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Chapter 12 Plan
LAWDOG is intended to assist in the understanding of basic concepts. See Disclaimer. Always obtain legal advice from legal professionals.
In a Chapter 12 Bankruptcy, the debtor is required to file a plan not later than 90 days after the order of relief. The court may extend this time under very limited circumstances. Only the debtor may file a Chapter 12 plan. See Section 1221 reproduced here for illustration purposes only.
The Chapter 12 plan may not provide for payments over a period that is longer than three years unless the court for cause approves a longer period not exceeding five years. However, certain long-term debts are exempted. See Section 1222 (c) reproduced here for illustration purposes only.
There are certain mandatory provisions which apply to every Chapter 12 plan. Section 1222 (a) requires that a Chapter 12 plan must:
1. provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan;
2. provide for the full payment, in deferred cash payments, of all claims entitled to priority unless the holder of the claim agrees to a different treatment; the full payment, in deferred cash payments, of all priority claims set forth in 11 U.S.C. Section 507, unless the holder of the claim agrees to a different treatment. These may include such things as administrative expenses, involuntary gap claims, certain wages or commissions of employees, unsecured consumer deposits, certain spousal and child support; certain taxes and customs duties. See Priority of Payment linked here. Link does not return to this page.
3. if the plan classifies claims and interests, provide the same treatment for each claim or interest within a particular class unless the holder of a particular claim or interest agrees to less favorable treatment.
In addition to the mandatory provisions, Section 1222(b) provides that a Chapter 12 plan may contain permissible provisions. These may include those which modify the rights of holders of secured claims, or of holders of unsecured claims, provide for the curing or waiving of any default and others. A copy of Section 1222 is reproduced here for illustration purposes only.
A Chapter 12 plan may be modified before confirmation at any time if it meets all the requirements provided under Section 1222. See Confirmation from the previous menu, or here. Link does not return to this page.
