For every chapter 13 case that is filed, a chapter 13 plan must be submitted to the court and to your creditors. The chapter 13 plan is probably the most crucial document of your chapter 13 bankruptcy. This article details what the chapter 13 plan is and why it is so important.
The chapter 13 plan must be filed along with, or shortly after, your chapter 13 bankruptcy petition is filed with the bankruptcy court. The plan proposes to the court and your creditors the following items:
1. The length of the plan (36 – 60 months)
2. The monthly payment into the plan by the debtor
3. If mortgage arrears or vehicle loan arrears will be paid through the plan
4. If secured debt, such as a car, will be paid through the plan (including if the interest rate and loan amount will be altered)
5. How much your attorney will be paid through the plan
6. What percentage will your unsecured creditors be paid through the plan
7. If there is a best interest amount in your bankruptcy, or the minimum amount your unsecured creditors must be paid through the plan
8. Indication of what debt may be paid outside of the plan
9. If any judicial liens will be avoided through the plan
10. And other provisions depending on the circumstances of a particular case
Once the plan is filed with the court, the court will provide notice to your creditors and chapter 13 trustee. At the hearing before the trustee, the trustee will review the plan to determine if you filed it in good faith and it is fair and reasonable to your creditors, given your particular set of facts. The trustee will also make certain that the plan is feasible, meaning the amount you propose to pay into the plan will adequately fund the plan.
Creditors and the trustee will have an opportunity to object to the plan. If the trustee or creditors object (usually based on if the plan is adequately funded or if a creditor receives fair treatment through the plan), we work to resolve the objections. Once all objections are resolved, we submit to the trustee a document called an Order Confirming Plan and Resolving All Motions. A bankruptcy judge will review the Order Confirming Plan, and a hearing will be held regarding the plan, called a Confirmation Hearing. If all objections are resolved, the bankruptcy judge will sign off on the Order Confirming Plan and your plan takes legal effect.
If you are interested in learning more about chapter 13 bankruptcy and the mechanics of the bankruptcy and plan requirements, please call today to schedule your free in-office bankruptcy consultation.