What Happens After I File a Chapter 13 Bankruptcy Plan, Part 1
Preparing a well-filed bankruptcy usually takes a lot of work for both the Debtor and their attorney. But if you file for chapter 7 relief, most of the work is generally done once the complete case is filed and the meeting of creditors is scheduled. This is not necessarily the case though when you file for relief under chapter 13. When you file a chapter 13 case, you must also file a proposed plan for how you’ll repay your creditors – who gets paid? When they’ll get paid? How much they’ll get paid?
In the District of Colorado, while Debtors must make their first payment under the plan 30 days after the case is filed, objections to the plan are not due until 1 week after the meeting of creditors. This is a recent change to our local rules, and the idea is that the trustee (the person who is usually the one objecting to the plan) may be able to clear up some or all questions or concerns they may have with the proposed plan at the meeting of creditors. If the trustee has no objections, then the repayment plan can be “confirmed”, or approved by the Court shortly after that time, and the debtor can continue making their 36 – 60 payments, and can request a discharge after their last payment has been made, and assuming they don’t have any unresolved issues with past-due mortgage, child support or alimony / maintenance payments or with certain serious criminal convictions.
Unfortunately, it is far more common for a debtor’s first proposed plan to receive at least one objection from the trustee, mortgage lender, or other interested party. These objections run from the simple – the plan doesn’t quite pay the full past-due balance on the home the debtor wants to keep – to the complex – The Plan fails to provide for the minimum distribution to Class 4 claims as required by Form 122C & 11 U.S.C. § 1325(b)(3) due to several disputes regarding the debtor’s Current Monthly Income & Projected Disposable Income – and everywhere in between. In our office, we have found that objections to a proposed plan can often either be easily resolved by either explaining and documenting expenses or fixing small errors such as underestimates of tax or mortgage debt in an amended plan. In some cases though, a Debtor who wants an affordable chapter 13 payment will need to take their argument to a U.S. Bankruptcy Judge for a decision. In almost all our chapter 13s though, our clients have felt more than comfortable with their “confirmed” plan payment.
Of course, getting a plan confirmed is only part of the battle. Next time, we’ll discuss challenges that may come up “post-confirmation.” Until then!