What Happens If the Bankruptcy Trustee Objects to My Chapter 13 Plan?

When you file for Chapter 13 bankruptcy, you are responsible for proposing a plan for paying creditors. If your proposed repayment plan doesn't comply with bankruptcy laws, the bankruptcy trustee assigned to the case will object to its approval. Learn about typical Chapter 13 plan objections and options for resolving potential problems.

The Chapter 13 Plan Confirmation Process

In Chapter 13, or “reorganization” bankruptcy, filers repay some or all debts over three to five years. Part of qualifying for Chapter 13 bankruptcy is submitting a payment plan that the bankruptcy court reviews at a “confirmation” hearing. If the plan doesn't adequately pay creditors or the debtor doesn't have enough income to fund it, the trustee will object to its approval.

Although the process takes several months, filers make the first proposed payment about 30 days after filing. This requirement ensures all plans end within the five-year maximum allowed. If the court confirms the plan for an amount different from the initial proposal, the payment amount is adjusted accordingly. If the court doesn’t confirm the plan, the trustee returns the payments to the filer, with some exceptions—most notably, car payments, which the trustee forwards to the lender as received.

Reasons the Trustee Might Object to a Chapter 13 Plan

A trustee who finds a problem with the plan will often discuss it informally with the debtor, possibly at the 341 meeting because it’s convenient (it's not required). If they can’t resolve the problem, the trustee will file a written objection stating why the court shouldn’t approve the debtor’s proposed Chapter 13 plan.

Because the Chapter 13 trustee’s primary role is maximizing creditor payments and evaluating whether the debtor has enough income to afford the required monthly amount, most objections will fall into one of the following categories:

• The debtor didn’t provide four years of tax returns or other required financial documents.
• The debtor is already behind on plan payments.
• Plan payments don’t include all the debtor’s disposable income.
• The debtor’s income is insufficient income to support required plan payments.
• The plan fails the “best interest of creditors test” because it doesn’t pay as much as creditors would receive in Chapter 7 bankruptcy.
• The plan doesn’t pay required priority debts fully.

Also, the debtor must propose a plan in good faith, a general requirement that opens the door for more case-specific trustee objections.

Options If the Trustee Objects to a Chapter 13 Plan

As briefly discussed, it’s common for the trustee and debtor (or, more realistically, the debtor’s bankruptcy attorney) to work together to resolve plan problems informally. When successful, the debtor files an amended plan, and the trustee withdraws the objection. Otherwise, the trustee files a written objection.

Of course, the trustee doesn’t always contact the debtor before filing an objection. Either way, after the trustee files the objection, the debtor should respond by filing a written opposition outlining why the plan is confirmable without change because most courts will grant the trustee’s motion without opposition.

At the confirmation hearing, the trustee and debtor can argue their positions to the judge. If further evidence is needed, the judge can continue the hearing or set the matter for trial or an evidentiary hearing. However, in most cases, the judge will either confirm the plan or give the debtor time to fix any issues.