The Chapter 13 Plan

Lets move on to the Chapter 13 Plan itself because this is really the fine work of the Chapter 13 case, its the road map that tells the court and the creditors where this case hopefully is going at least as proposed by the debtor. The bankruptcy code requires that every debtor file a plan within 15 days after commencement of the case. The plan must describe in some detail the method by which the debtor proposes to handle all of the debts.

13 Plan-Classification Of Debts

Priority claims . The typical plan should divide the debts into logical categories, for example, certain debts which are required under the bankruptcy code to be satisfied in full such as non-dischargeable tax obligations are typically going to be put under a priority classification along with family support. This “priority” class of debts might also contain a provision for payment of the debtor’s attorney fees.

Attorney’s fees. A large percentage of debtors will pay all or most of their attorney’s fees for their legal representation as a component of the Chapter 13 plan. The plan also will divide debts into other logical categories such as a category for general unsecured claims without priority, a category for secured claims which are secured by the debtor’s principal residence, perhaps a category for secured claims secured by collateral other than the debtor’s principal residence, perhaps a category of claims for debts that are secured by personal property such as motor vehicles, big screen TV’s and other appliances.

Secured claims. A general requirement is that the debtor is required to pay interest to the creditor on value of the secured portion of such claims.

Duration of the Plan. No plan is allowed to extend beyond the duration of 60 months. If the debtor enjoys an above-median income level, the plan duration, called a “commitment period” is required by law to be 60 months, (but less only if the plan pays all claims in full)so as to maximize any possible repayment to unsecured creditors. Otherwise, the commitment period is 36 months for those with below-median income, unless there is “cause” to extend the duration for up to 60 months total duration. “Cause” to extend beyond 36 months has been found to be justified where the debtor voluntarily desires to pay more to creditors, or where the debtor can’t afford to complete the required payments (such as payments to secured claims and priority claims) within 36 months.

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