Grounds for a Trustee Objecting to a Chapter 13
When a debtor files a Chapter 13 petition seeking reorganization of debt, the bankruptcy court appoints an impartial trustee to oversee the case. Part of the trustee’s job is to evaluate and approve the proposed plan for partial repayment of debts over a three- to five-year period.
In some cases, a trustee will object to a proposed repayment plan. The good news is that most objections are only a temporary roadblock and you usually have options for resolving them. This is where an experienced Chapter 13 bankruptcy lawyer can help.
There are a number of reasons why a trustee might object to your repayment plan:
- Your payments exceed your income.
- Your plan doesn’t have all of your disposable income going to unsecured creditors.
- The plan fails the “best interest of the creditors” test, which requires that your payments meet or exceed what unsecured creditors would have received had you filed a Chapter 7 bankruptcy.
- Debts are missing from your plan.
- The plan is either too long or too short.
- You are missing required documents (such as tax returns).
- You are over the debt limit.
- You failed to disclose an asset.
- The proofs of claim filed in your case might be different from the creditors and amounts listed in your bankruptcy schedules.
In addition, a trustee can object to a repayment plan not presented in good faith. This means the debtor is suspected of abusing the Chapter 13 remedy by proposing a plan that he or she has no intention of completing.
In the event a trustee objects to your repayment plan, you have several options. You can attempt to fix the problems in order to bring your plan in line with the trustee’s expectations. For example, if the trustee objects because your repayment plan is too short, you can simply extend the repayment period and submit the plan for another look. Likewise, if the trustee says there are debts missing from your plan, you can incorporate them into the plan and resubmit it.
In other cases, you may be able to negotiate with the trustee to find a mutually agreeable solution. If you go with this option, it’s important to come to the negotiating table in good faith.