Tennessee residents who are thinking about filing for bankruptcy should be aware that there are several procedures that must be followed. A bankruptcy court has ruled that five debtors in California altered their Chapter 13 bankruptcy model plans in a manner that violated the Bankruptcy Code.

Chapter 13 bankruptcy can be used by individuals who have a steady stream of income to seek debt relief and to keep their property. It requires the individuals to provide a plan for repaying their debts within three to five years. The changes the debtors made to their model plans permitted them to pay off their plans and seek a discharge after confirmation while skipping the modification process and not paying the full amount of allowed unsecured claims. According to the ruling from the United States Bankruptcy Court for the Northern District of California, debtors are not allowed to forgo the modification process in order to preempt the rights of the trustee and creditors to object.

The San Jose Division has allowed the confirmation of bankruptcy cases that had no defined term, which prevented distribution on allowed claims of unsecured creditors. It also allowed debtors to be discharged before the end of their estimated plan term without the need of a court order. The debtors stated that because the trustee and creditors offered no objections, there was no need for a minimum plan length.

The court ruled that a Chapter 13 payment plan should be modified in the correct manner using Bankruptcy Code Section 1329. It also stated that the debtors’ effort to create a plan with modification authorizations that gave no notice to the trustee or creditors openly defied Section 1329.

Individuals looking for debt relief should understand that bankruptcy has a variety of rules and regulations. They may want to meet with an attorney to learn more about the process.