In law, there are substantive legal questions and procedural legal questions. A substantive question might be what is required to be eligible to file a bankruptcy case or what is the legal speed limit for a highway.
Procedural questions address issues of the operation of courts and matter like how long do you have to respond to a notice of a complaint or does a court have jurisdiction to hear cases involving a person or an issue.
While many of these questions are clear, at times, the lines can blur. A case is going to the U.S. Supreme Court to address an issue where the lines have blurred.
A Chapter 13 plan is pivotal element of a bankruptcy. Once it is confirmed by the bankruptcy court, assuming the monthy payments to the bankruptcy trustee are timely and continue for the usual five-year period, when the plan is complete, the debtor will obtain their discharge and the bankruptcy case will be closed.
However, the trustee or a creditor can object to the plan and cause it to be rejected by the court. This does not happen very often, but it can occur. For instance, a Chapter 13 plan is supposed to direct all of the debtor’s disposable income to pay the unsecured creditors in the plan.
Disposable income is what remains after accounting for all of your reasonably necessary living expenses and your secured creditors. A trustee could object if they determined that you were failing to use your best efforts to maximize the disposable income payments to the unsecured creditors, and that your necessary expenses were not “reasonable.”
If a court agrees that a plan cannot be confirmed, the debtor is left in an unfortunate position. If the plan is unconfirmed, the bankruptcy case is typically dismissed. Once a bankruptcy case is dismissed, the automatic stay is lifted and there is no protection from creditors and their efforts to repossess or foreclose on their property.
Next week, we will look why finality is important in this discussion.
Courthousenews.com, “High Court to Consider Bankruptcy Plan Denial,” Dan Mccue, December 15, 2015