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Chapter 7 starting at $999, plus filing fees and costs.

Chapter 7

Chapter 13 starting at $2,500, plus filing fees and costs.

Chapter 13

What is a Chapter 13 Plan?

A Chapter 13 plan is a debt reorganization and repayment plan proposed by the debtor and approved by the bankruptcy court. In Chapter 13, creditors do not participate in development of the plan or vote on the plan. In fact, creditors may only object to confirmation or secured creditors may accept the plan. If the terms of the plan meet all legal requirements, the bankruptcy court will approve (confirm) the plan.

What are the Chapter 13 Plan Requirements?

Although debtors have great flexibility in drafting the Chapter 13 plan, the plan must meet certain legal requirements to be approved, both in form and substance.

As far as the form is concerned, debtor must use a model form approved by the bankruptcy court for the Chapter 13 plan. In the bankruptcy court for the Middle District of Florida (Orlando, Jacksonville, Tampa and Fort Myers divisions), the model form includes provisions for monthly plan payments, proposed distributions to various classes of creditors, general provisions applicable to the entire plan, and non-standard provisions.

The content of the plan must meet the following requirements:

Chapter 13 Plan

General Requirements

Every Chapter 13 plan must provide the following protections for the interests of creditors:

Amount of Repayment to Unsecured Creditors

The plan must provide for unsecured creditors to receive at least as much as they would have received in Chapter 7 and the debtors must devote all of their projected disposable income to payments over the term of the plan.

Maximum Repayment Term is 5 Years

Debtors with income below state median must commit all of their disposable income to plan payments for 3 years after the first payment under the plan is due (30 days from bankruptcy filing), unless the court approves a longer period “for cause.” The repayment term for debtors with income above median income is 5 years.

Adequate Protection for Secured Claims

While confirmation of the plan is pending, the plan payments must include adequate protection payments to secured creditors and executory contracts and leases based upon the proposed value of the property with interest, unless the property surrendered, or contracts rejected.

Chapter 13 Plan

Mandatory Requirements

Every Chapter 13 plan must meet the following requirements:

Adequate Funding

The debtor must submit all or the adequate amount of his future income to carry out the plan. The plan must be feasible, i.e., debtors must be able to make all payments under the plan.

Priority Claims

Debtor must pay all priority claims in full over the plan (or less than in full for domestic support obligations owed to a governmental unit if the debtor devotes all disposable income to the plan.)

Class Treatment

If a debtor chooses to classify claims within a particular class, all claims in the same class must receive the same treatment and debtor may not discriminate unfairly against any class of creditors.

Chapter 13 Plan

Permissive Provisions

In Chapter 13, debtors may restructure their debts by modifying claims, curing or waiving defaults, and curing the defaults and maintaining payments on long-term debts.

Loan Modification

With exception to homestead mortgages, debtors may modify the terms of secured and unsecured loans, such as extending the time for payments and/or reducing the amount of payments and/or modifying the interest rate on a long-term debt. The debtor’s new repayment schedule may not extend over the terms of the plan.

Cure or Waiver of Defaults

Debtor may cure defaults and reverse acceleration on mortgages or car loans by paying the arrearages over the term of the plan in addition to maintaining their regular original payments on the loan. Debtor may cure both pre-petition and post-petition default, as long as the collateral has not be sold at the foreclosure sale.

Write Down Undersecured Debts

Debtor can pay the value of the collateral over the term of the plan and write down the undersecured portion of the debt with exception to purchase money security interest loans incurred within 910 days before bankruptcy in a motor vehicle purchased for debtor’s personal use or other collateral incurred within the year before bankruptcy.

Order in Debt Repayment

Payments on non-priority unsecured debts can be made concurrently with payments on secured debts or priority debts, except that second priority claims must be paid before or at the time of each payment.

Post-Petition Debts

Debtors may pay through the plan allowed tax debts that become due while the case is pending and consumer debts that arise during the case and necessary for the debtor’s performance under the plan.

Cure Executory Contracts

Debtors may assume, reject, or assign executory contracts and unexpired leases through or outside of the plan and in case of defaults, assume by curing or providing adequate assurance of a prompt cure.

Good Faith Requirement

Finally, the debtor’s plan must be proposed in good faith. If a creditor objects to confirmation on the ground that the debtor has acted in bad faith, an evidentiary hearing may be required. Several factors are considered to evaluate the good faith requirements, such as the amount of the proposed payments, the debtor’s ability to earn and likelihood of future increase in income, the extent of preferential treatment of unsecured creditors, the extent of modification of the secured debts, debtor’s past bankruptcy filings, circumstances surrounding the accumulation of the debtor’s debts, etc.

A plan is not proposed in good faith if only nominal payments are proposed, or if the proposed payments do not represent the debtor’s reasonable best effort considering income and essential expenses. It is also not in good faith to propose a plan payment which is beyond the debtor’s ability to pay.

Plan Modification

The debtor is allowed to modify the plan both before and after the confirmation order. Before confirmation, the debtor has the exclusive right to propose any modifications by filing an amended plan. No court permission or stipulation of the affected parties is necessary. Plan modifications before confirmation may be necessary to resolve objections to the plan, to reflect a change in the debtor’s financial circumstances, or to correct the amounts of the debts set forth in the proposed plan.

Post-confirmation modification is different from the pre-confirmation modification. First of all, the plan modification may be required by the debtor, the trustee, or an unsecured creditor. Second, the post-confirmation modifications are possible only upon notice and hearing. Post-confirmation modifications may be warranted when there has been a change in the debtor’s financial situation to increase or reduce plan payments. The court may not allow the modification sought by the debtor if it is not for a good reason.

The modified plan must also comply with the legal requirements governing the plan, and the modification may not provide for payments for more than the maximum re-payment period. 

How can we help?

If you have secured debts that need attention, either because you are struggling to make monthly payments or behind on payments and risk foreclosure or repossession of the collateral, we can help you evaluate your options with respect to such debts if you want to keep the property and guide you through the necessary process to restructure your obligations and repay them in Chapter 13 over 3-5 years.

At Anna Handy Law Firm, P.A., we are acutely aware of the financial strain of our clients. We do not charge you for the initial phone consultation. We do not push you to file bankruptcy to get a retainer. We don’t judge – we find solutions. We give you honest advice about your options and rights, including the “doing nothing” approach. As such, we offer very affordable bankruptcy fees. We make our fees competitive and in certain cases, we offer payment plans to address each case individually as each case has a different set of circumstances. 

If you are overburdened by your debts, being sued or harassed by creditors, or subject to wage garnishment, do not hesitate to call us now for a free initial phone consultation. The attorney’s direct business cell phone number is (386) 248-3000. You may also email us at [email protected].