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Chapter 13 payments and confirmation

Tennesseans who are moving forward with a bankruptcy under Chapter 13 must understand when the payments must start and its connection to the confirmation hearing. Since Chapter 13 is a repayment plan rather than a liquidation and, depending on the situation, the payments are required to be made within three to five years, the timing of when the payments will commence is vital. So too is the confirmation hearing.

When filing for Chapter 13, the debtor must begin making payments to the trustee within 30 days even if the court has yet to approve it. If there are secured loan payments or lease payments that are due prior to the plan's confirmation, there must be adequate protection payments made with the amount that would be paid to the trustee deducted. This is common with car and home payments. Within 45 days of the meeting of creditors, a confirmation hearing will be held to determine if the plan is feasible or not and if it meets the criteria for Chapter 13. The creditors will have 28 days' notice of the hearing and have the right to object to its confirmation. Commonly, the creditors will object that the payments are less than what the creditors would get if there was a liquidation and all disposable income that the debtor is projected to earn has not been used to make payments within the time frame of the plan, three or five years.

Once the plan has been confirmed, the trustee will commence distribution of the funds that are received. This will be done at the earliest point it is practicable. The court has the right to decline confirmation. If that happens, the debtor can make a modified plan. The case can also be converted to a Chapter 7. The court can also decline to confirm the modified plan or dismiss the case. If it does, the court can issue an authorization to the trustee to retain some of the funds for costs, but the debtor must get the remaining funds back. If there is a change in circumstances that hinders the debtor's ability to adhere to the plan, it can be modified even after it has been confirmed.

For those who are experiencing financial struggles and would like to file for Chapter 13 to avoid a liquidation and retain certain properties while paying back part of what they owe, it is vital to understand the various aspects of the case. Having legal assistance from an attorney experienced in Chapter 13 bankruptcy is imperative.

Source: uscourts.gov, "Chapter 13 -- Bankruptcy Basics -- The Chapter 13 Plan and Confirmation Hearing," accessed on July 27, 2017

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Kenneth C. Rannick, P.C.
4416 Brainerd Road
Chattanooga, TN 37411

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