Common Objections To Proposed Chapter 13 Repayment Plans
In a Chapter 13 bankruptcy, you will have to propose a plan to repay your creditors over the course of the 3-5 year plan. The good news is that you usually won’t pay anywhere near the entire amount that you owe, and rarely if ever will you lose property.
Getting Plan Approval
But a Chapter 13 plan has to be approved by a court. To get that approval, you have to show that the plan is fair to creditors, and that you actually make the income to pay a Chapter 13 plan.
That’s the irony of Chapter 13 – we tend to think that you need to be destitute to file for bankruptcy, but in Chapter 13, making too little money can keep you from even being able to file.
The Trustee’s Role and Objections
If and when you propose a Chapter 13 repayment plan, the court must approve the plan. But the court also takes input from the bankruptcy trustee, who will recommend the plan or will object to the plan. When the trustee objects to the plan or gives it an unfavorable recommendation, there are things that you can do to get your proposed plan approved by the court.
Common reasons that a trustee might object to your proposed Chapter 13 plan include:
- The plan doesn’t pay all of your disposable income; in other words, that you have more disposable income than you say that you have. This dispute can often arise when the debtor thinks an expense is necessary or essential, but the trustee thinks it is luxury, excessive, or unnecessary, and thus the money being paid towards that expense should be considered disposable.
- The creditors in the Chapter 13 are getting less than they would in a Chapter 7, which is not allowed. This often happens when the debtor owns property which, in a Chapter 7, would be surrendered to creditors. The debtor has to pay back the value of these assets to creditors over the life of the plan, otherwise, the creditors are not getting the protection they are legally allowed to have in the Chapter 13.
- You are missing documentation of your income or your assets
Simple paperwork or disclosure objections can be easily corrected. You also can file an amended plan if you are able to work out a resolution to the dispute with the trustee. If you can’t resolve the problem with the trustee, it will be up to the judge to determine whether the plan is approved or not.
Objections by Creditors
Bear in mind that these are objections made by the bankruptcy trustee. But any individual creditor can also object to a proposed plan, if the creditor thinks they aren’t being treated fairly. Additionally, you can fight a creditor’s objection, if you think the creditor is claiming more than what they are entitled to receive.