By Ryan C. Wood

If you are filing for Chapter 13 bankruptcy protection you must also file a Chapter 13 Plan. The Chapter 13 plan will tell the court and all interested parties (such as the Chapter 13 trustee and your creditors) what you intend to do in your Chapter 13 case. The plan will provide for how long the Chapter 13 bankruptcy case will last, if you are reducing or “cramming down” the secured debt of a car to its fair market value, if you plan on stripping a junior lien on a house, if you need to pay back mortgage arrears, whether you are surrendering the collateral of a secured debt (such as a house or car), what percent your unsecured creditors will be paid and anything else you want to have done in your Chapter 13 reorganization case.

Your bankruptcy attorney will be working with the Chapter 13 trustee to make sure that your plan is confirmable (approved). It is the trustee’s job to take your Chapter 13 plan payments and disburse the funds according to the terms of your Chapter 13 plan. If there are issues with the plan payment, secured debt amounts, interest rates, payment percentages to the unsecured creditors, or any other terms of the plan, the Chapter 13 trustee will object to the confirmation/approval of your plan. Any of your creditors may also object to the confirmation of your plan as well if they do not agree with the terms you set forth in the plan. You may amend your Chapter 13 plan prior to confirmation if you need to change some of the terms, such as if the value to a car needs to be changed (based on negotiation between your bankruptcy lawyer and your car lender), or the amount of mortgage arrears (missed payments) is different than what is listed in the plan. If all issues are resolved with your creditors and trustee, the trustee can recommend to the court that your Chapter 13 plan be confirmed. The Chapter 13 plan you file with the court is only “proposed” until the bankruptcy court confirms/approves your Chapter 13 plan.

Once your Chapter 13 plan is confirmed you need to comply with the terms you set forth in the proposed Chapter 13 plan. Pursuant to 11 U.S.C. §1325, the bankruptcy court will confirm your Chapter 13 plan if: 1) it is proposed in good faith, 2) you are able to make all the payments proposed in the plan, 3) your unsecured creditors receive as much in your Chapter 13 plan as they would have if you filed a Chapter 7 case, 4) your secured creditors accept their treatment in your plan, 5) you file all applicable tax returns as required before your meeting of creditors and on time every year thereafter, and 5) if you comply with the terms of the plan.

One of the biggest factors in the determination of whether to confirm your Chapter 13 plan is feasibility. The Chapter 13 plan needs to be feasible or reasonably possible. In other words, you need to have the ability to pay what you propose in your plan. One example is if your plan proposes to pay $400 a month in your Chapter 13 plan but you only have $100 available after paying all your necessary expenses such as rent/mortgage, utilities, food, gas, insurance. How can you pay $400 a month in a plan if you only have $100 left over each month? The plan will be denied confirmation because it is not feasible or possible. To show that the plan is feasible you have to prove that the plan has a reasonable likelihood of success. One of the ways you can do so is to show that your income and expense schedules (Schedules I and J) provide the necessary disposable income to pay the Chapter 13 plan payment. For the example above, your plan may be feasible if your Schedules I and J reflect a disposable income of $400 to pay your Chapter 13 payment. Note that the plan only has to show that it has a reasonable likelihood of success. It does not have to prove that the plan is guaranteed to be successful. In re Anderson, 18 B.R. 763, 765 (Bankr. S.D. Ohio 1982). The bankruptcy court’s determination of feasibility should be based upon the facts before the court at the time of confirmation rather than hypothetical scenarios. In re Anderson, 18 B.R. 763, 765 (Bankr. S.D. Ohio 1982).

Another important factor in the determination of whether your Chapter 13 plan can be confirmed is the good faith requirement. Good faith is looked at on a case-by-case basis and takes all factors into account. You want to be sure that all your creditors are being treated fairly and that you are paying all of your disposable income into the plan.

In conclusion, if you propose a plan that satisfies the Chapter 13 trustee and the creditors, you can afford to pay the monthly payment every month, your creditors are being treated fairly, your case was filed in good faith, and you comply with the terms of your Chapter 13 plan, you will have a high likelihood of having your Chapter 13 plan be confirmed.