When the Plan is not in the Best Interest of the Creditors

What is the Best Interest of the Creditors?

It is a requirement that states that the claim holder (creditors, lenders, and/or the trustee) that is voting against a reorganization plan (Chapter 13) should receive at least as much as he/she would if the consumer’s assets were instead liquidated (Chapter 7).

How can the consumer protect himself/herself from this objection?

The consumer should gather his/her worksheets and other documents that would attest to the value of his/her non-exempt properties and bring them to the confirmation hearing. If the court would not accept them, the consumer may try to negotiate with the creditors or the trustee regarding the amount that he/she can pay to his/her (non-priority debts) unsecured creditors. He/she may propose to increase the amount of payment or have the plan extended.


When the Consumer’s Payment Plan Unfairly Discriminates

The plan must specify which unsecured creditors must be paid in full and which will get partial payments. It might be a little hard to classify which creditors will be prioritized as the consumer may get accused of discrimination. The consumer should expect the disgruntled creditors to object, bring the issue to court, and have the plan amended. This usually happens in the confirmation hearing. The court rules regarding this case varies from district to district. The consumer should research how his/her district ruled in a similar case in the past.