Chapter 13 Payment Plans Quiz

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What is the main question in the Best Efforts test for Chapter 13 plan?

Whether the debtor is making the best efforts to pay the creditors

What is required to be paid in full during the life of the Chapter 13 plan?

All priority creditors

What is the restriction for debtors above median income in the Best Efforts test?

Restricted to the IRS expense exemptions

What can be lien stripped in a Chapter 13 plan according to Section 1322(a)?

Other property, but not the debtor’s home

What is a key difference between Chapter 7 and Chapter 13 bankruptcy?

Chapter 7 involves liquidating nonexempt assets, while Chapter 13 involves dedicating a portion of future income to repay creditors.

Under which chapter of bankruptcy can intentional torts be discharged?

Chapter 13

What is a reason for selecting a Chapter 13 plan over a Chapter 7 plan?

To take advantage of the super discharge, allowing discharge of more types of debts.

What are the arguments against the discharge of debts under Chapter 13?

Not good faith, over caps, not regular income

What does § 1325(b)(2) allow above-median debtors to exclude from disposable income?

Child support payments

In the context of § 1325(b)(2), why are child support payments categorically excluded from the calculation of disposable income for above-median debtors?

To preserve child support payments for their intended beneficiaries

What is the outcome for an above-median debtor regarding the exclusion of child support payments from disposable income under § 1325(b)(2)?

Categorically exclude child support payments

In Chapter 13 bankruptcy, what is the requirement for the debtor's 'projected disposable income'?

It must be devoted to the plan for a 3-year or 5-year commitment period, unless the plan pays the creditors in full.

What does the Best Interests Test protect creditors against in Chapter 13 bankruptcy?

Debtors owning substantial non-exempt assets but having little income.

When does the Disposable Income test protect creditors in Chapter 13 bankruptcy?

When the debtor has few non-exempt assets but significant future earnings capacity.

What happens when there is a conflict between two statutory sections in Chapter 13 bankruptcy?

The more specific statute controls.

What is the requirement for the debtor's commitment of income in a Chapter 13 bankruptcy payment plan?

All projected disposable income

What must the debtor propose if the Ch. 13 trustee or a creditor objects to the payment plan?

Payments that pay unsecured claims in full

What does 'best effort' mean in the context of Chapter 13 bankruptcy?

Presenting an honest budget to the court

What does the court consider when determining necessary expenses in Chapter 13 bankruptcy?

Changes in income or expenses

What is critical in determining budget allowances in Chapter 13 bankruptcy?

Debtor's income level

What does the means test calculate disposable income by deducting in Chapter 13 bankruptcy?

Living expenses and secured debt payments

What expenses are considered in the means test for above-median income debtors in Chapter 13 bankruptcy?

Reasonable vehicle and college expenses

What can above-median debtors claim in the means test for expenses in Chapter 13 bankruptcy?

The full IRS standard amount for expenses

When can secured debt payments not be deducted in the Chapter 13 plan?

If the collateral is to be surrendered

What is necessary for a debt to be included in the Chapter 13 plan?

Legal obligation to pay

In a specific case, what is the monthly income of a single mother with two minor children, making her an above-median debtor?

$6614.50, including child support

Why are the details of the means test and expense deductions critical in Chapter 13 bankruptcy?

To determine the debtor's obligations and allowances

What is the rationale for creating a separate class for particular unsecured debts in a Chapter 13 bankruptcy plan?

To prioritize the payment of non-dischargeable debts over dischargeable debts.

In Chapter 13 bankruptcy, what type of creditors get their own classification for the money they’re owed?

Secured creditors

What is the legal standard for classifying creditors in a Chapter 13 bankruptcy plan?

Discrimination is allowed as long as it is not unfair.

In the case of In Re Crawford, what were the total unsecured debts owed by the Chapter 13 debtor?

$37,000

Which of the following is a requirement for a debtor to be able to lien strip a personal property loan in Chapter 13 bankruptcy?

The asset was financed with purchase money

What is the consequence for a debtor who wishes to retain a vehicle financed within roughly 2 1/2 years prior to bankruptcy under the hanging paragraph provision?

The debtor must pay the secured creditor the full amount of the principle if it wants to keep the collateral

What is the majority view regarding the surrender of a car by a debtor in Chapter 13 bankruptcy when Section 506 does not apply?

By surrendering the car, the debtors with their gave creditor the full market value of the collateral

Under what circumstances can a Chapter 13 debtor lien strip a personal property loan?

If the asset was financed with purchase money

What is the consequence for a debtor who has financed the purchase of a vehicle for personal use within roughly 2 1/2 years prior to bankruptcy and wishes to retain the collateral?

The debtor must pay the secured creditor the full amount of the principle if it wants to keep the collateral

What is the effect of the hanging paragraph provision on a debtor who has financed the purchase of a vehicle for personal use within roughly 2 1/2 years prior to bankruptcy?

The debtor must pay the secured creditor the full amount of the principle if it wants to keep the collateral

What is the purpose of the hanging provision for personal property loans in Chapter 13 bankruptcy?

To prevent a chapter 13 debtor from paying the secured creditor less than the full principle amount due on the debt if the debtor wants to retain the collateral

Can a debtor lien strip a personal property loan if it is for business use?

No, the debtor cannot lien strip

In Chapter 13 bankruptcy, what is the allowed ratio for unsecured creditors' payment as per the trustee?

2/3 of the debt

What is the basis for calculating interest in Chapter 13 when cramming down, according to the Till Rate?

Prime rate

What is the duration of the right to cure delinquent mortgages in Chapter 13?

The life of the plan

What are the choices for balloon payments in Chapter 13?

Making 59 payments then another balloon

What is allowed in lien stripping in Chapter 13?

Lien stripping for wholly unsecured loans

What is the requirement for accommodating secured creditors in the debtor’s proposed debt adjustment plan in Chapter 13?

Modification of the claim

What is the key restriction regarding home mortgage loans in Chapter 13 under 1322(b)?

They cannot be crammed down

What does §1322(b)(1) allow in Chapter 13 bankruptcy?

Classification of unsecured claims as long as it does not unfairly discriminate against a class of creditors

What is required for equitable treatment in Chapter 13 bankruptcy?

Equitable treatment for both unsecured creditors and the debtor

What is the outcome of the Harding case regarding fees and penalties during bankruptcy?

Fees and penalties cannot accrue during bankruptcy due to the automatic stay

What is the basis for calculating interest in Chapter 13 when cramming down, according to the Till Rate?

Prime rate

What is the basis for calculating interest in Chapter 13 when cramming down, according to the Till Rate?

Prime rate

What is required for a plan modification in Chapter 13 bankruptcy?

A substantial and unforeseeable change in the debtor's financial situation

What is a key requirement for debtors to report to the court in Chapter 13 bankruptcy?

Material changes to their income

What is the effect of the 'super discharge' in Chapter 13 bankruptcy?

Allows property division payments to be discharged

What is considered 'not good faith' in Chapter 13 bankruptcy?

Debtors repeatedly filing to get the automatic stay without sufficient justification

Study Notes

Chapter 13 Bankruptcy and Best Efforts Test

  • In Chapter 13 bankruptcy, the debtor is required to commit all "projected disposable income" to a payment plan unless paying creditors in full.
  • If the Ch. 13 trustee or a creditor objects to the payment plan, it must propose payments that pay unsecured claims in full or apply all projected disposable income to payments for the full commitment period.
  • "Best effort" means presenting an honest budget to the court.
  • The court determines necessary expenses based on the debtor's income level and may account for changes in income or expenses at the time of confirmation.
  • The debtor's income level is critical in determining budget allowances.
  • The means test calculates disposable income by deducting living expenses, secured debt payments, priority debts, and administrative expenses.
  • The reasonable vehicle and college expenses are considered in the means test for above-median income debtors.
  • Above-median debtors can claim the full IRS standard amount for expenses, even if their actual expenses are less.
  • Secured debt payments cannot be deducted if the collateral is to be surrendered in the Chapter 13 plan.
  • The debtor must be legally obligated to pay a debt for it to be included in the Chapter 13 plan.
  • In a specific case, a single mother with two minor children is an above-median debtor with a monthly income of $6614.50, including child support.
  • The details of the means test and expense deductions are critical in determining the debtor's obligations and allowances in Chapter 13 bankruptcy.

Bankruptcy Law Chapter 13 Key Points

  • Debtor proposed a plan to divide the debt into two classes: (1) for the debt to the county and (2) for other debts
  • The proposed plan aimed to pay 2/3 of child support payments and nothing to the rest of unsecured creditors
  • §1322(b)(1) allows classification of unsecured claims as long as it does not unfairly discriminate against a class of creditors
  • Equitable treatment for both unsecured creditors and the debtor is required, offering zero payment to unsecured creditors is not allowed
  • Trustee's permitted ratio for unsecured creditors' payment should be asked
  • The Harding case states that fees and penalties cannot accrue during bankruptcy due to the automatic stay
  • The debtor’s proposed debt adjustment plan must accommodate secured creditors in one of three ways: Accept the plan, Surrender the property securing the debt, or modify the claim
  • The Till Rate is used to calculate interest in Chapter 13 when cramming down, based on the prime rate
  • Home Mortgage Loans cannot be crammed down in Chapter 13 under 1322(b)
  • Delinquent mortgages can be cured in Chapter 13, and the right to cure lasts the life of the plan
  • Choices for balloon payments in Chapter 13 include making equal payments over five years or making 59 payments then another balloon
  • In Chapter 13, lien stripping is allowed for wholly unsecured loans but not for partially secured ones

Test your knowledge of Chapter 13 payment plans with this quiz. Explore the key requirements and provisions of Chapter 13 bankruptcy, including the model plan duration, asset retention, priority creditor payments, and Section 1322(a) provisions.

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