When you file a Chapter 13 bankruptcy case, you are asking the Bankruptcy Court to allow you to accept a payment plan that will pay off your debts in an affordable way. Your confirmed plan is an agreement that you will pay a monthly payment to the Chapter 13 Trustee for between 36 and 60 months, which will pay a certain percentage towards your unsecured debts.
For example, your confirmation order might say that you are to pay $300 per month for 60 months which will pay a minimum of 10% to your unsecured creditors. In this example, $300 times 60 months will total $18,000 over the course of your plan. This $18,000 is called your “base”.
After your creditors have filed their Proofs of Claim, it can be determined how much money is needed to pay off your claims according to your confirmed plan. This will include any secured claims plus interest paid inside the plan, any priority claims paid in the plan, legal fees, trustee’s payments and the 10% to the unsecured creditors.
If the amount needed to pay the claims turns out to be more than the “base”, your plan is “infeasible“. If this happens, the Chapter 13 trustee will usually contact you and your attorney and ask you to resolve this infeasibility. If you do nothing, then the Trustee will likely make a motion to dismiss your case.
There are several ways to deal with a feasibility problem. You can increase your monthly payments to the Trustee. You can pay in a lump sum during the course of your plan… for example from tax refunds…, you can make a motion to modify your plan to decrease the percentage to the unsecured creditors, you can extend the duration of the plan – but only if it is not already a 60 month plan, or you can propose that you step the payments up in the future.
It is helpful if you keep track of the status of your Chapter 13 case. The more you know about your case, the more peace of mind you will have about the entire bankruptcy process.
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Last modified: May 26, 2011