New Supreme Court decision about Chapter 13 bankruptcy

| May 8, 2015 | Chapter 13 Bankruptcy |

Texans who are planning to file Chapter 13 bankruptcy petitions should take note of a recent U.S. Supreme Court decision that could affect those cases. The ruling, issued on May 4, ended a circuit court split regarding the ability of people to appeal denials of their Chapter 13 repayment plans.

The Supreme Court held that since a denial of a repayment plan is not a final resolution to a case, and as such, cannot be appealed. Repayment plan denials are normally made along with giving the debtor a chance to modify their plans. If the case is dismissed, the person will still be able to appeal the dismissal.

The case before the Supreme Court involved a man who had amended his bankruptcy petition three times. His repayment plan, which artificially separated $101,000 in unsecured debts away from his $387,000 secured mortgage, was deemed by the lower court to be against bankruptcy code rules. The man’s plan arranged for him to make full mortgage payments while making minimal payments on his unsecured debt balance. Over his five-year repayment plan period, he would have only paid around $5,000 of that unsecured balance.

This case demonstrates the importance of drafting a repayment plan in a way that is most likely to be approved by the bankruptcy court. People who want to file Chapter 13 bankruptcy may want to get help from a bankruptcy attorney. An attorney may be better able to draft a proposed repayment plan that complies with the bankruptcy laws and that is likely to be approved. Chapter 13 bankruptcy is more complicated than Chapter 7, and many people find that getting the help of an attorney is helpful.

Source: Courthouse News Service, “Bankruptcy Plan Appeal Fails to Sway High Court,” Dan McCue, May 4, 2015