If you file for Chapter 13 bankruptcy, you will need to submit a proposed debt repayment plan with the rest of your paperwork. The bankruptcy court must confirm the repayment plan, and before it is confirmed, interested parties will have the opportunity to challenge it. Within 30 days of filing for bankruptcy, you will need to start making plan payments, even if the plan has not been confirmed. In addition, your plan may provide for you to make payments on some secured debts outside of the plan and directly to secured creditors. Make sure you read and understand your plan before it is filed. For example, your plan may pay one car loan through the plan and another outside of the plan. Mortgage payments on homes are normally paid directly by you outside of a plan while the plan may take what you are behind on the mortgage and spread that over the 3-5 year duration of the plan. In such cases, you will have to make both the plan payment and the house or car payments to be paid outside of the plan for it to work. A confirmation hearing is the proceeding by which a Chapter 13 debt repayment plan is confirmed. The bankruptcy lawyers at Grainger Legal Services can advise individuals in the Montgomery area on whether their debt repayment plans are likely to pass muster with creditors and the bankruptcy trustee, and represent debtors at a confirmation hearing.
In Chapter 13 bankruptcy, the law expects you to pay back your creditors to the extent possible before obtaining your bankruptcy discharge and a fresh start. Accordingly, your debt repayment plan must account for your creditors’ interests in getting repaid at least part of what they are owed. If, for example, the plan fails to provide for how your debt on your car or house is to be paid, those creditors are likely to object to confirmation. The bankruptcy administrator or trustee may also have objections, if it seems that your plan is not feasible or that your creditors will not be adequately repaid.
In some jurisdictions, a confirmation hearing is automatically scheduled within 45 days of a meeting of creditors. In other jurisdictions, the confirmation hearing is scheduled only if an interested party objects to your debt repayment plan. In the Northern Division of the Middle District of Alabama, where our firm serves clients, a hearing will be held before the bankruptcy judge at the Federal Courthouse in Montgomery, Alabama, which our clients almost never have to attend.
At the hearing, the judge will hear arguments from both sides with regard to the debt repayment plan if there is an objection although such objections are normally worked-out in advance. Secured creditors are more likely to object than unsecured creditors, particularly if they are faced with a large loss. For example, in Chapter 13 bankruptcy, our plan may be to pay less than what is owed on a car or mobile home by only paying what it is worth and saving our clients thousands of dollars. The creditor may dispute the value we are using and, if we don’t settle it, the judge may have to hold a hearing to determine the value of the car or mobile home.
Objections to confirmation are normally resolved informally. However, if necessary, the judge can hold an evidentiary hearing to make a determination about your debt repayment plan. You do not want to go through a confirmation hearing without legal representation. Agreeing to a debt repayment plan that you do not believe you can follow can be a recipe for disaster. An experienced bankruptcy lawyer will be able to explain nuances and consequences of the judge’s order at the confirmation hearing that you may not understand.
There are numerous potential pitfalls when you file for bankruptcy, which makes having an experienced lawyer important to you. Chapter 13 bankruptcy takes 3-5 years, and it is important to understand and commit to the plan that is confirmed. If you do not follow the plan, you will not obtain a bankruptcy discharge. An experienced bankruptcy attorney can guide you through the process of creating a proposed debt repayment plan in Alabama and advocate on your behalf at a confirmation hearing. Grainger Legal Services represents clients in South-Central Alabama from our offices located in Montgomery, Prattville, and Troy. Call us at (334) 260-0500 or contact us online to schedule a free consultation.