The debtors, husband and wife, filed a joint petition for relief under chapter 13 of the Bankruptcy Code on June 4, 1993. With the petition the debtors filed their chapter 13 plan which provided for payment to the chapter 13 trustee of $450.00 per month for 41 months, from which the trustee was to pay creditors holding unsecured claims to the greatest extent possible, a so-called pool plan.

The debtors listed two creditors as holding secured claims: Chemical Mortgage Company, and Kentucky Finance Company. The plan proposed the debtors would maintain payments on the mortgage on their residence by direct payments to Chemical Mortgage Company. The plan indicated the value of the collateral securing the claim of Kentucky Finance Company was only $100 and that the claim should be allowed as secured in that amount. However, on recommendation of the trustee the claim of Kentucky Finance Company was allowed as a secured claim in the amount of $1,525.00, which has been paid in full, and as an unsecured claim in the amount of $622.29, which has been paid pro rata with other unsecured claims.

The debtors listed themselves as owing unsecured claims in the amount of $13,499.64, including a debt in the amount of $6,180.70 owed to North Forth Shenandoah, Inc., on a condominium formerly owned by the debtors. The debt to North Fork was scheduled as contingent, disputed, and unliquidated. However, since the claim had been reduced to judgment it obviously is a liquidated claim.

Prior to confirmation of the plan North Fork Shenandoah, Inc., by counsel, filed its claim, claim no. 1, in the amount of $6,180.70 + 17.97% from 7-5-87 based on a judgment obtained 7-20-90 in the Warren County, Virginia General District Court at Waynesboro, Virginia.

The abstract of the judgment accompanying the proof of claim indicates the interest rate on the judgment is 17.80% rather than 17.97%, but the parties have stipulated the latter percentage is correct. There is nothing in the record to support the stipulation that the interest rate on the judgment is greater than 17.80%. The plaintiff was awarded costs of $12.00 and attorney’s fees of 25%.

The proof of claim as originally filed by counsel for North Fork did not include a computation of the attorney fee and court costs, or pre-judgment interest from 7-5-87 to 7-20-90, or post-judgment interest from the latter date to June 4, 1993, the date of commencement of the debtors’ chapter 13 case.

The chapter 13 trustee treated the claim as an unsecured claim in the amount of $6,180.70 for purposes of distribution under the plan. Neither the chapter 13 trustee nor the debtor, who had scheduled the claim as disputed, objected to the claim. Accordingly, the claim is deemed allowed as filed. 11 U.S.C. § 502(a).

The report of the chapter 13 trustee considered by the court at the hearing on confirmation of the plan indicated the plan would result in payment of 100% of all claims dealt with by the plan. This was based on the supposition that the claim of North Fork was only for the principal amount of $6,180.70. At the conclusion of the confirmation hearing held October 13, 1993 the court confirmed the plan.

On November 29, 1995, after the plan had been in progress more than two years, and after having substituted counsel, North Fork Shenandoah, Inc. filed an amended proof of claim, claim no. 11, increasing the amount of its claim to $16,484.87, and indicating that as of 11-17-96, after credit for payments received under the plan, there remained due on the claim a balance of $11,303.87.

On December 7, 1995 the chapter 13 trustee objected to the amended claim and noticed the objection for hearing on January 22, 1996. The objection was grounded on a misunderstanding that the claim included interest that had accrued postpetition. However, only prepetition interest is asserted in the amended claim. Following the hearing the chapter 13 trustee filed a notice of withdrawal of his objection to the amended claim on the ground the claim appeared to be correct.

After withdrawing his objection to the claim of North Fork Shenandoah, Inc., the chapter 13 trustee ceased distribution to other creditors holding unsecured claims and paid all monies thereafter received from the debtors, less administrative expense charges, on the claim of North Fork Shenandoah, Inc. By the time the trustee started this practice in January 1996, the plan had been in progress approximately 27 of the 41 months proposed as the life of the plan.

Thereafter, on March 11, 1996, North Fork Shenandoah, Inc. filed a second amended proof of claim, claim no. 12, clarifying the amount of the claim as $16,484.87. The documentation supporting this second amended claim is identical to the documentation supporting the amended proof of claim filed November 29, 1995, claim no. 11.

Claim no. 12 appears to be a calculation of the amount of the claim as of the date of the commencement of the debtors’ chapter 13 case, whereas the calculation in claim no. 11 was arrived at after giving the debtor credit for payments received by the creditor under the plan. In this respect claims no. 11 and 12 are not inconsistent.

There are additional facts which the court needs to consider. The judgment on which the claim is based is against the debtor James E. Smith and Frances T. Smith, who apparently is a former wife of the debtor. The joint petitioner in this chapter 13 case is Myra K. Smith, a/k/a Myra Kimball, the debtor’s present wife. The creditor North Fork does not have a claim against the joint petitioner, Myra K. Smith.

This is important because the debtor James E. Smith died October 26, 1996, shortly before the chapter 13 trustee received the final two payments under the plan, a $450.00 payment on October 28, 1996 and a $900.00 payment on November 13, 1996. This brought the total amount paid by the debtors under the plan to $18,900.00, whereas under the plan the debtors were obligated to pay only $18,450.00 ($450/month x 41 months = $18,450.00). The final report of the chapter 13 trustee indicates he refunded the $450.00 overpayment to the debtors.

The surviving debtor cannot be required to pay more under the plan as suggested by counsel for North Fork for two reasons. She is not obligated on the debt to North Fork, and she has paid the amount she and her deceased husband were required to pay under the terms of the confirmed plan.

While the parties have stipulated that the rate of interest on North Fork’s judgment is 17.97%, as previously noted, there is nothing in the record to substantiate that stipulation. The judgment fixes the rate of interest as 17.80%.

The court calculates the amount of the claim of North Fork as of the date of bankruptcy as follows:

Judgment as of July 20, 1990 $6,180.70

Pre-judgment interest from 7-5-87 to 7-20-90

or 1111 days at 17.80% 3,348.72

Attorney fees 6,180.70

x 25% = $1,545.18

Court costs 12.00

Interest on [$6,180.70 +

Attorney fees of $1,545.18 +

$12.00 costs] $7,737.88 at

17.80% for 1050 days = $3,962.18 3,962.18

(1050 x daily rate of $3.7735) _________

$15,048.78

If the claim is properly allowed as indicated and added with other unsecured claims the unsecured claims for purposes of distribution under the plan total $20,996.19. The total amount available for distribution on unsecured claims, after deduction of the amount paid on the secured claim of Kentucky Finance and administrative expenses, was $15,635.56, which should have resulted in a dividend of 74.47% on unsecured claims.

North Fork should have received dividends totaling $11,206.83. The creditor has been paid $10,401.83, and thus has been underpaid by $805.00.

The court believes the proper equitable solution on the facts of this case is to reduce the chapter 13 trustee’s commission and expense allowance in this case by $805.00 and to order the trustee to pay that additional amount to North Fork in satisfaction of its claim in this case.

The other unsecured creditors received dividend overpayments through no fault on their part. The trustee might recover these overpayments for redistribution on the claim of North Fork. 11 U.S.C. § 502(j), but that would be inequitable, and, moreover, impractical (not cost effective), on the facts of this case because the overpayments in most instances are small.

There is enough blame to go around here. Counsel for the debtor scheduled the claim of North Fork as disputed but never objected to the claim. The claim as filed was defective on its face in that there was no computation of the attorney fee or the amount of the interest that had accrued prior to bankruptcy. Ordinarily, the trustee has a duty to dispute rather than compute the amount of interest included in a claim. In this instance, because the claim was defective on its face, the trustee did have a duty to object to the claim as filed in order to seek clarification of the amount of the claim for purposes of distribution under the plan. Counsel for the claimant was dilatory in letting more than two years elapse before filing an amended claim to clarify the amount of the claim.

Counsel for North Fork has filed an objection to discharge of the debtors on the ground that all unsecured creditors except North Fork have received payment of 88% of their claims whereas North Fork has received payment of only 63% of its claim. The objection proposes that the life of the plan be extended until North Fork receives an additional $4,100.00 on its claim.

This objection is not well taken for several reasons. As previously noted, the debtor James E. Smith is deceased. The surviving debtor cannot be compelled to pay a claim on which she is not obligated. The debtors have paid to the trustee the amount they agreed to pay under the plan and cannot be compelled to pay more, because chapter 13 payments are voluntary, not compulsory. Once debtors have completed payments under a plan, entry of a discharge is mandatory. 11 U.S.C. § 1328(a). The fact that an error in distribution under the plan has occurred is not grounds for delaying entry of the discharge to which the debtors are entitled. The debtors are in no way responsible for the fact North Fork has been underpaid. North Fork bears some responsibility for not computing the gross amount of the claim in the original proof of claim it caused to be filed with the court. The chapter 13 trustee should have objected to and sought clarification of the claim before commencing distribution under the plan.

There is no happy solution to the dilemma presented by the facts of this case. The court believes the solution adopted, reducing the trustee’s commission and expenses and requiring the trustee to pay North Fork an additional $805.00, is the most equitable solution.

Dated:

By the court –

_______________________________
JOE LEE, U.S. BANKRUPTCY JUDGE

Copies to:

Sidney N. White, Trustee

L. W. Myers, Esq.

David P. Chinn, Esq.

For the reasons stated by the court in its memorandum opinion this day entered in the above-styled bankruptcy main case of the debtors, the complaint of the plaintiff, North Fork Shenandoah, in this adversary proceeding is dismissed.

Dated:

By the court –

_______________________________
JOE LEE, U.S. BANKRUPTCY JUDGE

Copies to:

David P. Chinn, Esq.

L. W. Myers, Esq.

Sidney N. White, Esq.

In conformity with the memorandum opinion of the court this day entered, IT IS ORDERED that the chapter 13 trustee’s commission and expense allowance is reduced by the amount of $805.00 and the chapter 13 trustee is directed to pay to creditor North Fork Shenandoah the amount of $805.00 in satisfaction of its claim.

Dated:

By the court –

________________________________
JOE LEE, U.S. BANKRUPTCY JUDGE

Copies to:

Sidney N. White, Esq.

L. W. Myers, Esq.

David P. Chinn, Esq.