Unless objected to, all claims will be allowed. Your plan may even allow late filed claims, but if a claim is filed late, after notice and a hearing, the Court must (usually) sustain the objection. Claimants can try to extend their deadlines, but unless they can demonstrate that they fit within the exceptions provided for under the Code, their request will be denied.

Once the deadline passes, your attorney as well as the Trustee will review the claims and objections will be made where appropriate. Claims should be filed with supporting documents, such as a note or contract. If not, an objection will likely follow. Supporting documents show the claim to be valid as prima facie evidence but not necessarily wholly undisputed. A creditor may show a claim to be higher than what is really owed. Debtors may still challenge a claim based on standing – which is the right the creditor has to file the claim in the 1st place, the amount owed, interest, fees and costs assessed, the type of supporting documents used and the nature of any amendments filed. The dispute of any creditors claims may be resolved by evidentiary hearing or may turn into an adversarial proceeding.

The plan must be filed in good faith and comply with all bankruptcy laws which mandate certain requirements but maintains the flexibility so that debtors may formulate a plan that enables them to keep property, stop foreclosure, repossessions, garnishments, attachments, catch up on missed payments, reduce interest rates on certain creditors, in specific circumstances, strip off liens and reduce the amount of unsecured debt being repaid over a period of time.

So long as the plan complies with the aforementioned and is feasible, meaning the debtor has the funds necessary to comply with the terms of the plan, it would likely get confirmed. It is also possible, with changed circumstances for the debtor to request a modification of the plan, such as when there is a substantial change in income.

As a practical matter, debtors who have certain secured claims with exorbitant interest rates can present a plan that reduces the interest rate that the creditor has applied against the property. Unsecured creditors are paid a small percentage of their totals, based on disposable income.

The most interesting aspect of the debtors power in the plan is the strip off or lien-stripping power. When an evaluation is done by the attorney, we look to see if the primary home, like many in Central Florida as well as around the United States, has lost value so that the value is proven to be worth less than what is owed on the first mortgage and note. If this turns out to be the case, then any other secured interest in the property, such as an equity line of credit or second mortgage, is now reclassified as unsecured debt and is treated in that class like any other unsecured creditor. Only a fraction of that debt is repaid and the remaining balance will be discharged at the conclusion of the plan.

As an example, say your home has a 1st mortgage on it for $200,000.00 dollars, a second mortgage for $68,000.00 and a $20,000.00 dollar equity line of credit. The market crashed and now your home is worth $174,000.00 dollars. In this case, so long as you prove its worth less than 200k, you can strip off both the second mortgage and equity line of credit but may not modify the 1st mortgage. You would therefore still owe the entire 1st mortgage but pay only a fraction of the second and equity line as unsecured debt, called a “cram down”, then discharge the balance.

It’s critical that the debtor have enough income to fund a plan if it will be successful.

Plans typically fail when debtors try to keep property that is simply too expensive for them to own, when unforeseen circumstances arise or when there is a drastic change in income. The Chapter 13 bankruptcy still works to protect the debtor as it is a re0organization of their finances. Motions can be made to the Court to amend the plan and adapt to the changed circumstances as the need arises. If the debtors income changes by more than $10,000.00 dollars up or down, then the plan must be changed.

Documents are submitted to the Trustee before the meeting which usually include proof of income and tax returns. Additional documents may be requested by the trustee to clarify potential discrepancies in the petition or other supporting documents. It is not a time where the debtor will be intimidated or be asked embarrassing or humiliating questions.

The Trustee usually asks about the debtors background, assets and liabilities as well as income and expenses. They will inquire whether the debtor realized he filed his documents under the penalties of perjury; whether the documents were reviewed for their accuracy, completeness and truthfulness; whether anything needs to be added or changed regarding the petition, schedules or statements; if they have any interest in any real estate; if any transfer of property occurred in the year preceding the bankruptcy; if anyone holds property that belongs to the debtor; if they are owed any monies or are a party to a lawsuit or anticipate receiving funds in the near future. In the event of the debtor being self employed, the Trustee will look into the financial aspects of the business as well. Though this sounds like it may take a while, the typical meeting is concluded in 5 to 10 minutes.

When the meeting is concluded, creditors then have a limited time to object to the debtors claimed exemptions.