§ 56.1     How to Determine Proposed Treatment of a Creditor
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 56.1, at ¶ ____, LundinOnChapter13.com (last visited __________).

Determining the treatment of creditors that is being proposed by the debtor is not always simple. In theory, the Chapter 13 plan should detail a precise treatment for all creditors.1


The Bankruptcy Rules require the debtor to file the plan with the petition or within 15 days thereafter, and the plan or a summary of the plan is supposed to accompany the notice to creditors of the hearing on confirmation.2 Because Chapter 13 plans are not always timely filed, because Chapter 13 debtors do not always file clear or complete plans, and because of the physical limitations on the ability of court clerks and trustees to give notice of the content of plans, creditors are often anything but certain of their precise treatment under the proposed plan.


Typically, the notice of the § 341 meeting is combined with the notice of the hearing on confirmation, and there is little space left on the form for a detailed description of the plan. Instead, each creditor’s treatment is described in one sentence, such as “unsecured claim holders will be paid 75 percent of allowed claims” or “the debtor proposes monthly payments of $150 up to a value of $4,000 with 10 percent interest.” These cryptic descriptions may be subject to modification before confirmation.3 Creditors are entitled to notice of preconfirmation modifications of the plan,4 but in some jurisdictions, that notice is accomplished by a warning in the notice of the meeting of creditors that modifications of the plan may occur at the § 341 meeting or at the confirmation hearing. The precise amounts to be paid to a creditor, the percentage to unsecured claim holders, and the final provisions of the plan may not be hammered out until the meeting of creditors or the confirmation hearing. The information in the notice initially received by creditors may not accurately reflect the final treatment under the plan.


The two principal sources of information about the plan are debtor’s counsel and the Chapter 13 trustee. Because only the debtor can propose a plan, creditors should begin the search for information with debtor’s counsel. It is an unfortunate fact of Chapter 13 life in most districts that the attorneys who represent Chapter 13 debtors are difficult to get on the telephone (maybe no more difficult than attorneys generally, but difficult nonetheless). As a debtors’ attorney’s practice grows, the number of cases and the number of creditors with questions about pending cases multiplies. It is a common complaint that creditors cannot get timely information about the treatment of their claims from debtors’ attorneys over the telephone.


Recent appellate decisions demonstrate that the adequacy of notice to creditors of their treatment in the plan will be outcome determinative whether confirmation binds all creditors to the plan.5 That creditors find it difficult to determine the precise treatment of their claims in advance of confirmation is good reason for increased attention by debtors’ counsel to the problems of notice and communication with creditors. It is clearly in the best interests of debtors that creditors easily and accurately determine the treatment of claims under the plan before confirmation.


1  See §§ 36.2 [ Plan ] § 36.24  Plan and 55.1 [ Debtor Must File a Plan ] § 51.2  Debtor Must File a Plan.


2  Fed. R. Bankr. P. 3015.


3  See discussion of modification of plan before confirmation beginning at § 114.1  Timing, Procedure and Form.


4  See §§ 209.1 [ Timing, Procedure and Form ] § 114.1  Timing, Procedure and Form and 215.1 [ Opposing a Preconfirmation Modification of the Plan ] § 114.7  Opposing a Preconfirmation Modification of the Plan.


5  See §§ 233.1 [ Notice and Due Process Considerations, Including Claims Allowance and Valuation ] § 121.2  Notice and Due Process Considerations, Including Claims Allowance and Valuation and 234.1 [ Failure to Provide For ] § 121.3  Failure to Provide For.