Objection to Chapter 13 Plans

In a Chapter 13 bankruptcy case, the debtor must file a proposed Chapter 13 plan in "good faith," that is, the debtor must be honest regarding the facts of the case and not engage in fraud or concealment of assets. In formulating the plan, the debtor is required to devote all "disposable income" to repaying creditors. Disposable income is defined as "current monthly income received by the debtor is less than amounts reasonably necessary to be expended for the debtor to provide for the debtor and any dependents." Current monthly income is defined as the debtor's average income received over the six months prior to the bankruptcy filing.

Chapter 13 Plan and Process

Through the Chapter 13 plan, some creditors are entitled to receive 100% of the debt owed, while others receive a much smaller percentage, and in certain circumstances, nothing at all. The plan must be filed within 15 days of the filing of the case, and the debtor must commence making proposed plan payments to the Chapter 13 Trustee within 30 days.

The length of the plan that the debtor must propose is commonly referred to as the "commitment period." The commitment period is determined by whether the debtor's income is above or below the state median income. If above, the commitment period must be five years. If below, the debtor may limit the commitment period to three years. In all instances, a creditor must not receive less than what they would receive in a liquidation of the debtor's assets in a Chapter 7 bankruptcy case. The debtor must make all of the Chapter 13 plan payments in order to successfully complete the plan and receive a discharge.

The plan is initially characterized as a "proposed" plan because all creditors (and the Chapter 13 Trustee) have the right to review the plan to determine if an objection should be lodged. In addition, the plan must be "confirmed" by a bankruptcy court judge before it is considered permanent and enforceable. Prior to confirmation, the debtor's plan is merely a proposal and interested parties may object to its terms at any time prior to confirmation. A creditor may object to the plan on various grounds, including, but not limited to, the following:

  • The plan does not appropriately treat the creditor's claim, e.g., inappropriately proposes to "cram down" or "strip off" a secured party's interest
  • The plan undervalues a secured party's collateral
  • The plan contains incorrect information regarding debt arrearage
  • The plan fails to provide for sufficient payments to creditor as a result of an understatement of income and / or an overstatement of expenses
  • The plan is not "feasible" (meaning that the plan does not have a reasonable possibility of success as the debtor is relying upon "highly dubious" or fallacious sources of income to support payments called for by the plan)

How can a Massachusetts creditors' rights attorney help me?

D. Baker Law Group, P.C. files objections to chapter 13 plans for creditors in both the United States Bankruptcy Court-District of Massachusetts and the United States Bankruptcy Court-District of Rhode Island. It is essential for creditors to have competent counsel review and closely scrutinize a debtor's proposed Chapter 13 plan to ensure that the creditor's rights are adequately protected. Our office stands ready to perform this vital function and to take any further action that is required under the circumstances.

David M. Baker, Esq.- your Massachusetts and Rhode Island Creditors' Rights Law Attorney!

Ready to schedule your case evaluation? Simply call our firm today.