National Chapter 13 Plan

Right now, there is a movement by a committee of judges and trustees towards the creation of a uniform national Chapter 13 plan.  It will arguably provide greater benefits to debtors and creditors and place greater burdens on Chapter 13 trustees.

Currently, each judicial district has its own customized Chapter 13 plan — there is no national uniformity and one district is completely different from another.  Since each plan is different, multistate creditors cannot comb through chapter 13 plans — they must read each plan individually rather than have a computer scan the plan for information.  For example, a mortgage creditor can completely ignore a bankruptcy filing, fail to file a proof of claim or an objection to confirmation of the Chapter 13 plan, waive their rights to collect from the Chapter 13 plan the prepetition arrears owed to them, and then collect on the mortgage arrears from the debtor years later.

The proposed new plan contains a provision requiring debtors to serve certain creditors pursuant to Federal Rule of Bankruptcy Procedure 7004, i.e., in some cases by certified mail to the attention of an officer of the creditor-entity.  Serving the plan will therefore become much more cumbersome and expensive for debtor-attorneys.  Additionally, both lien avoidances and lien strips will be done through the plan without the need for separate motions.

While this movement stands for the proposition that bankruptcy law is Federal law that should be uniform throughout the country, the ultimate impact is unknown and will remain unknown if and after the proposed plan is adopted.  However, it will be beneficial for debtors in that they will know the precise amount of creditor claims at the time of confirmation, most importantly the claims of secured mortgage lenders


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