Feasibility issues. The Chapter 13 Trustee for the Cleveland division of the bankruptcy court has increasingly been filing motions to dismiss confirmed chapter13 cases. The latest issue: the plan lacks feasibility. What on earth does this mean? For a plan to be confirmed in a chapter 13 case a few things must occur:
- File a chapter 13 plan
- Fund the plan
- Plan must have feasibility
- Plan addresses all classes of scheduled creditors
- All disposable income is committed to the plan
- Plan will be completed within 3 to five years, unless unsecured creditors will be paid in full in which case it can be under 3 years.
The plan has been confirmed between three and five years. You have been faithfully making all the plan payments on time and in full. You have been making all of your other payments no matter the sacrifice. Out of the blue your attorney gets a letter from someone in the trustee’s office. It says the plan is not feasible because it will not complete within 5 years. No further explanation.
What causes a chapter 13 plan to not have feasibility? At the time of confirmation the time frame for filing proofs of claim has not yet passed. That is normally 6 months after the notice of filing the chapter 13 case goes out. Often one or more creditors file proofs of claim in an amount so far over the amount in the plan, that to pay it, the case will take more than the 5 year maximum. Sometimes a creditor will overstate what it is due. Sometimes the claim includes improper items. Sometimes the claim is accurate, but the amount you gave your bankruptcy attorney to put in the plan is severely understated. Bottom line: the plan will not work due to feasibility problems.
Steps to take if faced with action to dismiss for lack of feasibility
What to do if a feasibility issue arises:
- Analyze the claims to see if one or more are too large, or do not meet the requirements of the rules.
- Object to improper claims
- If a Motion to Dismiss for Lack of Feasibility is filed, normally by the Trustee
- Object to the motion, otherwise it can be granted without a hearing
- Object to the claims in question
- If claims are proper amend plan
- If you can’t amend the plan
I recently conferred with a person who just got notice the chapter 13 case was dismissed for lack of feasibility. The chapter 13 case belongs to you. Do not assume that your bankruptcy attorney will automatically respond to the letter or even the motion to dismiss or lack of feasibility. If you do not hear from your attorney, call, write, do anything to get their attention. This is an issue that can be fixed. Doing nothing gets your case dismissed for lack of feasibility.