The “Plan” in a Chapter 13 Bankruptcy
“The “Plan” is a document that lays out what you want the Chapter 13 Trustee to do with your money every month during your bankruptcy. It dictates who to pay and how much to pay them. It must be approved (confirmed) by the Court before becoming permanent. Upon your initial bankruptcy filing, you will file a proposed edition of the Plan. The Trustee may object or suggest changes. At a point following the filing of the proposed plan, the court will decide to approve that plan, or an amended version thereof”
Generally, the plan must provide for payment of secured creditors in full or according to the terms of the contract if the security is retained (e.g., home loans and vehicles). However, some secured creditors may have their claims modified or avoided altogether. The plan must also pay all administrative and priority creditors in full. Unsecured creditors are entitled to receive as much as they would receive under Chapter 7, or how much you can afford to pay them over the life of the plan, whichever is greater. Payments are made over a period of time. Plans can provide for payments over as little as 10 months or as long as 5 years. The minimum plan length will be determined by your income and allowable expenses. Payments usually start immediately via payroll deduction if the debtor is employed or directly from the debtor if self-employed. The first plan payment is due no later than 30 days after the case is filed. No new debts can be incurred while in Chapter 13 unless approved by the court. The court considers bonuses part of your disposable income, your employer may be directed to pay a portion of your bonus over to the Trustee.
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