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US Supreme Court issues opinion in favor of Chapter 13 bankruptcy debtor

Court Issues an Opinion in Favor of Chapter 13 Debtor

In Harris v. Viegelahn, the United States Supreme Court issued a unanimous opinion this week in favor of a debtor in Chapter 13. The court held that a chapter 13 trustee must return any post-petition wages to the debtor received under plan not already disbursed to creditors.

As a background, Petitioner Harris was behind on his mortgage payments on his house to Chase. Wanting to keep his house, Harris filed a Chapter 13 bankruptcy, where the court approved a plan allowing him to resume making his mortgage payments to Chase as well as pay $530 to the Chapter 13 trustee, Viegelahn. Trustee Viegelahn made monthly payments to Chase to pay down the mortgage arrearages owed by Harris. But when Harris fell behind on his mortgage payments again, Chase moved forward and foreclosed on his house.

After the foreclosure, Harris continued making the $530 Chapter 13 plan payment, but Viegelahn stopped making the arrearage payments to Chase. The funds set aside for the arrearage payments that were no longer being made started to accumulate. Harris then converted his Chapter 13 bankruptcy to a Chapter 7. But the trustee, Viegelahn distributed $5,519.22 in Harris’ withheld wages to Harris’ creditors. Harris asked the Bankruptcy Court to refund the accumulated wages back to Harris rather than to the creditors.

The US Supreme Court eventually heard the matter. They held that “a debtor who converts to Chapter 7 is entitled to return of any post-petition wages not yet distributed by the Chapter 13 trustee.”

Why Hire a Chapter 13 Bankruptcy Utah Attorney to Save My House?

When a homeowner falls behind on mortgage payments, the homeowner may try to save the house by attempting a loan modification. Most loan modifications are eventually denied, however. And during the loan modification trial, the homeowner inevitably has fallen further behind on the mortgage payments. If the house has no equity, it may be better to consider short selling the house and moving on. But in situations where the house has equity, a homeowner may consider doing as Harris mentioned above and file a Chapter 13 and wrap up missed mortgage payments into a Chapter 13 plan. By doing so, the bankruptcy trustee can allow the homeowner up to 5 years to pay back arrearages owed to a mortgage company.

Contact an Experienced Chapter 13 Attorney

Call an experienced Chapter 13 bankruptcy Utah lawyer at Pearson Butler at (801) 495-4104 and schedule a free bankruptcy consultation and take the first step toward a life free of uncertainty and debt.

We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.