What if the debtor is temporarily unable to make the chapter 13 payments?
March 28, 2008
If the debtor is temporarily out of work, injured, or otherwise unable to make the payments required under a chapter 13 plan, the plan can usually be modified so as to enable the debtor to resume the payments when he or she is able to do so. If it appears that the debtor’s inability to make the required payments continue indefinitely or for an extended period, the case may be dismissed or converted to chapter 7.
How are secured creditors dealt with under chapter 13?
March 28, 2008
There are four methods of dealing with secured creditors under chapter 13:
- The creditor may accept the debtor’s proposed plan,
- The creditor may retain its lien and be paid the full amount of its secured claim under the plan,
- Debtor may surrender the collateral to the creditor, or
- The creditor may be paid or dealt with outside of the plan.
It is important to understand that a creditor has a secured claim only to the extent of the value of its security, which cannot exceed the value of the property securing the claim. Thus, a creditor with a mortgage on, say, a $1500 automobile, cannot have a secured claim for more than $1500 regardless of how much is owed to the creditor. If the debtor is in default to a secured creditor, the default must be cured (made current) within a reasonable time. Also, interest must be paid on secured claims.
How are the claims of unfiled creditors handled under chapter 13?
March 28, 2008
Unsecured creditors must file their claims with the bankruptcy court within 90 days after the first date set for the meeting of creditors in order for their claims to be allowed. Unsecured creditors who fail to file claims within that period are barred from doing so, and upon completion of the plan their claims will be discharged. The debtor may file a claim on behalf of a creditor, if desired. After the claims have been filed, the debtor may file objections to any claims that he or she disputes. When the claims have been approved by the court, the chapter 13 trustee begins paying unsecured creditors as provided for in the chapter 13 plan. Payments to secured creditors, priority creditors, and special classes of unsecured creditors may begin earlier, if desired.
Is it necessary for all creditors to approve a chapter 13 plan?
March 28, 2008
NO. To become effective, a chapter 13 plan must be approved by the court, not by the creditors. The court cannot approve a plan unless secured creditors are dealt with in the manner described in the answer to Question 16. Also, unsecured creditors are permitted to file objections to the debtor’s plan, and these objections must be ruled on by the court before it can approve the debtor’s chapter 13 plan.
What if the court does not approve a filed chapter 13 plan?
March 28, 2008
If the court will not approve the plan proposed by a debtor, the debtor may modify the plan and seek court approval of the modified plan. If the court does not approve a plan, it will usually give its reasons for refusing to do so, and the plan may then be appropriately modified so as become acceptable to the court. A debtor who does not wish to modify a proposed plan may either convert the plan to chapter 7 or dismiss the case.
How long does a chapter 13 plan last?
March 28, 2008
A chapter 13 plan must last for three years, unless all debts can be paid off in full in less time. However, a chapter 13 plan can last for as long as five years, if necessary.
When does a debtor have to appear in court in a chapter 13 case?
March 28, 2008
Most debtors have to appear in court at least twice: once for a hearing called the meeting of creditors, and once for a hearing on the confirmation of the debtor’s chapter 13 plan. The meeting of creditors is usually held about a month after the case is filed. The confirmation hearing may be held on the same day as the meeting of creditors or at a later date The debtor’s testimony should not be lengthy at either hearing, however. If difficulties or unusual circumstances arise during the course of a case, additional court appearances may be necessary.
When must the debtor begin making payments to the chapter 13 trustee and how must they be made?
March 28, 2008
The debtor must begin making payments to the chapter 13 trustee within 30 days after the debtor’s plan is filed in the court, and the plan must be filed with the court within 15 days after the case is filed. The payments must be made regularly, usually on a weekly, biweekly, or monthly basis. If the debtor is employed, some courts require the payments to be made by the debtor’s employer, otherwise, the payments cm be made by either the debtor or the debtor’s employer.
What is required for court approval of the chapter 13 plan?
March 28, 2008
The court may confirm a chapter 13 plan if: (1) the plan complies with the legal requirements of chapter 13, (2) all required fees, charges, and deposits have been paid, (3) all priority claims will be paid in full under the plan, (4) the plan was proposed in good faith, (5) each unsecured creditor will receive under the plan at least as much as it would have received had the debtor filed under chapter 7, (6) it appears that the debtor will be able to make the required payments and comply with the plan, and (7) each secured creditor has been dealt with in the manner described in the answer to Question 16 above.
How much of a debtor’s income must be paid to the chapter 13 trustee under a chapter 13 plan?
March 28, 2008
Usually all of the disposable income of the debtor and the debtor’s spouse for a three-year period must be paid to the chapter 13 trustee. Disposable income is income received by the debtor and his or her spouse that is not reasonably necessary for the support of the debtor and the debtor’s dependents.