You Chapter 13 has been filed, you’ve started making payments, and the 341 Meeting of Creditors is complete. At this point, it’s time to have your Chapter 13 Plan “Confirmed” by the Court, but what exactly does that mean, and how does it work?
The Initial Filing
You and your attorney painstakingly drafted the Petition and a Chapter 13 Plan. Those documents were filed with the Court, and everybody has received a copy. It’s important to realize that the Plan you filed initially was nothing more than a proposal. Some would argue that is should be called a “Proposed Plan” in fact. With that “Proposed Plan” being filed, it is up to the Judge to approve it through the confirmation process. At a Confirmation Hearing, the Judge will confirm the Plan after hearing from all interested parties, if it makes sense, it is fair, and it follows the extensive guidelines under the applicable bankruptcy law.
Note: I use the term “Proposed Plan” here. This is a term I use to aid understanding. I’m not actually aware that anyone else called the initial Plan a “Proposed Plan”, but it is a proposal, and the terms makes sense to me. As usual, the US Congress did not consult me when writing law, had they done so, I would have suggested calling the first plan filed a Proposed Plan.
Objections to Plan Confirmation
The Chapter 13 Trustee, or any of the creditors may file an Objection to the confirmation to the Plan you filed; usually it’s the Trustee. They file a document called an Objection, arguing that the Proposed Plan fails in one way or another. Perhaps it does not promise to pay what is required to be paid, or that there is a technical error contained within the terms of the plan such as the wrong interest rate being used. They may also file an objection should they believe the Debtor(s) does not have the ability to pay the monthly obligation contained in the Proposed Plan.
Remember, the Plan is derived from your income and expenses, along with the debts that you have. A certain portion is absolutely required to be repaid. In some cases, a percentage of the unsecured debt may be discharged at the end of a successful Plan. Any objection to the Proposed Plan is an argument saying that “Hey, Your Plan doesn’t work”.
What to do About Objections
There are two ways to address an objection. Keeping in mind that the Trustee’s Office has an entire department dedicated to reviewing these Proposed Plans, and they take their job very seriously, they are more often than not correct in their analysis.
Option #1: Fight the Objection. This is done at a hearing in front of the Judge, where he or she will listen to the arguments and make a finding if the Plan should be confirmed or not. There is a disagreement between yourself and the Chapter 13 Trustee, and you are arguing that you are correct under the law, and that the Proposed Plan makes sense. Similar to picking a fight with a professional MMA fighter, generally this is not the best option, though at times it has to be done.
Option #2: Amend the Plan. This means to change it, rewrite it, make adjustments and file an file and amended Proposed Plan essentially saying “you complained last time, so how do you like this one?” If the Plan is amended in accordance with the Trustee’s objections, then the Trustee should have no more objections, and the judge is likely to approve it. Under this scenario, all parties agree that the Proposed Plan makes sense, and the Judge is likely to agree.
Often, Amending the Plan requires a continuation of the Confirmation Hearing, and the Amended Plan is referred to as a “First Amended Plan”, “Second Amended Plan”, and so on as the facts dictate. While not preferable, this process of back and fourth can take several months before all agree on the terms of the Plan. Of course, during this process, it is essential to continue to make payments as set forth in your Proposed Plan.
Following the Confirmation of the Plan
Once the Judge signed the Plan, is it often referred to as a “Confirmed Plan”. The Confirmed Plan is the law of the case. The Trustee will collect the money you put into the Plan and distribute it according to the terms of the Plan. Do not miss plan payments, otherwise the plan you proposed and that all agreed to does not work.
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