§1225 — Title 11 Bankruptcy | U.S. Code

Summary

A court must approve a debtor’s repayment plan if several things are true. The plan must follow the bankruptcy rules and other parts of the law, any fee required under chapter 123 of title 28 (or by the plan) that is due before approval is paid, the plan was proposed honestly and legally, unsecured creditors will get at least what they would if the debtor’s assets were liquidated under chapter 7 on the plan’s start date, each secured creditor is treated by one of three options (the creditor accepts the plan; the creditor keeps its lien and will receive value at least equal to its allowed claim; or the debtor gives the creditor the collateral), the debtor can make and follow the plan payments, and any required post-filing domestic support obligations have been paid when required by an order or law. If the trustee or an allowed unsecured creditor objects, the court may only approve the plan if, as of the plan’s start date, one of three things is true: the plan gives that creditor property worth at least the claim amount; the plan applies all of the debtor’s projected disposable income for a three-year period (or a longer period approved under section 1222(c)) starting when the first payment is due to plan payments; or the value of property paid into the plan during that period is at least the debtor’s projected disposable income. “Disposable income” means income the debtor receives that is not reasonably needed for support or for a domestic support obligation that first becomes payable after the filing date, or for expenses necessary to keep the debtor’s business running. After approval, the court can order any source of the debtor’s income to pay some or all of that income to the trustee.

Title 11, §1225

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(a)Except as provided in subsection (b), the court shall confirm a plan if—

(1)the plan complies with the provisions of this chapter and with the other applicable provisions of this title;

(2)any fee, charge, or amount required under chapter 123 of title 28, or by the plan, to be paid before confirmation, has been paid;

(3)the plan has been proposed in good faith and not by any means forbidden by law;

(4)the value, as of the effective date of the plan, of property to be distributed under the plan on account of each allowed unsecured claim is not less than the amount that would be paid on such claim if the estate of the debtor were liquidated under chapter 7 of this title on such date;

(5)with respect to each allowed secured claim provided for by the plan—

(A)the holder of such claim has accepted the plan;

(B)(i)the plan provides that the holder of such claim retain the lien securing such claim; and

(ii)the value, as of the effective date of the plan, of property to be distributed by the trustee or the debtor under the plan on account of such claim is not less than the allowed amount of such claim; or

(C)the debtor surrenders the property securing such claim to such holder;

(6)the debtor will be able to make all payments under the plan and to comply with the plan; and

(7)the debtor has paid all amounts that are required to be paid under a domestic support obligation and that first become payable after the date of the filing of the petition if the debtor is required by a judicial or administrative order, or by statute, to pay such domestic support obligation.

(b)(1)If the trustee or the holder of an allowed unsecured claim objects to the confirmation of the plan, then the court may not approve the plan unless, as of the effective date of the plan—

(A)the value of the property to be distributed under the plan on account of such claim is not less than the amount of such claim;

(B)the plan provides that all of the debtor’s projected disposable income to be received in the three-year period, or such longer period as the court may approve under section 1222(c), beginning on the date that the first payment is due under the plan will be applied to make payments under the plan; or

(C)the value of the property to be distributed under the plan in the 3-year period, or such longer period as the court may approve under section 1222(c), beginning on the date that the first distribution is due under the plan is not less than the debtor’s projected disposable income for such period.

(2)For purposes of this subsection, “disposable income” means income which is received by the debtor and which is not reasonably necessary to be expended—

(A)for the maintenance or support of the debtor or a dependent of the debtor or for a domestic support obligation that first becomes payable after the date of the filing of the petition; or

(B)for the payment of expenditures necessary for the continuation, preservation, and operation of the debtor’s business.

(c)After confirmation of a plan, the court may order any entity from whom the debtor receives income to pay all or any part of such income to the trustee.

Notes & Related Subsidiaries

Editorial Notes

Codification For repeal of section effective Oct. 1, 1998, and subsequent reenactment of section, see note set out preceding section 1201 of this title.

Amendments

2020—Subsec. (d). Pub. L. 116–260, § 320(f)(2)(A)(iv), contingent on its addition by Pub. L. 116–260, § 320(d), struck out subsec. (d) which read as follows: “Notwithstanding section 1222(a)(2) of this title and subsection (b)(1) of this section, a plan that provides for payment of a claim of a kind specified in section 503(b)(10) of this title may be confirmed if the plan proposes to make payments on account of such claim when due under the terms of the loan giving rise to such claim.” Pub. L. 116–260, § 320(d), added subsec. (d). 2005—Subsec. (a)(7). Pub. L. 109–8, § 213(5), added par. (7). Subsec. (b)(1)(C). Pub. L. 109–8, § 1006(a), added subpar. (C). Subsec. (b)(2)(A). Pub. L. 109–8, § 218, inserted “or for a domestic support obligation that first becomes payable after the date of the filing of the petition” after “dependent of the debtor”.

Statutory Notes and Related Subsidiaries

Effective and Termination Dates of 2020 AmendmentAmendment by section 320(d) of div. N of Pub. L. 116–260 effective on the date on which the Administrator of the Small Business Administration submits to the Director of the Executive Office for United States Trustees a written determination relating to loan eligibility under pars. (36) and (37) of section 636(a) of Title 15, Commerce and Trade, and applicable to any case pending on or commenced on or after such date, and amendment by section 320(f)(2)(A)(iv) of div. N of Pub. L. 116–260, relating to repeal of such amendment if it became effective, effective two years after Dec. 27, 2020, see section 320(f) of Pub. L. 116–260, set out as a note under section 364 of this title. [Pursuant to 15 U.S.C. 636(a)(36)(A)(iii), the “covered period” for loans under the Paycheck Protection Program ended on June 30, 2021.]

Effective Date

of 2005 AmendmentAmendment by section 213(5), 218, and 1006(a) of Pub. L. 109–8 effective 180 days after Apr. 20, 2005, and not applicable with respect to cases commenced under this title before such

Effective Date

, except as otherwise provided, see section 1501 of Pub. L. 109–8, set out as a note under section 101 of this title.

Effective Date

sPermanent reenactment of section effective July 1, 2005, see section 1001(a)(2) of Pub. L. 109–8, set out as a Repeal, Reenactment, and Termination of Chapter note under section 1201 of this title. For

Effective Date

s of section and

Amendments

extending periods for which section was reenacted prior to permanent reenactment, see

Effective Date

and

Effective Date

of 1999, 2001, 2002, 2003, and 2004 Amendment notes set out under section 1201 of this title.

§1225 Confirmation of Plan

Summary

Title 11, §1225

Notes & Related Subsidiaries

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Amendments

Statutory Notes and Related Subsidiaries

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Amendments

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Citations & Metadata