Bankruptcy Alphabet-P is for Plan

In a chapter 13 Bankruptcy, the most essential element is the Plan.

                    P is for Plan

Photo by Leo Reynolds

Plans are required for Chapter 11, 12 and 13 bankruptcy cases. For this entry, I’m focusing only on the Chapter 13 Plan.

Introduction
The Chapter 13 Bankruptcy Plan is the debtor’s proposal to pay creditors a certain amount over a period of three to five years. The length of the plan is determined by both the means test and the debtor’s individual circumstances.

The plan categorizes the amount the debtor will pay each month, how much the trustee shall be paid, the amount the attorney is to be awarded, a list of creditors who will receive adequate protection until the plan is confirmed, how much secured creditors will be paid upon a confirmed plan, how much priority unsecured creditors will be paid, whether the debtor assumes or rejects executory contracts or leases and finally how general unsecured creditors are treated.

Click to view a sample version of a Chapter 13 Plan

Confirmation of Plan
The goal of a Chapter 13 Bankruptcy case is to get a plan confirmed by the Court. In order for a Plan to be confirmed, the Bankruptcy Court must determine whether the requirements are satisfied.

1. The court filing fees must be paid;

2. The plan must be proposed in good faith;

3. Unsecured creditors must at least receive the value they would have received in a liquidation in a Chapter 7 case (known as the Best Interest of Creditors Test);

4. Holders of secured claims retain their lien until a) debt is paid in full under the plan; b) secured creditor is paid the value of the allowed claim; or c) debtor surrenders the collateral to the creditor;

Objections to Plan Confirmation
The trustee can object to confirmation of the plan for a variety of reasons:

1. Plan doesn’t satisfy Best Interests of Creditors Test;

2. Debtor is not submitting all of his disposable monthly income;

3. Debtor has not fulfilled all requirements prior to confirmation; (such as provide tax returns to trustee, file certain requirements, etc).

4. Plan does not provide enough funds to pay necessary secured or priority claims.

Secured creditors can object if they believe the plan proposes to wrongly modify their lien or plan does not provide for adequate protection.

Unsecured creditors can object if the plan does not propose to pay the creditor in full, however, the Court will confirm the Plan over the objection of an unsecured creditor if all of the debtor’s disposable monthly income is committed to the plan.

Other Bankruptcy Attorneys talking about the Letter P include:

Pay Advice-New York Bankruptcy Attorney, Jay S. Fleischman

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