A Chapter 13 plan must meet the requirements of section 1325(a) to be confirmed. 11 U.S.C. § 1329(b)(1). Plan compliance is discussed in section 1325(a)(6). That section states that "the court shall confirm a plan if the debtor will be able to make all payments under the plan and to comply with the plan." 11 U.S.C. § 1325(a)(6).
Debtors have the burden to prove that their plans are feasible. A court must determine whether a chapter 13 debtor will be able to comply with all provisions of a plan, including making all plan payments.
A chapter 13 must provide for the priority debts of the creditors, and occasionally a plan will include a lump sum payment at the end of the plan to allow the debtor to fully fund the plan for the priority debts. To determine feasibility of a plan where a balloon payment on the debt is proposed, courts look to a number of factors. The factors include the future earning capacity and disposable income of the debtor, whether the plan provides for payment of interest to secured creditors, the debtor's perseverance and motivation to execute the plan successfully, the type of employment in which the debtor is engaged or may become engaged, whether the plan includes a cushion for unexpected expenses, the equity in the property.
The debtor may be required to provide the source of the balloon payment to prove feasibility of their plan.
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Chapter 13 plans offer relief to many debtors, but debtors do have to provide for their priority debts to be paid in the plan. When the debtor does not have the feasibility in the budget to pay all the priority debts on a month to month basis, a lump sum payment may be required at the end of the plan. However, it is the debtor’s obligation to prove the plan and therefore the lump sum payment are feasible. Contact the attorneys at LifeBackLaw and see us at www.LifeBackLaw.com and let us help you get your life back.
