The Bankruptcy Code requires that every Chapter 13 bankruptcy have a plan. More than anything, it is a summary that is delivered to all your creditors that lets them know what they are going to get paid every month and how long they can expect payments to last. Generally a Chapter 13 bankruptcy plan will run between three and five years. In Portland, the Chapter 13 bankruptcy plan payment can be dictated by anyone of three things.
First, the debtor must pay back at least the rough difference between net income and living expenses. So if all your income minus all your living expenses allows you to pay, say, a couple hundred per month, you will have to make that plan payment every month during the plan period to the Portland Chapter 13 Trustee.
Second, the plan payment itself must be high enough to pay certain creditors off. If you have a car or furniture loan that you want to keep, your plan must account for the repayment of those debts. Often these debts are paid off with lowered principal amounts and interest rates. Certain taxes, child support, and mortgage arrears must be accounted for in the plan as well.
Finally, if you have property that could not be protected in a Chapter 7 bankruptcy, your plan payment must at least pay back approximately that total to your unsecured creditors. For example, let’s say you own a house with $60,000 worth of equity. The Oregon exemption is only $40,000 so in Chapter 7 bankruptcy, you would run the risk of a Portland-area Chapter 7 bankruptcy trustee selling off your home, handing you $40,000 and distributing the rest to your creditors. In Chapter 13 bankruptcy, you would get to keep the house but your plan payment would have to allow for a yield to your unsecured creditors more or less equal to a somewhat discounted portion of that unprotected equity
The Portland bankruptcy judge, who signs off on your plan, regards the Chapter 13 plan as an agreement between you, the Trustee, and your creditors. The Trustee must pay your creditors exactly as required by the plan. The Trustee does not have any discretion to change those payments. If they need to be changed, you can always file an amended plan which must be then be approved by your bankruptcy judge.
The plan is sent to your creditors prior to your meeting of creditors so that they may review it and object to their treatment if they don’t like what they see. Once the plan has been mailed out to your creditors, you will along with your attorney meet with the Portland area Chapter 13 Trustee for the meeting of creditors(also known as the 341 hearing) to go over the plan, discuss potential revisions, and, if any creditors appear(they rarely do), to give them an opportunity to raise any questions that they might have. Most filers are pleasantly surprised at how collegial these hearings are.
Roughly five weeks after the 341 hearing, you will have what is called a confirmation hearing. You will not need to attend this hearing as your attorney will appear on your behalf. At that hearing, the judge will hear from the Trustee and any creditors that want to object to their treatment in the plan. Once the judge is satisfied that the Trustee approves of your plan and that any creditor objections have been satisfied, the judge approves your plan and signs an Order of Confirmation(also known by the acronym OCP for Order Confirming Plan)the court that approves your plan that binds both you and your creditors to the agreement or plan. You will receive a copy of the Order in the mail which you should read and save.
If your income or expenses change in the coming years after the confirmation of your plan, you should contact your attorney to at least explore the possibility of modifying your plan to account for the change in circumstances. In addition to not wanting to overpay, there is an ongoing obligation to communicate any increase in income to the Portland Chapter 13 Bankruptcy Trustee. This is normally accomplished through your attorney who will, in turn, review your options with you.
Our attorneys have been filing and confirming Chapter 13 for over fifteen years in the Portland area. We are happy to help. Call today.