Friday, November 4, 2016

What Happens If My Chapter 13 Plan Is Not Approved?

A Chapter 13 bankruptcy requires the debtor to prepare and present a proposed plan of debt repayment. Creditors are given a chance to review the plan, if make an objection as to how their debt is being treated. If a creditor does not like the amount being offered as repayment, or has an issue with the proposed interest rate, that creditor can file an objection and ask the Court to deny confirmation of the Plan. When that happens, many times, the objection is resolved by negotiating terms that are acceptable to all parties and advising the Court of the compromise. Once all of the debts in the plan meet the approval of the lenders, as well as the Chapter 13 trustee, the Court will confirm the Plan and enter an order stating that the content of the Plan is how repayment will be made. Thereafter, as long as you make the plan payment as required by the Trustee, who then disburses the money you’ve paid to your creditors, you should not have a need to revisit the decisions made and memorialized in the order confirming your plan. But what do you do if the Court refuses to approve your plan?

While rare, there are cases where the Court declines to enter an order confirming the content of your Chapter 13 Plan. Most times, the debtor is aware this is a possibility, because the Trustee will have raised an issue that needs resolving prior to the Court taking a look at the plan for confirmation. One of the most common reasons the Trustee would ask the Court not to confirm a plan is if the debtor has not made the plan payments, thus there are no funds for the Trustee distribute to the creditors pursuant to the terms of the Plan. If your plan is not approved, you can do the following:

         File a motion to modify the plan terms, which most times includes asking that the Court consider you current on any past due plan payments, and allow you to resume payments to the Trustee.
         Seek Court approval to let you convert your case from a Chapter 13 to a Chapter 7. There are certain requirements when making this request and it is best to discuss your options with your attorney when considering a conversion.
If you are unable to come to an agreement about the confirmation of your Chapter 13 Plan, the Court has the power to dismiss your case. A dismissed case has the effect of bankruptcy never having been filed. You are no longer under the protection of the automatic stay, and all of your debts will remain due. In order to avoid a dismissal, and these harsh consequences, call us to make sure the plan you intend to propose is likely to succeed. We will help you develop a repayment plan that fits your budget, and work with your creditors to accept what you propose. This will increase the chances that your plan is not objected to, and that the Court accepts what you propose to repay. Contact us today to learn more.

For more information about Chapter 13 bankruptcies, call us today or reach us online at We have multiple locations to serve you and can schedule a time to meet at the office most convenient for you.

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