§349 Required that Funds held by Chapter 13 Trustee be Paid to the Debtor Upon Dismissal

§349 Required that Funds held by Chapter 13 Trustee be Paid to the Debtor Upon Dismissal

This Chapter 13 case is before the Court on the Application for Administrative Expenses filed by Debtors’ counsel Samantha Valenzuela.

The Debtors  filed a joint petition in bankruptcy pursuant to Chapter 13 in this Court on March 9, 2016. Husband is disabled and receives $996 per month in social security disability payments. Wife is a cashier at McDonalds who reports gross income of $1,148 per month. The Debtors filed a Chapter 13 Plan calling for bi-weekly payments of $261 for 58 months.

The Debtors’ Plan proposed that they keep two vehicles: (1) a 2004 Mercury Grand Marquis, which they valued at $3,700, against which they owed $7,642; and (2) a 2010 Toyota Camry, which they valued at $9,225, against which they owed $15,729. The Debtors’ Plan proposed specified monthly payments of $200 for the Mercury and $297 for the Toyota, a total of $497 per month in car payments alone.

The Plan provided for a $3,000 attorney fee to be paid to Valenzuela but no dividend to unsecured creditors. This Court allows a “no look” fee of $3,000 for Chapter 13 debtors whose income is below the national median. That is, the Court does not require Debtors’ counsel to file a formal fee application. Rather, an attorney fee in the amount of $3,000 is allowed presuming that cases are sufficiently fungible so as to not require individual fee applications.

On Schedules I and J, the Debtors reported total monthly income of $2,306 and expenses (excluding car payments) of $2,148, leaving net income of $158 per month. How the Debtors would make bi-monthly payments of $261, with net income of only $158 is a mystery that was never solved. The Debtors’ Chapter 13 Plan was confirmed without objection on July 14, 2016. (Doc. 26). On February 10, 2017, the Chapter 13 Trustee moved to dismiss this case for the Debtors’ default in making plan payments. No response was filed and the Court granted the motion on March 7, 2017.

Valenzuela has been paid $2,006.28 of the $3,000.00 to be paid under contract. The Chapter 13 Trustee held $94.39 at the filing of the application, which Valenzuela wants paid to her. Valenzuela states that she filed papers with the Court and attended a meeting of creditors and a confirmation hearing—which are things expected of any lawyer who represents a debtor in bankruptcy court. Of interest here, Valenzuela has a provision in her contract which provides that upon dismissal, any funds held by the Trustee and paid over to the Debtors will be paid to Valenzuela. Yet, Valenzuela is requesting that the Court order the Trustee to pay funds on hand over to her.

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