LAWDOG Bankruptcy: Chapter 13 Plan

LAWDOG BANKRUPTCY: CHAPTER 13

Chapter 13 Plan

LAWDOG is intended to assist in the understanding of basic concepts. See Disclaimer. Always obtain legal advice from legal professionals.

In a Chapter 13 proceeding, only a debtor may file a plan. The Bankruptcy Code provides mandatory provisions, which every Chapter 13 plan must contain, and permissive provisions which may be contained in such a plan. The debtor must file a Chapter 13 plan with the petition, or within 15 days thereafter. Such time may not be further extended except by the court for cause. A copy of Bankruptcy Rules Rule 3015(b) is reproduced here for illustration purposes only.

Mandatory Provisions

The debtor's plan must provide for these mandatory requirements:

(1) 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.

(2) The plan must 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.

(3) If the plan classifies claims, it must provide the same treatment for each claim within a particular class. A copy of Section 1322(a) is reproduced here for illustration purposes only.

Permitted Provisions

Under 11 U.S.C. Section 1322(b), the plan may contain certain permissive provisions, including the following illustrations:

1) Classes and Unfair Discrimination

The plan may designate a class or classes of unsecured claims, but may not discriminate unfairly against any class. However, such plan may treat claims for a consumer debt of the debtor involving a cosigner or guarantor differently than other unsecured claims. See Section 1322(b)(1), linked here.

2) Modification of rights of creditors

The plan may modify the rights of holders of secured claims, other than a claim secured only by a consensual security interest in the debtor's principal residence, or of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims. See Section 1322(b)(2), linked here.

(3) Provide for the Curing or Waiving of any Default

Section 1322(b) permits a plan to provide for the curing or waiving of any default. Since Section 1322 limits a plan to 3 years unless the court, for cause, approves a longer period up to 5 years, another section permits a debtor to deal with secured claims with maturities extending beyond the length of the plan. See Section 1322(b)(5), linked here.

4) Assumption, Rejection, or Assignment of Executory Contracts

Section 1322(b) also permits a plan to provide for the assumption, rejection, or assignment of certain executory contracts or unexpired leases of the debtor not previously rejected. See Section 1322(b)(7), linked here.

4) Provide for Payment of Certain Postpetition Claims under Plan

Section 1322(b)(6) of the Bankruptcy Code allows a plan to provide for payment of certain filed and allowed postpetition claims. Section 1305 permits a plan to provide for certain taxes that become payable while the case is pending; or certain post-petition consumer debt, for property or services necessary for the debtor's performance under the plan. See Section 1305, linked here.

A Chapter 13 plan may be modified at any time before confirmation. See Confirmation of Plan from previous menu or click here. Link does not return to this page. Always discuss actual cases with your actual legal advisor or legal department.

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