Chapter 13: Repayment Plan and Confirmation Hearing

If the Chapter 13 trustee doesn’t believe your Chapter 13 plan is feasible, they will advise you to change it. If a creditor objects to your plan, it may delay your case or convince the bankruptcy court judge to deny your proposed plan.

After you file the plan, the trustee reviews it and may either recommend confirmation or object. The court then holds a confirmation hearing, and the bankruptcy judge will go over your plan to decide if it meets the standards of the U.S. Bankruptcy Code.

Here, we’ll explain the confirmation hearing in more detail. We will also explain how to create a reasonable repayment plan and what to do if the creditors object to it. Finally, we will discuss what happens if the judge doesn’t approve your Chapter 13 plan.

If you’re thinking about filing for Chapter 13 bankruptcy, it’s a good idea to meet with an experienced bankruptcy attorney. They can examine your case, offer legal advice, and represent you in court if necessary.

Chapter 13 Repayment Plan Basics

If you plan to file for Chapter 13, you must file a proposed repayment plan with your bankruptcy petition or within 14 days, unless the court extends the deadline. Your proposed plan must include a fixed monthly amount you will pay the trustee.

You must start payments within 30 days of filing, regardless of whether your plan has been confirmed by then. After confirmation, the trustee will disburse your payments to the creditors according to the terms in your approved plan.

This will continue until you have completed your payments. Chapter 13 repayment plans can last for three to five years. The length of your plan depends on the following:

• Total amount of your debt
• Your monthly income and disposable income
• Amount of your monthly payments
• Exempt and non-exempt assets
• Whether you make your plan payments within the plan’s time frame

When you submit your plan to the trustee, you must outline the monthly payment schedule. Once the court approves your plan, you must adhere to the payment payments. The judge will include a copy of your repayment plan with your confirmation order.

Types of Creditors’ Claims To Include in Your Chapter 13 Plan

Filing for bankruptcy is one way to rework your finances or reorganize your debt. If you’re looking for a fresh start where the U.S. Bankruptcy Court will discharge most of your debt, a Chapter 7 bankruptcy case might be what you need.

To keep your assets and repay your debts over time, you’ll want to file a Chapter 13 bankruptcy case. In a Chapter 13 bankruptcy, you must include all your debts and propose repayment to all of your creditors.

How you propose to pay your creditors depends mainly on what type of debt you owe. In bankruptcy, there are three types of claims:

• Priority claims: Bankruptcy law grants these claims special status. Most tax debts and the cost of the bankruptcy proceeding are examples of priority debt.
• Secured claims: Secured claims are debts that involve collateral. Creditors can repossess certain property if you do not pay the underlying debt. If you choose to keep any secured assets, you have no choice but to include those debts in your Chapter 13 plan. Secured assets include such things as mortgages and car loans.
• Unsecured claims: These are claims where the creditor has no special right to collect against a debtor’s property. These claims include credit card companies and banks that issued you personal loans.

When you design your repayment plan under Chapter 13, you must pay your debts according to the federal and state bankruptcy laws. 

Importance of Claims in a Chapter 13 Repayment Plan

Each claim has a different level of importance. The more important a claim is the higher the priority for it to be paid in. Let’s see how the claims are broken down and ranked.​

Priority Claims Under the Repayment Plan

Unless the creditor agrees otherwise, you must pay all priority claims, like administrative costs, recent taxes, and domestic support obligations, in full during the repayment plan. You must remain current on ongoing domestic support obligations to obtain confirmation and discharge. 

Secured Claims Under the Repayment Plan

The bankruptcy laws give you two options when it comes to secured claims. You can either:

• Surrender the property (i.e., return it to your creditor)
• Continue making regular payments as part of your repayment plan and keep the property

If a claim is secured by collateral, you must repay at least the fair market value of the collateral if you want to keep your property. You must explicitly state that you intend to keep the property in the repayment plan.

There are also instances where you won’t have to pay the entire balance on a secured debt. A car loan may be subject to a lesser amount because its value depreciates immediately after you buy it. If the court imposes a reduction over the objections of the creditor, it’s called a”cramdown.”

Unsecured Claims Under the Repayment Plan

The amount of money you will pay to unsecured creditors depends on your disposable income. Disposable income is the money you have left after paying necessary expenses for you and your dependents.

You must allocate all of your disposable income to paying your unsecured debts. Unsecured creditors may get some or all the money you owe them, depending on how much disposable income you have. The creditors must receive at least as much as they would have received under a Chapter 7 bankruptcy.

If your current monthly income is below-median, you usually make payments within three years but may go up to five. The plan will typically last five years if your monthly income is above-median, unless unsecured claims are paid sooner in full.

The 341 Meeting of Creditors

Before the judge holds your confirmation hearing, creditors can meet with the trustee. At this meeting, which is called the 341 meeting of creditors, your creditors can either agree with or object to your proposed repayment plan.

A creditor may object to your Chapter 13 plan for a host of reasons, including but not limited to the following:

• Your plan is not realistic
• A creditor feels your plan treats some creditors unfairly and unequally
• Your plan does not serve the creditor’s best interests
• There are mistakes or omissions in your plan that affect the creditor

If a creditor still objects to your plan after the 341 meeting, the court will schedule a special hearing for them to voice their objections. If a creditor successfully challenges the plan, the judge will instruct you to revise your plan and submit a new plan to the trustee.

Once the court has addressed all creditor objections, it will schedule your confirmation hearing. The hearing must occur within 45 days of the 341 meeting of creditors.

The Confirmation Hearing

The judge overseeing your Chapter 13 bankruptcy case will conduct a confirmation hearing to determine if your repayment plan is possible and that it meets the Bankruptcy Code requirements. At the court hearing with the bankruptcy judge, either the creditors or the trustee can raise objections to your plan. The judge will allow both sides to have their say and decide whether your plan fulfills the requirements outlined in the Bankruptcy Code.

Chapter 13 Plan Confirmation Requirements

Before confirming your plan, the judge will determine whether you have complied with the confirmation requirements. They will consider the following when determining whether they will approve your plan:

• Can you afford the proposed payments?
• Will unsecured creditors get the same or more than they’d receive in a Chapter 7?
• Did you file in good faith?

If the court confirms the plan, the trustee will distribute the assets to the creditors.

You can file a modified plan if the court doesn’t confirm your original version. You can also convert the case to a liquidation case under Chapter 7.

Do I Have To Attend the Chapter 13 Confirmation Hearing?

Some courts require debtors to attend the confirmation hearing. In most cases, your bankruptcy attorney can attend on your behalf and answer the judge’s questions. If you’re representing yourself (pro se), you’ll have to attend. Follow your local rules and your trustee’s instructions. Otherwise, the judge may dismiss your case.

Making the Repayment Plan Work

As the debtor, you are responsible for ensuring the repayment plan works. You must make your payments to the trustee according to the plan.

Failure to make timely payments may result in the judge dismissing your case. This is especially true if you don’t pay your child support and alimony on time or fail to file your taxes. The judge has the option to convert your bankruptcy to a Chapter 7 liquidation case if you’re not holding up your end.

Disclaimer: Bankruptcy and banking laws change frequently due to new legislation, higher court rulings, and other means. While FindLaw strives to provide readers with the most current information, we recommend you consult a local bankruptcy lawyer to confirm the current laws.

An Experienced Bankruptcy Attorney Can Help

When you file for a Chapter 13 bankruptcy, you must submit a repayment plan outlining how you plan to pay creditors. Preparing the repayment plan may become challenging, as it requires knowledge of bankruptcy laws. Consult a bankruptcy attorney to get legal help with your Chapter 13 case.

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