In a Chapter 13 bankruptcy, a key part of the process is a plan which the debtor and the debtor’s attorney file with the Bankruptcy Court. This plan explains how the classes of creditors are going to be paid. The rules for Chapter 13 plans are quite rigid with the statute stipulating how the debtor is supposed to treat certain creditors. Claims secured by a mortgage on a home or a car loan are frequently not going to be changed or modified by the plan. This means that the debtor can continue making the normal monthly payments for that home mortgage or car loan. When that’s the idea behind the plan, we call this paying the secured creditors “outside the plan”. The debtor is paying the money directly to the creditor without involving the Chapter 13 trustee. It makes the administration of the case quite a bit easier and it makes payment of the claim much less complex.
What Does It Mean when the Mortgage Is Being Paid “Outside the Plan” of a Chapter 13 Bankruptcy?
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Ronald J. Drescher has been practicing since 1986 in the areas of business transactions, commercial litigation, loan documentation, bankruptcy, creditors’ rights, and out-of-court workouts. His experience also includes corporate reorganizations, insolvency, business and tax planning.
