September 18, 2018

What Happens After Your Chapter 13 Plan is Confirmed?

When your Chapter 13 plan is confirmed, it means that the bankruptcy judge assigned to your case has formally approved your plan of reorganization and all creditors are bound to the terms of your plan.

In the Northern District of Georgia, a hearing on the confirmation of your plan will be scheduled automatically a the time you file your case. Usually, these hearings are scheduled for about 2 to 3 months from the date you file your case. Therefore, you can think of the first 2 or 3 months of your plan as a kind of probation period.

While in this probationary period, you have all the benefits of bankruptcy – namely the automatic stay that protects you from creditor action – while the Chapter 13 trustee watches to see if you have the capacity to meet your plan obligations. This is also the time when creditor claims are filed and either creditors or the trustee can object to your proposed plan.

Usually the most significant objections we see are the following:

  1. Funding – are you paying the trustee the amount you set out in your proposed plan?
  2. Terms – if creditor claims came in higher than expected, do we need to amend your plan to squeeze these claims into the maximum 60 month term of your plan?
  3. Good faith – does your plan allocate enough money each month to creditors?

In the majority of Chapter 13 cases, we will have to amend your plan prior to confirmation to satisfy the objections filed by the Chapter 13 trustee or by creditors. Usually this means that we will have to bump up your Chapter 13 plan payment.

From our perspective as your attorney, the issue with increasing the plan payment has to do with the long term viability of your case. We know, for example, that during the 5 year term of your plan, you are likely going to need new tires for your car, repairs to your home, a medical emergency or an unexpected funeral to attend. Creditors and the trustee will push back on allocating any funds for an unknown future expense. This is where an experienced attorney will negotiate on your behalf.

After your case is confirmed, your job primarily involves making payment to the trustee and direct payments, if applicable, to your mortgage company, vehicle leasing company or to any other creditor who is eligible to receive direct payments under the terms of your plan.

If you fall behind on your trustee payments, the trustee will file a motion to dismiss your case. If you fall behind on a mortgage, lease or other direct creditor payment, that creditor will likely file a motion for relief from stay.

Hearings will be scheduled for any motion to dismiss or motion for relief from stay, and we will have an opportunity to work out a payment plan to get you caught up. Obviously, however, if you didn’t have the money to make your regular trustee or creditor payments, you may struggle even more to catch up any arrears.

If your financial situation takes a turn for the worse, or if you need to allocate your funds to cover an emergency, we also have the option of asking the judge for a 2 or 3 month suspension in your requirement to make trustee payments, and we can also file a proposed amendment to your plan to either surrender secured property that you cannot afford or to reduce the plan payment based on reduced income.

In general, however, Chapter 13 assumes steady and consistent income and steady and consistent expenses. The more instability you have with income or expenses the likelihood of a plan failure and dismissal of your case.

Chapter 13 cases do not always result in a completed plan and order of discharge of debts. The percentage of Chapter 13 cases that successfully complete is only about 33%. This means that two out of every three Chapter 13 plans end up being dismissed or converted to Chapter 7. Some people use Chapter 13 as a tool to buy time and preserve assets in the hope that a new job comes through, to to remain in a home as long as possible.

I advise my clients to use the power of bankruptcy to walk away from secured property (i.e., a house, car, furniture, jewelry) that you have to stretch to afford.

Whatever your goal, if you need to file either Chapter 7 or Chapter 13, Ginsberg Law can help. We have been representing Atlanta area debtors for almost 30 years and we are standing by to serve you.

About Jonathan

Jonathan Ginsberg represents honest, hardworking men and women in the Atlanta area who need personal bankruptcy protection. In practice for over 25 years, Jonathan teaches bankruptcy law and practice at legal continuing education seminars and he is a founding member of the Bankruptcy Law Network. Jonathan lives with his wife and children in Atlanta.

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