by: Baran Bulkat, Attorney
If you file for Chapter 13 bankruptcy and your proposed repayment plan doesn't comply with all applicable bankruptcy laws, the bankruptcy trustee can object to the confirmation (approval) of your plan. Below you can learn why the trustee might object to your Chapter 13 plan and your options if the trustee does object to your plan.
The Chapter 13 Plan and Court Confirmation
Chapter 13 is commonly referred to as a reorganization bankruptcy because you pay back some or all of your debts through a repayment plan. When you first file your Chapter 13, you propose an initial repayment plan to the trustee, your creditors, and the court. Once your case is filed, you must begin making plan payments to the trustee (your first payment is typically due within 30 days). But your plan doesn’t take permanent effect until it’s confirmed by the court (which can take up to several months). (Learn more about the Chapter 13 repayment plan.)
In most cases, unless the trustee or one of your creditors objects to the confirmation of your plan, the court will approve it. But if you don’t propose a feasible plan that complies with all bankruptcy laws, the trustee can object to its confirmation.
When the Trustee Might Object to Your Chapter 13 Plan
There are several requirements you must satisfy if you want the court to approve your proposed Chapter 13 plan. In most cases, the trustee will object to your plan if:
- you don’t pay all of your disposable income to your unsecured creditors in your plan (learn about how your disposable income affects your Chapter 13 plan)
- you don’t have enough income to afford your plan payments
- your plan doesn’t satisfy the best interest of creditors test (which states that your plan must pay your unsecured creditors at least an amount equal to what they would have received in Chapter 7 bankruptcy)
- your plan doesn’t include certain debts you are required to pay back (learn about debts you must pay back in your Chapter 13 plan)
- the length of your plan is too short or too long (learn about how long your Chapter 13 plan must last)
- you don’t provide all of the supporting documents (such as tax returns or pay stubs) the trustee requires
- you are behind on your plan payments, or
- your plan is not otherwise proposed in good faith. (Learn about the good faith requirement in Chapter 13 bankruptcy.)
What Happens If the Trustee Objects to Your Chapter 13 Plan?
In Chapter 13 bankruptcy, one of the trustee’s most important responsibilities is to maximize payment to your unsecured creditors. This means that in most cases, the trustee will be arguing that you should be paying more into your Chapter 13 plan. For this reason, trustee objections are very common in Chapter 13 bankruptcy. (Learn more about the role of the Chapter 13 trustee.)
If the trustee wants to object to your plan, he or she will typically file a written objection to confirmation with the court and set forth the reasons why the court should not approve your proposed plan. If you don’t respond to the trustee’s objection, most courts will not confirm the plan. If you want the court to approve your plan after the trustee objects, you must file a written opposition and explain to the court why you believe your plan is ready for confirmation.
Your Options If the Trustee Objects to Your Plan
In most cases, you can:
- fix your errors
- file an amended plan, or
- negotiate with the trustee to resolve the objections.
But if you can’t work out a solution with the trustee, you must be prepared to argue your position to the judge at the Chapter 13 confirmation hearing (discussed below).
The Chapter 13 Confirmation Hearing
After you file for Chapter 13 bankruptcy, the court will schedule a confirmation hearing to determine whether or not your plan should be approved. If the trustee or your creditors don’t object to your proposed plan, the court will confirm your plan at the hearing. (Learn more about the Chapter 13 bankruptcy confirmation hearing.)
But if the trustee objects to your plan and you are not able to resolve the objection prior to the confirmation hearing, you must explain to the judge why you believe your plan should be confirmed. After you present your position, the trustee will also have a chance to make an argument.
After hearing both sides, the judge will decide whether or not your plan should be confirmed. If the judge needs further evidence, he or she can also continue the hearing or set the matter for trial or an evidentiary hearing.