Proposing a 0% Chapter 13 Bankruptcy Plan

In a normal Chapter 13 Bankruptcy, the goal is to propose a plan to repay your debts over a period of 3-5 years. This type of plan can be used to save your home from foreclosure, or just pay down debts interest free. The typical Chapter 13 Bankruptcy Plan contains, among other items, payment to general unsecured creditors of anywhere between 10%-100% of the entire debt. But what happens if the Debtor has so much priority tax debt that the Chapter 13 Bankruptcy Plan payments will not be able to pay back all of the priority claim, let alone provide anything for the other unsecured creditors? I posed this question to a number of Attorneys and everyone told me that because they could not pay anything to the general unsecured creditors, this was just simply a person that could not be helped through Chapter 13 Bankruptcy. I was not willing to settle for letting my client “slip through the cracks” of the legal system so I devised a solution that would appease the Judge (and in the end the Trustee).
I proposed a Chapter 13 Bankruptcy Plan that sought to pay 100% of my Debtor’s disposable income over 5 years to the priority debt and 0% to the general unsecured creditors. In the Chapter 13 Bankruptcy Plan was language that this Debtor was in no way seeking a Chapter 13 discharge of his remaining priority or general unsecured debt. The Judge saw no reason not to confirm the Chapter 13 Bankruptcy Plan since the general unsecured creditors’ claim would survive intact at the end of the Chapter 13 Bankruptcy Plan payments. The Chapter 13 plan was confirmed.
This case is the first of several Chapter 13 Bankruptcy cases in which I plan to propose a 0% payment to the general unsecured creditors because of the size of the priority debt. In the end, this Debtor could not receive a Chapter 13 Bankruptcy Discharge because he had filed for Chapter 7 Bankruptcy and received a discharge four years prior. So for now, the proverbial jury is still out on whether a 0% Chapter 13 Bankruptcy Plan can be confirmed in a case where a Chapter 13 Bankruptcy Discharge can be received at the end of the plan. More on this in the future.