the first major step of financial well being and will be able to survive unexpected expenses arise so often. It also will help establish a pattern of savings, which can be directed to other financial goals in the future. In the end, this ultimately helps establish a pattern of savings that can aid you in achieving your financial goals.

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Balance transfers, what you should know

One common trap people fall into when trying to eliminate debt is the "balance transfer", transferring debt on one credit card to another credit card which has a lower annual percentage rate, or APR. This seems like a quick solution to try to dig yourself out of debt, but like most quick fixes, balance transfers have their pitfalls consumers should be wary of. Here are 6 things you should ask yourself before doing a balance transfer:

How long will I benefit from the lower rate?

As a general rule, the introductory APR that seems so appealing to consumers typically only lasts 6 months, sometimes a year. After that, the APR will jump to a higher percentage, maybe even higher than you were initially paying before you did the transfer. If you cannot pay the balance off in the time before the rate changes, then it may actually hurt you to do the transfer.

What do I have to do to keep the rate low?

Most of these lower rates have hidden clauses you must abide by to keep the low rate. This can include making new purchases on the card, paying your bills on time and so on. Some of the more unscrupulous companies write broad clauses that basically enable them to increase the rate whenever they are so inclined. Be sure to make yourself aware of these prior to signing up.

Is the interest rate for new purchases the same as the interest rate on the transfer?

Most people that do balance transfers probably intend to never use the card for new purchases, then get into trouble and are forced to buy necessities with it. Some cards that offer this low rate on balance transfers offer the same low rate for new purchases. However, many have a higher APR for new purchases. To compound this problem, when you make payments, the creditor typically applies these payments to the lower interest balances, which makes it harder to pay off the debt.

Do I have to pay a balance transfer fee?

Most cards will charge you 3% of the transfer. Be sure you calculate this when deciding if the transfer is in your best interest.

Is a balance transfer different than a cash advance?

Yes! Cash advances let you take money on credit for any purpose, while balance transfers only allow you to move a balance from one card to another. Balance transfers generally have a higher fee, but lower interest rate, and cash advances, vise versa. Make sure you investigate all options before you make your decision.

Do I even qualify for the lowest interest rate?

Most creditors entice you by dangling the lowest possible interest rate in your face without telling you that most people don't qualify for that rate. Before you go through with it, find out what your interest rate will be. You may find out that it isn't any lower than your current rate, and therefore not in your best interest.

The moral to the story is:

Many people find themselves just as bad off, if not worse, as a result of a balance transfer. It sometimes ends up being more of a stall tactic than an actual solution to debt problem. So, make sure you are choosing the best option for you. If you determine that you are not able to solve your debt problems on your own, please call 888-743-5787 for a free consultation regarding your financial situation.

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