In Chapter 13 bankruptcy debtors file a plan proposing how they would like their debt reorganized. The plan may say that the debtor wishes to discharge certain debts without repayment while repaying other debts. A debtor can propose a plan saying just about anything but the plan isn’t binding until the plan is confirmed and only plans that follow the rules set out by the Bankruptcy Code, Federal Rules of Bankruptcy Procedure, and the local rules will be confirmed. Confirmation is the point at which all objections filed by the trustee in the case and the creditors are resolved, by agreement or by hearing, and the court approves the plan. Once the confirmation order is signed all creditors are bound by the treatment afforded them in the plan.
Confirmation means different things in different districts. Many bankruptcy districts have a form plan that is used that sets out the general terms of the plan. For example, some districts require that the debtor’s regular mortgage payment be paid through the trustee while other districts only allow mortgages to be included in the plan if the entire balance can be paid during the duration of the bankruptcy. The debtor’s attorney fills in the specific terms for each creditor, such as interest rate, valuation of collateral, pro-rata or fixed payment, any special provisions affecting the creditor, etc.
For most bankruptcy attorneys filing Chapter 13 cases, confirmation is the goal at filing. We work towards this point in time. In fact the majority of the work performed in a Chapter 13 case takes place during the weeks before filing the case and when the plan is confirmed, usually in the third to sixth month. When a plan cannot be confirmed the case is eventually dismissed.