Bankruptcy confirmation is required under the United States Bankruptcy Code for all debtors filing Chapter 13 protection. Commonly referred to as “reorganization bankruptcy”, debtors must submit proposed repayment plans at the time of filing or within 15 days of petitioning the court.
The purpose of bankruptcy confirmation hearings is to ensure debt repayment plans adhere to new bankruptcy laws. Chapter 13 payment plans must include payment amounts to each creditor along with payment dates.
Once bankruptcy refinance plans are approved, debtors submit payments to the court Trustee. Chapter 13 payments are generally paid on a bi-monthly or monthly schedule. Trustees distribute payments to creditors until debts are repaid.
Shortly after bankruptcy petitions are filed, notification to creditors is sent out to inform them of the bankruptcy filing and scheduled date of the 341 creditors meeting. 341 meetings give debtors the opportunity to meet face-to-face with creditors and explain their financial situation and ability to repay debts. Creditors can agree to accept a reduced payoff, lower interest rates, or remove late fees and penalties.
Information obtained at creditor meetings is given under oath. Debtors who provide false information are subject to criminal charges and their petition of bankruptcy will be denied.
In 2005, Congress enacted new bankruptcy laws which have made filing bankruptcy protection more difficult. The Bankruptcy Abuse Prevention and Consumer Protection Act require debtors to repay a portion of their debt and undergo credit counseling.
Few people can abide by BAPCPA regulations without legal counsel. Unfortunately, locating bankruptcy attorneys has become more challenging and expensive because the new laws hold lawyers accountable for information provided by their clients.
Several bankruptcy lawyers changed to other legal fields; leaving a deficiency of lawyers willing to assist with petition filings. Those who have remained in this field of law charge higher fees to cover increased business insurance premiums and potential litigation fees.
Debtors filing for Chapter 13 bankruptcy are required to undergo the means test to determine the amount of debt to be repaid. The means test compares debtors’ income to that of their states’ median income level.
When income is equal to or greater than median levels, debtors must file Chapter 13 and develop a confirmed debt reorganization plan. If income falls below median income, debtors might qualify for Chapter 7 which discharges all outstanding debts.
Bankruptcy repayment plans typically extend between three and five years. Debtors are prohibited from incurring new debt during the repayment period without court authorization. Chapter 13 payments are in addition to normal household expenses. One unexpected expense could cause debtors to fail out of bankruptcy.
If debtors are unable to adhere to bankruptcy repayment plans, creditors can petition the court seeking dismissal. If approved, debtors lose protection from the court and creditors are allowed to proceed with collection actions.
Bankruptcy confirmation can help debtors overcome financial hardships. However, individuals should become informed about the advantages and disadvantages of this action. Research bankruptcy alternatives including: debt consolidation, debt settlement, credit counseling or budgeting, to determine if similar results can be achieved.
Simon Volkov is an author and real estate investor who specializes in buying houses to help homeowners avoid foreclosure and bankruptcy. He has published numerous articles about personal bankruptcy, bankruptcy confirmation, tips for hiring bankruptcy lawyers, failing out of bankruptcy and bankruptcy alternatives via his website at www.SimonVolkov.com