Bankruptcy plans require specific details

On behalf of Bankruptcy Law Firm of Clare Casas on Friday, December 11, 2015.

Florida debtors who file for bankruptcy under Chapter 13 need to submit plans that satisfy the federal bankruptcy laws. While such plans may provide for actions like waiving debts, changing the rights of claim holders and designating claims, they also have to detail how the filer will make full payment of claims and specify how future earnings and income will be handled.

As per 11 U.S. Code § 1322, plans can denote different claim categories as long as they specify a uniform, non-discriminatory treatment for each claim within a given category. Although most plans should detail how the debtor will make deferred payments for those claims, they may not be required to do so if the claim holder consents to another form of resolution or if the debtor can show that all of the disposable income they receive for five years following their first payment due date will be used to make payments.

The law provides a number of specific formulas governing how a debtor and their spouse’s combined monthly income should be used to determine the length of a valid plan payment period. Although bankruptcy plans are permitted to vest estate properties in different entities or stipulate the payment of future interest within reason, they can neither modify existing loan terms nor use loan repayment amounts to calculate disposable income for repaying other debts.

While bankruptcy provides many people with much-needed financial relief, it is not always the only appropriate or available solution. Chapter 13 bankruptcy has eligibility and other requirements that an attorney can outline to a client during an exploration of other forms of debt relief that may be available.