How Much Does My Plan Have To Pay?

Bankruptcy answers from thin airWhen an inexperienced Chapter 13 practitioner asks how much a plan has to propose to pay, I envision the Carnac the Magnificent routine from the Johnny Carson show.

Carnak, in turban and robes, puts the sealed envelope with the question to his forehead, provides an answer, then opens the envelope to read the question.  The results were uniformly hilarious.

Not so when a bankruptcy lawyer answers the question without facts.

What says the code?

The Bankruptcy Code tells us what the plan must provide and what it may provide.  The baseline for your plan lies in the statute.

a) The plan—

(1) shall provide for the submission of all or such portion of future earnings or other future income of the debtor to the supervision and control of the trustee as is necessary for the execution of the plan;
(2) shall provide for the full payment, in deferred cash payments, of all claims entitled to priority under section 507 of this title…
(3) if the plan classifies claims, shall provide the same treatment for each claim within a particular class…1322(a)

But the Code doesn’t supply all of the answers.

What are the client goals?

A Chapter 13 plan only exists to further the client’s financial reorganization.  Tell me what drove the selection of Chapter 13 over Chapter 7 and I have some clues as to how much money it takes.

Is the debtor trying to pay taxes?  Then tell me what the priority taxes total.

Is the debtor trying to cure mortgage arrears?  How much are the arrears?

Does the debtor have non exempt property he wants to keep?  Walk me through the liquidation analysis.

How much are the unpaid attorneys fees?  The avoidable transfers?

More like juggling

Drafting a Chapter 13 plan that works is akin to juggling, or a balancing act.  You’ve got to get enough money into the plan to do meet your goals, all the while proving that the debtor has enough real world income to do the trick.

I’ve come to appreciate a printing calculator, amortization tables, and step plans.

The power of Chapter 13 for the client makes it worthwhile to do the math.

Image courtesy of Wikipedia.

Coming to Mt. View in July:  Yours, Mine & Ours  Community Property in Bankruptcy