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What is the Chapter 13 Plan, and what does it mean for the Plan to be confirmed?

 

The Plan is the blueprint that guides the Chapter 13 Trustee in paying your debts. In the beginning, I draw up a Plan based on your debts and your goals. If you have a mortgage that has to be paid, it will provide for payment of the ongoing mortgage payments every month, and for payments to catch up on the arrearage (the amount that you were behind on the mortgage at the time of filing). If you have secured debts, such as payments on cars, furniture, appliances or electronics, we will suggest monthly payments and interest rates (in amounts that are usually smaller than what you have been paying). If you have priority debts, such as taxes or child support, we set monthly payments on those things, as well. All unsecured debts are lumped together in one amount, to be paid after everything else is paid in full. Those unsecured debts might be paid in full, or they might get pennies on the dollar, or anywhere in between.

Our proposed Chapter 13 Plan is given to the Trustee and to all of your creditors. By the time we get to the Meeting of Creditors (about 6 weeks after filing), everyone has had a chance to review the Plan. We might come to agreements with certain creditors to make certain minor changes, or the Trustee might insist on other changes, but by the time the Meeting of Creditors is over, the Plan is usually set in place. After that, if nothing unusual happens, the Plan is confirmed, and the Trustee starts making payments to your creditors every month.

Sometimes the Trustee or a creditor will file an objection; usually because there is something about your Plan that they don’t like. In those cases, it might be weeks or months before your Plan is confirmed. In the meantime, all of the money that you are paying in is just building up in your Plan account with the Trustee. Nothing is being paid, and interest is accruing on your secured debts. Obviously, we want to avoid that situation if possible, but sometimes we get involved in long arguments with creditors over certain details. If there is just one creditor with one particular problem, we can usually confirm the Plan "without prejudice" to that creditor, so payments can start being made. If that creditor wins his legal argument later on, then the Plan has to be restructured to make room for that debt to be handled his way.