Order Confirming Plan (OCP) / Chapter 13 -

     If all objections are either resolved by the parties or overruled by the bankruptcy judge, the Court will enter an Order Confirming Plan, known sometimes as "OCP". If the court denies confirmation of his plan, Bankruptcy Code Section 1323 lets a debtor file an amended plan to try to meet confirmation requirements. The debtor can ask that his case be converted to Chapter 7 liquidation bankruptcy, under Bankruptcy Code Section 1307(a). Or, if confirmation has been denied, the Court on its own motion or on motion of a party in interest can dismiss the case. If the case is dismissed, then under Bankruptcy Code Section 1326(a)(2), the Chapter 13 trustee will return undisbursed monies on hand to the debtor, less the trustee's expenses.

Section 1327(a)

     Under Bankruptcy Code Section 1327(a), the OCP is the Court's determination of the rights and liabilities of the debtor, his creditors, and the Chapter 13 trustee. It can have quite powerful and far-reaching effects. For instance, a creditor who was previously owed $ 10,000.00, may now only have the legal right to expect $ 1,000.00, over time, under a 10% percentage plan. An auto finance creditor like Toyota Motor Credit may have been owed $ 20,000.00 on a Toyota Sequoia, with payments of $ 600 per month. If the contract was entered into more than 910 days prior to the petition date, and the car was worth only $16,000 on the petition date, then the lender could very well end up with a secured claim of $ 16,000, and reduced payments of $ 500 per month or less, in full payment of the debt. The lender could also see a reduction in the interest rate on the loan.

Section 1327(b)

     Once the OCP is entered, the debtor is required to make the payments set forth in the plan. Under Section 1327(b) of the Bankruptcy Code, a debtor is allowed to keep all of his property, and it "revests" in the debtor once the OCP is entered. There are alternative plan provisions, however, which provide that the property does not revest until all plan payments are completed and the debtor receives his discharge. There are advantages to both types of treatment, both immediate and delayed vesting. With delayed vesting, the property remains property of the bankruptcy estate, and the automatic stay remains in effect. With immediate vesting, the debtor has the freedom to deal with his property as he sees fit. Many jurisdictions have form plans with a box to check, either for immediate or delayed vesting. This choice is best made after consultation with competent counsel and a cost/benefit analysis done.

     As long as he keeps making his plan payments in a timely fashion, there will generally be no further problems and only minimal contact with the trustee and debtor's counsel. However, in order to assist the debtor in making his plan payments, the debtor is not allowed to incur new debt, without the consent of the trustee.

Written by Henry Rendler