Experienced Chapter 12 bankruptcy lawyer explains the elements of a “plan”

Under the law, a Chapter 12 bankruptcy plan must provide for the following:

1. The trustee’s receipt of the debtor’s future earnings in an amount sufficient for execution of the plan.
2. Payment of priority claims. (A claim to a governmental unit that arises from the sale or transfer of a farm asset is treated as an unsecured claim and is not entitled to priority.)
3. Classification of claims and treatment of each claim within its classification. The plan’s duration is for a period of three years, but may be extended to five years.

In addition, a Chapter 12 bankruptcy plan may do the following:

• Designate one or more classes of unsecured claims, provided that all claims within a particular class are substantially similar, and no class of claims is unfairly discriminated against, except claims for a consumer debt of the debtor upon which another individual is also liable may be treated differently.
• Modify the rights of holders of secured or unsecured claims or leave unaffected the rights of holders of any class of claims.
• Provide for the curing or waiving of any default.
• Provide for the curing of any default within a reasonable time, and the maintenance of payments while the case is pending on any secured or unsecured claim on which the last payment is due after the due date for the final payment.
• Provide for the assumption, rejection, or assignment of any executory contract or unexpired lease not previously rejected.
• Provide for the payment of all or part of a claim against the debtor from property of the estate or from property of the debtor.
• Provide for the sale of all or any part of the property of the estate or the distribution of all or any part of such property among those with an interest in such property.
• Provide for payment of allowed secured claims, consistent with the bankruptcy law, over a period exceeding the maximum length of a plan.
• Provide for the vesting of property of the estate, on confirmation of the plan or at a later time, in the debtor or in any other entity.
• Provide for payment of interest accruing after the date of filing on unsecured, nondischargeable claims.
• Include any other appropriate provision not inconsistent with bankruptcy law.

The debtor (along with his or her bankruptcy attorney) may file a plan with the petition or within 90 days after the order for relief. If there are no objections to the plan, the court will hold a hearing to confirm the plan within 45 days after the plan is filed. The debtor must prepare a notice and motion to confirm the plan not less than 15 days prior to the confirmation hearing. The notice and motion are mailed along with a copy of the plan to the trustee, all creditors and equity security holders. A certificate of mailing must be prepared and filed with the court. Creditors may appear at the hearing and object to confirmation of the plan. If the court finds that the plan was filed in good faith, it will enter an order confirming the plan.