Re:Early Payoff
Posted: Fri May 01, 2009 9:05 am
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Sylvia:
It may depend on how the early payoff will occur. If the debtors have had
an increase in income or a bonus at work or something like that, you have to
be careful if the plan is less than 100%. The trustee and court will only
allow payoff early if the dividend is increased to the unsecureds, and if
the trustee is alerted to the increase in income he or she could move to
require modification ANYWAY to increase the dividend to unsecureds.
I have had two cases where the debtors were offered a loan from a family
member to retire the plan early, or borrowed the $ from a lender who took
security on the debtors' exempt assets (the house). In those cases I
successfully petitioned the court to modify the plan to pay it off early for
less than 100%. If the debtors are going to borrow from friends or family
all you need is a motion to modify, and be explicit about the source of
funds in your motion. Make sure your order specifically states the when the
debtors tender a specific amount to the trustee, the plan obligations are
retired.
If the debtors are going to borrow against estate assets, you need both a
motion to modify and a motion for permission to borrow. I think I combined
those in a single motion when I did it a few years back, and it was fine,
but I think local rules frown on combining he requests. That was a Zurzolo
case for what its worth.
-Jeffrey B. Smith
CURD, GALINDO & SMITH, L.L.P.
301 East Ocean Blvd. #1700
Long Beach, CA 90802
(562) 624-1177
(562) 624-1178 fax
(310) 993-6560 cellular
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