Filing a Chapter 13 Plan -

     Section 1321 of the Bankruptcy Code requires the debtor to file a plan. The form of the plan can vary widely from district to district, and even from judge to judge. It is very important for the debtor's attorney to be familiar with the practice in the court where the case is filed. In many courts, debtors are allowed to select between a short-form, 1-page "fill-in-the-blanks" plan for the simpler case, and a 8-9 page, detailed plan with much greater detail for the more complex case.

The Plan and Payments

     The plan is usually filed with the petition. If it is not, as when a "skeleton" petition is filed, then the plan is required to be filed within 14 days. For good cause shown, this time can be extended. The first plan payment is due 30 days after the filing of the petition, regardless of when the plan is filed. The plan is the debtor's proposal for repayment of his creditors.

     The plan must provide for payment of a fixed amount to the Chapter 13 trustee on a regular basis, usually monthly. Most courts require that the payment be made by money order, cashier's check, or via a voluntary wage assignment order with the debtor's employer. The trustee then distributes the money to creditors, and often the debtor's attorney, according to the terms of the plan. It is very common for general unsecured creditors to receive only a small fraction of their claims.

Percentage Plan vs. Base Plan

     The debtor's attorney, working with the information provided by his or her client, makes these computations, sets forth the amount in the debtor's plan, and then asks that the court confirm the plan. The debtor can propose a straight percentage plan, i.e., where each creditor receives a set percentage (e.g., 5% 10%, 50%) of its allowed claim. Alternatively, he can propose a "base" plan, which simply says that unsecured non-priority claims will be paid on a pro rata basis, from whatever money is left after payment of the secured and priority claims. The debtor makes a set plan payment for a fixed amount of time, with no minimum guaranteed dividend to creditors--they basically get whatever is left. The use of the "percentage plan" vs. the "base plan" will vary widely from court to court, and persons filing bankruptcy should ensure that their attorney is familiar with local practice.

Written by Henry Rendler