Confirmation orders are only entered in reorganization chapters (for consumers most normally a Chapter 13), but when they are entered, they constitute a new contract between all parties to the order (which includes the debtor and all of the creditors in the case). This new contract requires, among other things, that the debtor be treated as current. It limits the creditors’ ability to get paid only as provided for in the plan. It limits a creditor’s ability to charge late fees or to apply payments in ways other than as specified in the plan. Now, some of the protections of the Confirmation Order require that the debtor successfully complete the plan and receive a discharge; but it remains a potent form of protection for a debtor in a chapter 13 bankruptcy.
Another thing that makes a Confirmation Order particularly valuable during uncertain times is that it can be modified by Motion and Order. That means that if bad things happen during a multi-year plan of reorganization, the Debtor can ask the Court to modify the Confirmation Order to allow the debtor room to cope with the unexpected. The ability to request a modification means that if something bad happens during a Chapter 13 bankruptcy, the Debtor is almost always going to have time to address it, and if a little time isn’t enough the tools to change payment terms or sometimes even to extend the repayment term.
One of the surprising aspects of the CARES act (one of the principal pandemic assistance statutes) is the ability to extend a chapter 13 repayment plan from 5 years to 7 years. Now, this only applies to cases that were confirmed before March 27, 2020, and the provision will sunset on March 27, 2021. Still, for people experiencing a decrease in income for an extended period of time, this provides a unique tool for curing arrears on secured debt.
The incredible protections of a confirmation order are one of the reasons I am recommending Chapter 13 filings during this time of great uncertainty. It can be difficult to explain, but being in a chapter 13 can be one of the safest places to be during times as scary as the ones we are currently living through.