When your Chapter 13 case is filed, a proposed Chapter 13 repayment plan is also filed with your documents. This plan outlines a proposal of how much money you are going to pay into the plan, how long the plan is estimated to be, and how much each creditor will get paid in the plan.
The amount you end up paying in the bankruptcy will depend on what creditors file claims with the court, if your normal mortgage payment changes due to escrow or an adjustable interest rate, and other factors. Even after the plan is confirmed (approved) by the bankruptcy court, as stated, the amount may change due to changes in the mortgage payment or other factors. Please consult your attorney if you have any questions.
Typically, most Chapter 13 plans are between 36 and 60 months (3-5 years). The length depends on the individual factors of each bankruptcy case and cannot be compared from case to case. Like the plan payment amount, the plan length can be changed.
After the appropriate deadlines have expired, a Chapter 13 plan can be approved by the court. Confirming the plan means that all issues between the debtor and creditor with respect to the plan have been resolved, and those parties are bound by the terms of the Chapter 13 plan. A plan can be approved within 20-45 days after the completion of the 341 meeting. You do not need to attend this hearing.
Sometimes a plan is not confirmed (approved) by the court because there is a discrepancy between figures, such as the amount owed for taxes and child support or the amount of the mortgage arrearage when the bankruptcy was filed. Once these issues are resolved, then the Chapter 13 plan can be confirmed (approved).
Your Plan Payments
At the start of your bankruptcy, when you make payments to the Trustee, normally the Trustee’s office will hold those funds in trust until the Chapter 13 plan is confirmed by the court. Once the plan is confirmed, then the Trustee will mail out a lump sum check to creditors (mortgage or car lenders) for the months prior to the confirmation of the plan. That is why some lenders will state that they have not received payment because the Trustee is holding the funds until the plan is confirmed. Sometimes creditors will reach an agreement with your attorney to have funds dispersed prior to confirmation.
Changes to Your Plan
Your Chapter 13 plan is “flexible.” The amount you pay may adjust lower or higher due to the specifics of your plan. For example, if you are paying your mortgage through your bankruptcy or if the escrow portion of your mortgage increases, then your Ch. 13 plan payment must increase as well to cover the new escrow payment.
Likewise, your plan may be shortened or lengthened, depending on the circumstances as well. If you fall behind on your plan payments due to sickness or loss of employment, your plan may possibly still be saved by extending the plan or temporarily increasing your payments to resolve the plan payment delinquency. Again, please consult with your attorney regarding modifying your plan.
Dismissal of Your Bankruptcy Case
If your bankruptcy case is dismissed, your creditors can resume their collection activity, including but not limited to car repossessions, home foreclosures, and wage garnishments.