New York bankruptcy lawyers aren’t always known for their math skills. In fact, there are many jokes about lawyers as liberal arts majors who can’t do math or science. The issue of lawyers and math, however, is quite serious in consumer bankruptcy, which can be “numbers intensive.” Unfortunately, easy math mistakes can plague a chapter 13 New York bankruptcy case—often to the point of dismissal.
Take this example: Debtor promises to pay $18,000 to the creditors over 60 months. That should be $300 per month, but sometimes the parties make mistakes and a plan that promises less is confirmed. It could be just a simple typo: $280 a month for 60 months to pay $18,000. No one realizes it’s wrong until they check the math.
But once the error is found, the trustee will demand the debtor amend the plan to cover the missing amount. If an amendment happens before the first payment is made (or if the debtor makes a technical overpayment), then it shouldn’t be much of a problem, assuming the debtor can afford the higher payments to begin with. If payments have already been made, though, then the entire plan will need to be recalculated—including compensating for prior payments.
A bankruptcy lawyer who isn’t good at math might simply multiply the numbers all over again, albeit correctly: $300 times 60 payments, but this won’t work. If the debtor made two $280 payments before anyone noticed the error, then the debtor will need to make up for the cumulative difference between the prior payments and the current one: $20 for two payments. These will need to be distributed across the remaining payments or paid up front to ensure the plan is on track. Overall, this comes out to $300.69 per month. Usually the debtor will round it up to the nearest $1, $5, or $10 to keep the numbers even.
In other words, when amending the plan, subtract the amount already paid from the amount promised and then divide by the number of remaining payments. Anything else will cause a mess, including possibly a default or a dismissal.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Chapter 13 Bankruptcy Lawyer Brooklyn NY Bruce Weiner for a free initial consultation.