Chapter 13 Laws

New developments in Chapter 13 laws after reform

The most significant recent changes in Chapter 13 laws and the confirmation process include the following amendments. These changes affect all people proposing Chapter 13 plans:

All debtors must attend an approved course in budget analysis and credit counseling before filing.
All tax returns must be current for all prior taxable fiscal years.
Debtors who earn more than the median income for their current state of residency must propose 5 year plans.
The amount of plan payments is determined by a statutory formula and allowances based upon a national schedule, rather than on a case by case basis based on need, special circumstances, or hardship.

How Chapter 13 laws are applied in practice

Predictably, creditors encourage all debtors who file to select Chapter 13 laws and plans over all other chapters. This preference is based upon their partial recovery, as compared to full discharge under Chapter 7 without payment, or the complex nature of Chapter 11. In the former cases, creditors tend to allow slightly more leeway before filing objections for technical defects, whereas strict compliance is demanded in the later chapters. The new Chapter 13 bankruptcy laws are intentionally designed to promote the choice of repayment plans, both voluntarily and involuntarily.