How do the Chapter 12 bankruptcy confirmation and discharge processes work?
Bankruptcy procedures vary from district to district according to local rules, which change often. You and your bankruptcy lawyer should check the local rules for your district governing confirmation and discharge. In general, however, the Chapter 12 bankruptcy confirmation and discharge processes operate as follows:
The court will set a hearing to confirm the bankruptcy plan within 45 days of filing the plan. The plan will be confirmed if:
- It complies with the Bankruptcy Code.
- All fees due have been paid.
- The plan is prepared in good faith.
- The value of the payments is not less than it would be under a Chapter 7 case.
- The debtor (you) can make the payments under the plan.
- The plan provides that the creditor of a secured claim retains the lien securing the debt, and you surrender the property securing the claim.
- You have paid all domestic obligations.
The confirmation of the plan binds the parties and vests all property of the estate in you, the debtor. After the plan is confirmed, the trustee will disburse the funds according to the plan.
You (the debtor) are discharged upon completion of all payments pursuant to the plan. If you have a domestic support obligation, you must certify that all domestic support payments have been paid. If all payments are not made, you may obtain a discharge if:
- You are unable to complete the payments due to circumstances beyond your control.
- The value of the payments is not less than would have been made under a Chapter 7.
- Modification of the plan is not feasible.
The court will hold a hearing no more than ten days before the discharge hearing to determine if you, the debtor, have:
- Exceeded your homestead exemption.
- Committed any criminal act, intentional tort, or reckless misconduct.
- Incurred any debt that arises from fraud or deceit when you acted in a fiduciary capacity.
- Violated any federal securities law.
- Been convicted of a felony, or have a felony proceeding pending.
If none of the above is found, then you are discharged. All property in the estate then belongs to you, free and clear of all claims, with a few exceptions, such as mortgages.
Revocation of discharge
On request of a party in interest, the court may revoke a discharge after a noticed hearing if the discharge was obtained through fraud, and the requesting party was unaware of the fraud when the discharge was granted. The request must be made within one year of the discharge. If a discharge is revoked, the clerk of the court will send a notice to all creditors.