Requirements to Confirm Plan
In order for a judge to approve or “confirm” the debtor’s plan, the debtor and his plan must satisfy certain requirements. The Chapter 13 Trustee monitors the case on behalf of the creditors and will object to confirmation if any of the requirements are not met. Creditors may also object to confirmation of the debtor’s plan. In the Jacksonville Division, the two judges handle confirmation differently. Judge Proctor makes the debtor take the stand and testify that these requirements have, in fact, been satisfied. Judge Funk does not usually require the represented debtor to attend confirmation as long as his attorney appears and as long as the debtor is current with the plan payments.
(a) Adequate treatment of priority and secured creditors – All priority and secured creditors must be treated fairly. See above.
(b) Proposed in good faith – This is self-explanatory.
(c) Unsecured creditors receive better treatment than in Chapter 7 – Under most Chapter 7 cases, unsecured creditors receive no distribution, so even a 5% payment toward unsecured creditors satisfies this requirement.
(d) Using all disposable income to fund plan – Disposable income is the difference between monthly income and monthly expenses. This is frequently a contested point between the debtor and the Chapter 13 Trustee. The Trustee often scrutinizes the debtor’s monthly expenses in an effort to increase the amount paid to general unsecured creditors.
(e) Still have enough money for living expenses – This is known as feasibility. If, after making the plan payment, the debtor does not have enough money for monthly living expenses, the trustee argues the plan is not feasible. The judge will never deny confirmation based upon feasibility, as long as the debtor is making the plan payments and is keeping support payments current. As the judges say, “The proof is in the pudding.” In other words, if the debtor is actually making the plan payment, then the plan is feasible regardless of what the stated monthly expenses are.
(f) Financial circumstances substantially unchanged since filing case – This requirement confirms that the debtor is using all disposable income.
(g) If applicable, all court ordered child support and alimony payments which have come due since the filing date are current. This is new under BAPCPA, and it is a potential pothole on the road to confirmation. BAPCPA requires that all child support payments be kept current from the date of filing forward. The logic is that support is a monthly obligation, and if the debtor is unable to pay this obligation and the plan, the plan fails the feasibility requirement. Even before BAPCPA, both Judge Funk and Judge Proctor made this a requirement. The difference now is that, before BAPCPA, it was only raised if the support creditor objected to confirmation. Now, the debtor must automatically testify as to the status of current payments.
ii) Chapter 13 Trustee – The Chapter 13 Trustee is charged with overseeing the Chapter 13 process and enforcing compliance with the Bankruptcy Code. It is a complex and thankless job. Although the Chapter 7 Trustee and Chapter 13 Trustee both want to see creditors get “top dollar” from the debtor, the Chapter 7 trustee focuses on the debtor’s assets, and the Chapter 13 Trustee focuses on the debtor’s income. The Chapter 13 trustee also administers confirmed plans, which includes receiving payments from debtors and disbursing funds to creditors. Although there is oversight from the United States Department of Justice, the Chapter 13 Trustee operates as a private business funded by a 5% administrative fee paid by the debtor with each plan payment.