A confirmation hearing is the grant of the petition wherein the court approves the request of the petitioner to declare bankruptcy. Why is it applicable only in Chapter 13 cases? This is due to the fact that the confirmation is in consideration of a repayment plan submitted by the petitioner. The repayment plan contains a detailed schedule of how the petitioner intends to pay off any outstanding debts.
Chapter 7 vs. Chapter 13
To understand the extent of a confirmation, it’s important to first discuss exactly how Chapter 7 and Chapter 13 are treated. Chapter 7 essentially means that ALL allowable assets are liquidated, the proceeds of which are paid off to creditors. Once all the money is gone, any remaining unpaid amount is considered discharged which means that the petitioner no longer has to pay them off.
Chapter 13 on the other hand is a repayment schedule. The schedule takes into account the disposable income of a person at the end of the month and adjusts the amount of debt payment to fit the disposable income. Hence, a Chapter 13 usually means that all liabilities will be paid off but stretched over a longer period of time.
The confirmation hearing is therefore a meeting wherein the petitioner presents their payment schedule upon approval of which, the bankruptcy petition is granted. The schedule is often subject to the scrutiny of the creditors to ensure that everyone gets their fair share.
Note though that prior to a confirmation hearing, you’ll be going through a meeting of creditors. This is characterized by all interested parties showing up and ascertaining the details of the situation. During this time, the petitioner and creditors will be agreeing in repayment schedules and discussing any problems that might hinder the bankruptcy. Within 45 days of the said meeting, the confirmation hearing is schedule.
Limits to Repayment Schedules
Repayment schedules are often subject to limits or constraints laid down by the law to ensure fairness in all dealings. A good bankruptcy attorney and trustee should be able to advise petitioners on how to properly follow these guidelines while still creating a system that’s favorable to them. Petitioners are also allowed to make final changes prior to a confirmation hearing provided that it does not go beyond what the law allows.
Objections to Confirmation
Objections may still be raised during a confirmation hearing or prior to it. Ideally, such objections are raised and dealt with before the hearing so that a ruling may be reached quickly and payments started off immediately. Common reasons for objections include:
- Unused Disposable Income
Some of the disposable income you have remains unused. It’s essential that all the money you have left over after the allowable expenses are committed to the repayment of the debt.
- Insufficient Payments to Creditors
It’s important that all creditors are paid off each month to satisfy the proposed schedule. The amount paid off may vary, as long as each of them receives money within limits of the disposable income.
If there is no confirmation, you will be asked to create a different plan or change it to a Chapter 7 petition. You may also have the bankruptcy case dismissed.