When Can Creditors Object to a Chapter 13 Bankruptcy?

 Posted on October 26, 2022 in Chapter 13 bankruptcy

If you are considering filing for bankruptcy, you may be wondering how your creditors will react. Since bankruptcy will remove the obligation to repay some of your debts, it is likely that creditors will not be happy about the loss of money they will experience. However, since bankruptcy is a right that is provided to people in the United States, creditors often will be unable to do anything about a bankruptcy filing. There are some situations where creditors may be able to object, and if you are planning to file for Chapter 13 bankruptcy, you will need to be aware of the possible reasons for the objection to the confirmation of your repayment plan.

Chapter 13 Objections to Confirmation

When you file for Chapter 13 bankruptcy, you will propose a repayment plan to pay off some or all of your debts over a three- to five-year period. The bankruptcy court will review this plan and may make changes before confirming it. Once the repayment plan is confirmed, you will begin making payments according to the terms outlined in the plan. During the repayment plan, you will make payments to the bankruptcy trustee, who will then distribute the payments to different creditors who are included in the plan.

After you file your bankruptcy petition, creditors will be given the opportunity to object to your repayment plan. They may do so for a number of reasons, including:

• Feasibility of the plan - A creditor may believe that you do not have the ability to repay the debt under the proposed plan. That is, after reviewing your income and expenses, a creditor may believe that you will not be able to make ongoing payments. Because of this, they may claim that you have proposed the plan in bad faith, and they may ask for the proposed plan to be rejected or adjusted as necessary.
• Unfair treatment of creditors - A creditor may argue that the Chapter 13 plan unfairly discriminates against them in comparison to other creditors included in the plan. This can occur if, for example, one creditor is being paid a significantly lower percentage of the debt owed to them as compared to another creditor. It is important to note that in a Chapter 13 repayment plan, priority debts such as domestic support obligations will be addressed first, and non-priority debts will only be repaid if there is enough left over to do so.
• Violations of the best interests of creditors - A Chapter 13 plan must provide creditors with at least as much as they would receive if a debtor had filed for Chapter 7 bankruptcy. If a creditor believes that they would not receive this amount under the proposed plan, they may request that the bankruptcy case be converted to a Chapter 7 liquidation instead.

If a creditor objects to your repayment plan, you will have an opportunity to respond to the objection. If you are able to overcome the objection, then your repayment plan will be approved, and you can proceed with your bankruptcy case. If you are unable to overcome the objection, then your case may be dismissed or converted to a Chapter 7 bankruptcy.

Contact Our San Antonio, TX Chapter 13 Bankruptcy Lawyer

If you are considering filing for Chapter 13 bankruptcy, it is important to be aware that one or more creditors may object to your proposed repayment plan. However, if you are prepared to respond to their objections, you may be able to overcome them and continue with your bankruptcy case. At the Law Offices of Chance M. McGhee, our Schertz bankruptcy attorney can guide you through the Chapter 13 process and help you devise a repayment plan that meets the requirements of the bankruptcy court. Contact us today at 210-342-3400 to schedule a free consultation.

Sources:

https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics

https://www.law.cornell.edu/rules/frbp/rule_3015