Business Law

Chapter 13: Repayment Plan Hearing and Confirmation Hearing

You will make a repayment plan for your debts at the beginning of a Chapter 13 bankruptcy. This is often done as part of credit counseling. The repayment plan will outline how you intend to repay your debts. The confirmation hearing will see your plan and determine if it meets the requirements of the U.S. Bankruptcy code.

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Chapter 13 Repayment Plan Basics

You must file a repayment plan if you intend to file for Chapter 13 within 15 days after filing the petition.

A repayment plan must include a fixed monthly payment to the trustee. The trustee will distribute your payments according to the plan if the court approves it.

Claims of Creditors and Repayment under the Plan

The type of debt you have will determine how you plan to repay creditors. There are three types in bankruptcy:

  • Priority claims: These claims have special status under bankruptcy law. Priority debt includes most taxes and the costs of the bankruptcy proceeding.
  • Secured claims: Secured claim involve collateral. If the debtor fails to pay the underlying debt, creditors have the right of taking back certain property. A secured debt is a mortgage.
  • Unsecured claims Claims that the creditor does not have any special rights to collect on the debtor’s property. Credit cards are unsecured debt.

Priority Claims under the Repayment Plan

Priority claims must all be paid under a Chapter 13 repayment program. This rule is exceptionable if:

The creditor agrees to treat the claim differently or

The debtor transfers all of his “disposable income” to a five year plan for domestic support obligation cases

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Repayment Plan “Secured Claims”

Secured claims are covered by a Chapter 13 repayment plan. There are two options with a Chapter 13 repayment program. These are:

  • Give up the property, i.e. return it to our creditor)
  • Keep making your payments on the repayment plan.

If you wish to retain your property, you will need to repay the collateral. This information should be included in the repayment plan.

In some cases, you may not have to pay all of the secured debt. This is known as a “cramdown”. This is where a car loan could be useful, as the car’s value immediately after purchase depreciates.

Repayment Plan: Claims “Unsecured”

Your “disposable Income” will determine how much money you pay to unsecured creditors. Your “disposable income” is the amount of money you have left after you’ve paid all necessary expenses for yourself and your dependents.

You must make sure that you have enough income to pay your unsecured debts. Your disposable income will determine how much money your unsecure creditors can get. However, creditors should receive at least the same amount as if you had filed Chapter 7 bankruptcy.

If your monthly income is below the state median, then you will need to make all payments within three year. The commitment period is five years if your monthly income exceeds the state median for a family of the same size.

Confirmation Hearing

Within 45 days of the creditors meeting, the judge will hold a confirmation hearing. The judge will hear whether the repayment plan meets the Bankruptcy Code rules and if it’s feasible. The confirmation may be challenged by creditors.

What happens at the Confirmation Hearing

The confirmation hearing is just like other court hearings. You will have to wait until you are called to court. After your case has been brought before the court, creditors and trustees can make any objections to the plan. Both sides will be heard by the judge, who will decide if your plan meets the Bankruptcy Code requirements.

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Chapter 13 Plan Confirmation Requirements

The judge will verify that you have followed the confirmation requirements before confirming your plan. The judge will then examine the following in order to decide if your plan is acceptable.

How practical your plan is in terms of timely payments

Unsecure creditors may get at most the amount they would have received if you had filed a Chapter 7 bankruptcy

  • No matter if you filed in good faith
  • The trustee will distribute the assets “as soon is practical” if the court approves the plan.

You can file a modified plan if the court does not approve your original plan. A Chapter 7 liquidation case can be converted to the case. However, you will need to pay a fee to convert an Chapter 13 case to a Chapter 7 case.

Are I required to attend the Chapter 13 Confirmation Hearing

It depends. It depends. Your attorney can assist you and answer any questions that the judge might have in most cases. If you do not have an attorney, it is necessary that you appear at the hearing. Otherwise, your case may be dismissed.

How to make the Repayment Plan work

As the debtor, you are responsible for ensuring that the repayment plan is successful. You must pay the trustee in accordance with the plan.

Your case may be dismissed if you fail to pay your bills on time. This can happen especially if you don’t pay your domestic support obligations on time or fail to file taxes. Your case may be converted by the judge to a Chapter 7 liquidation. Also see Chapter 13: Individual Debt Adjustment information on the U.S. Courts website.

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A Chapter 13 Attorney may be able to assist you

You must submit a repayment plan detailing how you will pay creditors when you file bankruptcy. It can be difficult to prepare the repayment plan because it requires knowledge about bankruptcy laws. To get legal assistance with your Chapter 13 case, consult a bankruptcy attorney.