Trustees, creditors and other interested parties are responsible for reviewing a chapter 13 Debtor’s plan and schedules to determine whether the Debtor’s plan complies with the Bankruptcy Code. This point is illustrated in a recent case out of the Middle District of Florida, Bankruptcy Court.
In In re Ford, the chapter 13 Debtor’s schedules reflected $5,125.49 in monthly disposable income. Debtor’s plan proposed no payments to unsecured creditors in the first two months, payments of $1,312 to unsecured creditors in months 3 through 23, and payments of $2,408 to unsecured creditors in months 24 through 60 of the plan. Neither the Trustee nor any other party objected to confirmation of the Debtor’s plan. Therefore, despite not proposing to pay all of his disposable income into the plan, as required by the Bankruptcy Code, Debtor’s plan was confirmed.
Debtor subsequently lost his job and began living off long-term disability. Consequently, Debtor filed amended schedules, which revealed a negative monthly disposable income. As a result, Debtor sought to modify his plan. The modified plan provided that unsecured creditors would no longer receive distributions. The Trustee objected.
The Trustee argued if Debtor had originally paid all of his disposable income into the plan, then the unsecured creditors would have been paid off prior to Debtor losing his job. The Bankruptcy Court ruled that the Trustee’s objection was time-barred and that he should have raised the objection prior to confirmation of the plan. The Bankruptcy Court went on to state that it does not conduct an independent review of each case to ensure the requirements of the Bankruptcy Court are satisfied.
This case illustrates the importance of conducting a thorough review of a Debtor’s bankruptcy documents and plan. Creditors, trustees and other interested parties should never assume that another party will conduct the necessary due diligence required in a given case.
