New Requirements in the Northern District of NY Bankruptcy Court

In the Northern District of New York, the Chapter 13 standing trustee recently received approval from the bankruptcy court to require the use of a uniform model plan and confirmation order. The new model plan and confirmation order have a provision that may create problems for certain creditors.

In this district, it is common for debtors to make regular monthly payments directly to creditors while pre-petition arrears are paid by the Chapter 13 trustee from funds that it receives from the debtor. The new model plan provides that “creditors being paid directly by the debtor under the plan shall continue to send customary payment coupons, statements, and notices to the parties making ongoing payments. Debtor agrees that such actions shall not constitute or form the basis for finding a violation of the automatic stay.” 

The new plan language is not clear whether pre-petition arrearages can be included in the customary statements sent by the creditor. Some creditors may not have the ability with its computer systems to send current monthly statements without showing the pre-petition amount past due on the same statement. If the pre-petition arrearage amount is included on a current monthly statement, debtors may view this as an attempt to collect and file a motion for sanctions. A creditor cannot attempt to collect a pre-petition debt while a bankruptcy case is pending without approval from the bankruptcy court. 

If a creditor is unable to separate pre-petition arrears from its regular monthly statement, it is important that they bring this matter to the attention of the court and the Chapter 13 trustee.  Creditors should file an objection to the model plan.  They could request the court insert language into the plan that allows a creditor to send its regular monthly statement that includes past due pre-petition arrears.  It is not clear how the bankruptcy court will rule on this issue.  However, it is important that creditors be proactive with this issue. 

Weltman, Weinberg, & Reis Co. LPA, as well as other creditors’ counsel practicing in the Northern District of New York Bankruptcy Court, will continue to vigorously represent clients and attempt to amend this language.  We will keep our clients updated as to any new developments.