CBS Chapter 13 Repayment Plans 2 — Questions and Answers
Question 1: Under Chapter 13, what is the maximum length of a repayment plan for a debtor whose current monthly income exceeds the applicable state median?
- 3 years
- 4 years
- 5 years (Correct answer)
- 7 years
Correct answer: 5 years
When a debtor's current monthly income exceeds the applicable state median, the plan must be at least 5 years (60 months) and cannot exceed 5 years.
Question 2: Which party has the right to object to confirmation of a Chapter 13 plan?
- Only the trustee
- Only unsecured creditors
- Any party in interest, including the trustee and creditors (Correct answer)
- Only the U.S. Trustee
Correct answer: Any party in interest, including the trustee and creditors
Under 11 U.S.C. § 1324, any party in interest—including the trustee, any creditor, and the U.S. Trustee—may object to confirmation of a Chapter 13 plan.
Question 3: What happens to a Chapter 13 plan payment if the debtor receives a substantial windfall (e.g., an inheritance) during the plan period?
- The debtor keeps the windfall and plan payments remain unchanged
- The windfall must be paid directly to secured creditors
- The trustee may seek plan modification to increase payments to unsecured creditors (Correct answer)
- The case is automatically converted to Chapter 7
Correct answer: The trustee may seek plan modification to increase payments to unsecured creditors
Under 11 U.S.C. § 1329, a trustee or unsecured creditor may move to modify the plan to apply the windfall, increasing distributions to unsecured creditors.
Question 4: Under the 'hanging paragraph' of 11 U.S.C. § 1325(a), what special protection is given to certain secured creditors?
- They receive interest at the federal judgment rate
- They are barred from bifurcating their claim into secured and unsecured portions for debts incurred within specific timeframes (Correct answer)
- They are entitled to payment in full before any other creditor
- They can accelerate the debt upon plan confirmation
Correct answer: They are barred from bifurcating their claim into secured and unsecured portions for debts incurred within specific timeframes
The hanging paragraph prevents cramdown (bifurcation) of purchase-money security interests for motor vehicles acquired within 910 days before filing or other personal property within 1 year before filing.
Question 5: A debtor proposes to pay a long-term mortgage through the Chapter 13 plan over 60 months. The mortgage has 20 years remaining. How is this treated?
- The mortgage must be paid in full within the plan period
- The debtor may cure arrears and maintain regular post-petition payments, with the mortgage surviving the plan (Correct answer)
- The court must reduce the mortgage term to 5 years
- The mortgage is discharged at plan completion if any payment was made
Correct answer: The debtor may cure arrears and maintain regular post-petition payments, with the mortgage surviving the plan
Under 11 U.S.C. § 1322(b)(5), a debtor may cure pre-petition defaults and maintain current payments on long-term debts that extend beyond the plan period.
Question 6: What is the 'best efforts' or 'disposable income' test under 11 U.S.C. § 1325(b)?
- The debtor must contribute all income to the plan
- If an unsecured creditor objects, the plan must commit all projected disposable income to plan payments for the applicable commitment period (Correct answer)
- The debtor must maintain employment for the full plan term
- The trustee sets payment amounts based on estimated future income
Correct answer: If an unsecured creditor objects, the plan must commit all projected disposable income to plan payments for the applicable commitment period
Section 1325(b) requires that if the trustee or an unsecured creditor objects, the plan must dedicate all projected disposable income for the applicable commitment period to unsecured creditors.
Question 7: Which of the following debts CANNOT be modified (crammed down) under a Chapter 13 plan?
- Auto loan where the car is worth less than the loan balance
- Unsecured personal loan
- Mortgage secured only by the debtor's principal residence (Correct answer)
- Business equipment loan
Correct answer: Mortgage secured only by the debtor's principal residence
Under 11 U.S.C. § 1322(b)(2), a Chapter 13 plan may not modify the rights of a creditor whose claim is secured only by a security interest in real property that is the debtor's principal residence.
CBS Chapter 13 Repayment Plans 2
Under Chapter 13, what is the maximum length of a repayment plan for a debtor whose current monthly income exceeds the applicable state median?