In our last post, we began looking at the topic of modifying a Chapter 13 repayment plan. We’ve already looked briefly at some of the permissible grounds for modifying a repayment plan under federal bankruptcy law. Here we wanted to briefly mention some of the substantive requirements for modification.
First of all, secured creditors have the right to accept or reject the modified repayment plan. It is important for secured creditors to realize, though, that if they do not change their previous acceptance or rejection of the original repayment plan, that acceptance or rejection will be carried over to the modified plan.
A number of other requirements, which apply to any Chapter 13 repayment plan, must be met with modified repayment plans. These include:
- The modification is proposed in good faith and without fraud
- The value of property to be distributed under the plan due to unsecured creditors is at least the amount that would be paid to each unsecured creditor under a Chapter 7 plan
- The debtor must meet all domestic support obligations, such as child support payments
- The debtor must have filed all Federal, State and local tax returns
- Full payment of all claims entitled to priority payment must be made, unless the creditor has agreed to a different arrangement or the plan makes use of all of the debtor’s projected disposable income for a 5-year period
- A modified repayment plan may designate classes of unsecured claims, but must provide the same treatment to each claim in a particular class of claims and may not unfairly discriminate against any class, except for claims
In addition, the bankruptcy court must approve any modified repayment plan which extends beyond the period designated in the original plan, though courts may not approve a plan extending more than five years after the first payment under the original plan was due.
Navigating the legal and procedural requirements of a bankruptcy filing can be complicated, and it is important for debtors to work with an experienced attorney to receive guidance advocacy throughout the process.
Sources: 11 U.S. Code § 1329 - Modification of plan after confirmation