A Chapter 13 bankruptcy case revolves around the payment plan. Your plan sets forth what creditors will be paid and how much they will receive. Once a plan is confirmed by the court, the debtor must make a monthly payment to the trustee for the next 3 to 5 years.
The creditors of a Chapter 13 debtor must file Proofs of Claim, which set forth the amount each creditor claims is owed. The trustee will us the claims to determine how much money is needed to pay off the claims under the confirmed plan. It is important to note that the plan must pay secured claims (may include interest), priority claims, legal fees, trustee’s fees, and a percentage to the unsecured creditors.
The “base" of your plan is the total amount to be paid under your plan. For a simple example, if you pay $100 per month to the trustee over a period of 36 months, your base is $3600.
If the amount needed to pay the claims turns out to be more than the “base", your plan is “infeasible." When this happens, the trustee normally contacts your attorney and requests that you amend the plan to resolve the infeasibility. If this is not done, the trustee may file a motion to dismiss the case.
What can a debtor do to cure the feasibility problem? There are a few options:
•increase the amount of your monthly payments
•make a lump sum payment
•file a motion to modify your plan to change the amount paid to unsecured creditors, extend the duration of the plan (if it is under 60 months), or propose a gradual increase in monthly payments after a certain time period passes.
Having a qualified bankruptcy attorney assist you during your case can help you deal with issues such as infeasibility of your Chapter 13 plan.
If you are considering a foreclosure, short sale, or filing for bankruptcy protection, call The Dodds Law Firm, PLC, at 623-209-8923. The Dodds Law Firm, PLC, serves clients primarily in the areas of Fair Debt Collection Practices Act violations, Chapter 7 and 13 bankruptcies, and issues of Unfair or Deceptive Business Practices. Our firm is committed to protecting the rights and benefits afforded to all individuals under state and federal law, as well as the U.S. Constitution.