What happens at the most important hearing you don’t attend in your Chapter 13 case, the “Confirmation Hearing”?

This blog post continues a series of them which explain the Chapter 13 process through the relatively straightforward case of a married couple, Andrew and Amanda. They are using Chapter 13 to save their home from foreclosure and to deal with a substantial income tax debt.

The Chapter 13 plan that they have proposed has them paying $525 per month for about four years, which is much, much less than what they would otherwise have been required to pay. In fact a major part of the funds for that plan payment comes from no longer needing to make the $400 second mortgage payment because of the “stripping” of that mortgage. 

The money Amanda and Andrew are paying into their plan is earmarked to completely catch up their large first mortgage payment arrearage, plus is paying for two recent years of income taxes, as well as the case’s “administrative expenses” (trustee and attorney fees). A modest amount may be left over to distribute among all the rest of their creditors.

In the process they will avoid paying more than $100,000 of their debts, will make their home much less expensive to keep immediately and in the long term, and will pay off a greatly reduced amount of tax debt.

So far in the case, Andrew and Amanda and their attorney have attended the “Meeting of Creditors” about a month after their Chapter 13 case was filed. They have filed an amended plan with some minor changes to address corrections in the amounts of their first mortgage arrearage and income tax debts.  

The “Order Confirming Plan”

The goal of the first few months of a Chapter 13 case is to get a plan approved by the bankruptcy judge. That means getting the judge to sign a document called the “Order Confirming Plan.” A Chapter 13 plan is a detailed proposal for addressing the debtors’ debts through the laws in the Bankruptcy Code. The “Order Confirming Plan” is, as it sounds, the judge’s determination that the originally proposed plan, or an amended plan, is consistent with the law. Sometimes that Order will add some very minor adjustments to the plan. The judge confirms,” or legally approves the plan by signing the “Order Confirming Plan.”

In Andrew and Amanda’s case, after their attorney filed an amended plan the deadline for creditors to object passed without any objections being filed. That was not surprising since the amendments had to do with corrections to debt balances provided by the creditors themselves—the first mortgage lender and the IRS.

The debtors’ attorney then sent the Chapter 13 trustee a proposed “Order Confirming Plan,” for the trustee to review and sign off on. After doing so the trustee lodged that Order with the Bankruptcy Court.

The “Confirmation Hearing”

Usually about four to six weeks after the “Meeting of Creditors” (discussed in our last blog post), the “Confirmation Hearing” is held. While Amanda and Andrew MUST attend the “Meeting,” only their attorney attends the “Confirmation Hearing” (except in very rare circumstances when debtors are asked to attend). The “Meeting” is NOT held at the Bankruptcy Court; the “Confirmation Hearing” IS.

The “Confirmation Hearing” is the last opportunity for creditors to object to the plan or anything related to it, such as the debtors’ budget. Usually any creditors who have objections raise them earlier, instead of unexpectedly showing up at the “Confirmation Hearing.” But nevertheless it is for most purposes their last chance to complain.

In Andrew and Amanda’s case, as for many debtors, the “Confirmation Hearing” goes very smoothly. The trustee had earlier signed off on the “Order Confirming Plan” prepared by their attorney, and sent it to the Bankruptcy Court. Now at the “Confirmation Hearing,” the judge announces the case, and listens, along with the debtors’ attorney, to the trustee’s short summary of the case’s status, concluding with the trustee’s recommendation that the judge confirm the plan. The judge asks if any creditors are present who wish to object to the plan. When no one speaks up, the judge reviews and signs the “Order Confirming Plan.” That concludes the Hearing.

The combination of two documents—Amanda and Andrew’s amended plan and the judge-signed Order Confirming Plan—now  governs their case through to its completion.