How Should a Creditor Respond to a Proposed Chapter 13 Repayment Plan?

 Posted on June 16, 2023 in Debt Collection

Creditors need to be able to recover the money owed to them by debtors. Unfortunately, when a debtor files for bankruptcy, a creditor may not be able to recover the full amount owed. However, creditors may receive some payments during the bankruptcy process, and the amount they can receive will depend on the type ofbankruptcy filed. In a Chapter 13 bankruptcy, a debtor will propose a repayment plan in which they will make ongoing payments over a period of three to five years, and these payments will be distributed among their creditors by the bankruptcy trustee. In these situations, creditors will need to understand how to respond to a debtor's proposed repayment plan and the steps they can take to protect their financial interests.

Steps Creditors Should Follow During a Chapter 13 Bankruptcy

1. Read and review theproposed plan thoroughly - It is important for a creditor to examine the proposed Chapter 13 repayment plan carefully. The repayment plan should include detailed information about how much the debtor will pay, how frequently they will do so, and the duration of the plan. A creditor should ensure that the proposed plan complies with the rules and regulations governing Chapter 13 bankruptcy while also ensuring that the plan is accurate and realistic based on the debtor's income and expenses.

2. Evaluate how the plan will affect the creditor's claims - A creditor will need to determine how much of their claim will be paid back under the proposed plan and whether the payments will be enough to satisfy the entire claim.

3. Consider whether to accept or object to the plan - After reviewing the proposed plan and evaluating how it will affect their claims, the creditor can determine whether objecting to the plan may be beneficial. If the plan meets expectations and will provide the creditor with a fair distribution of payments, they may choose to accept it. However, if the plan is not feasible, does not comply with the law, or does not provide adequate repayment of a creditor's claims, it may be necessary to object to the plan.

4. File an objection if necessary - If a creditor believes a proposed repayment plan is unfair or violates bankruptcy regulations, they have the right to object to the plan, and this objection must be filed at least seven days before the confirmation hearing. The objection should explain why the creditor believes the plan is not feasible, does not comply with the law, or does not allow them to recover enough of what is owed. A creditor may also propose alternative payment terms that would be more feasible.

5. Attend the confirmation hearing - At the confirmation hearing, a creditor will have the opportunity to present their objections and proposed alternatives to the court. The court will then evaluate the proposed plan and any objections. A plan may be confirmed, modified, or denied. If the plan is confirmed, or if a modified plan is accepted, the debtor will be required to being making payments, and the bankruptcy trustee will distribute these payments to creditors.

Contact Our Chicago Creditor Representation Lawyers

Determining how to respond to a Chapter 13 repayment plan or address other bankruptcy-related issues can be challenging for a creditor. By following the correct steps during the bankruptcy process, creditors can protect their rights and financial interests and minimize their potential financial losses. At Dimand Walinski Law Offices, P.C., our Illinois creditors' rights attorneys can provide representation in these situations, and we can help creditors determine their best options for protecting their rights. Contact our firm at 312-704-0771 to set up an appointment.