Chapter 13 Archives


When a chapter 13 bankruptcy is filed the court automatically schedules two hearings. The first is a meeting of creditors. The debtors are required to attend this meeting with the chapter 13 trustee and their attorney. Creditors are invited to come but they rarely do. The other hearing is the confirmation hearing. The debtors' do not have to attend this hearing but their attorney does. In New Jersey the hearing will take place at the Federal courthouse in Camden NJ, Trenton NJ or Newark NJ. The purpose of the hearing is to have the court approve the chapter 13 plan regarding repayment to creditors. Often the confirmation hearing will need to be adjourned to address the claims filed or other issues raised by the trustee. Except in unusual or complicated matters if the Chapter 13 trustee is satisfied with the plan and objections have been addressed the trustee will recommend confirmation and the judge will enter an order approving the chapter 13 plan

Eliminating Divorce Obligations in Bankruptcy

A Chapter 13 Bankruptcy can eliminate obligations from a Judgment of Divorce that cannot be eliminated in a Chapter 7 Bankruptcy. Neither will eliminate domestic support obligations such as child support or spousal support. However, if there are other obligations relating to a property settlement agreement or an allocation of liabilities, those obligations can be reduced or eliminated in a chapter 13 but not in a chapter 7. This is because the exception to discharge section that applies to chapter 7 basically makes all divorce related liabilities nondischargeable but the exception section for chapter 13 only applies to domestic support obligations. Because of these differences, if you are filing a bankruptcy after a divorce, it is imortant to discuss with your attorney all obligations under the Judgment for Divorce because it may make more sense to file a chapter 13 when at first blush the case may seem appropriate for a chapter 7.

what is a chapter 13 confirmation hearing and does the debtor have to attend.

When a Chapter 13 bankruptcy is filed in New Jersey a notice is sent by the court to schedule two hearings. The first is the meeting with the trustee that the debtors and their attorneys must attend. Creditors are also invited but rarely attend. The other hearing scheduled is the Confirmation Hearing. Typically only the attorney attends although occasionally the debtors will need to attend. In New Jersey the hearing will take place in Camden NJ, in Trenton NJ, or in Newark NJ. The hearing is to determine whether the court will approve the Chapter 13 plan that was filed. The trustee will consider the amount of the claims filed by the creditors, the income of the debtors, the equity in the assets of the debtors and the feasibility of the plan to determine whether or not to recommend confirmation to the judge. It is important that payments are made each month leading up to the confirmation so that the trustee can see you actually have the ability to make payments. Once the case is confirmed the creditors and the debtors are bound by the plan.

Priority Claims in Chapter 13 Bankruptcy

Chapter 13 is a type of bankruptcy often used by debtors to save their home by paying mortgage arrears over time. However, when filing Chapter 13, a debtor is obligated to pay priority claims in full through the bankruptcy as well. Priority claims include domestic support obligations such as child support, certain types of taxes, claims for personal injuries from a motor vehicle accident when driver was intoxicated, and other types of claims are priority claims. In certain circumstances, this obligation could make retaining the home more difficult since instead of paying just the mortgage arrears, these priority claims must be paid as well. However, it could also make keeping the home easier since it may be more affordable by stretching these payments out over five years.

Chapter 13 Bankruptcy Codebtor Stay

Section 1301 of the Bankruptcy Code is entitled "Stay of Action Against Codebtor". If an individual files a bankruptcy while living in, say, Pennsauken, NJ and his ex-wife, living in Philadelphia, PA had cosigned for a credit card while they were married, can the creditor pursue the ex-wife since she is not in bankruptcy? Not when a Chapter 13 is filed. Section §1301 of the bankruptcy code provides a "Codebtor" Stay in Chapter 13 Bankruptcy. A "Codebtor" Stay protects a vehicle from being repossessed and protects a debtor's residence from a foreclosure sale when only one of the individuals responsible for the debt files Chapter 13. A "Codebtor" Stay does not apply to Chapter 7 bankruptcies or business debts. There are other exceptions. For example, although a liability on a personal tax return would seem to be a consumer debt a number of cases have held that the co-debtor stay does not prevent the IRS from pursuing the spouse that did not file a bankruptcy on a joint return.

When You File Bankruptcy, You Can Stop Repossession

Creditors may try to repossess your car, truck or your motor home if you are behind in payments. Filing for bankruptcy will stop asset repossession. If you file bankruptcy, creditors cannot repossess assets such as a car. If you are behind with your payments, you can pay the missed payments over time through a chapter 13 bankruptcy and resume your regular payments. An alternative which may provide you with lower payments would be to pay the entire car balance plus interest through the bankruptcy plan. If the car was purchased more than two and one half years before the bankruptcy was filed, you may be able to save even more money by cramming down the value of the car. In other word, if you owe $20,000.00 on a car worth $14,000.00, you can propose to pay $14,000.00 plus interest through the plan which result in substantial savings. 

Options When Over Chapter 13 Debt Limit

Chapter 13 bankruptcy is a great way to save your home by paying arrearages on a mortgage over time or to pay back unpaid taxes. But Chapter 13 has debt limits. As of April 1, 2016 a debtor cannot file Chapter 13 bankruptcy if they have more than $394,725.00 in unsecured debt or more than $1,184,200.00 in secured debt. Personal guarantees from a failed business, student loans and IRS debt can put an individual in this debt limit dilemma. What options do they have? There are several. A couple in Cherry Hill New Jersey could not file a joint Chapter 13 bankruptcy to save their home because each owed significant student loans. However, individually their total was less than the unsecured debt limit so each filed a separate Chapter 13 to save their home and address their debt. An individual from Mount Laurel New Jersey needing to pay mortgage arrears was unable to file Chapter 13 because of debt left over from a failed business. In his case, an individual Chapter 11 bankruptcy was filed to save his home. Filing a Chapter 7 and doing a modification helped an individual from Voorhees, NJ save his home when he was over the debt limit. Even with high debt limits options exist to deal with debt so meeting with an experienced bankruptcy attorney is an important step in finding a solution.

Bankruptcy and The Life Estate

What happens when a life estate is involved in a bankruptcy. First, a life estate is created in order to provide an individual with a right to remain in a property for the remainder of their life. For example in a will an individual can give his wife a life estate and give the remainder interest to his child. The child is the owner of the property except the mother has the right to remain in the property for the rest of her life. What happens if the child files for bankruptcy. In a bankruptcy a debtor filing bankruptcy can protect a certain amount of equity. If the equity exceeds the value of the exemption in the property then a trustee in a Chapter 7 bankruptcy could sell the property and use the money in excess of exemptions to pay creditors. Or the debtor can file a Chapter 13 and pay creditors an amount equal to the nonexempt equity. For example, if the home in question is worth $100,000 and there is a $25,000 mortgage against the property and the individual lives in, say,  Voorhees New Jersey where the New Jersey exemption allows the individual to protect approximately $24,000 in equity in his home, is there $50,000 in equity in the property. The real question is would a willing buyer pay $100,000 for a property which would otherwise be worth $100,000 except for the fact that whoever buys the property has to allow the mother to remain in the property until she passes away. In the Chapter 13, rather than selling the property the debtor could pay creditors an amount equal to the value of the property. However, establishing the value can be problematic. Some trustees and courts will look at actuarial tables to determine how long the person with the life estate is expected to live. Often the value could be negotiated between the debtor's attorney and the trustee but certainly an experienced attorney would be needed to assist in a circumstance like this and one should be consulted to discuss the impact of any life estate issues in the bankruptcy.

Limiting Student Loan Payments in Chapter 13

As previously discussed in my Blog at in certain hardship cases student loans can be eliminated. However, what about those circumstances where the student loan cannot be eliminated. Is there anything that can be done in bankruptcy that can help with limiting the student loan payments? The answer is yes. A Chapter 13 can be used to provide some relief. Chapter 13 is a form of bankruptcy where payments are made over a period of 3 to 5 years. It is often used to pay mortgage arrears over 5 years to allow the borrower to save their home. However, what about a situation where someone has unsecured debt, such as $20,000.00 in credit cards, and $80,000.00 in student loans, the student loan lender is demanding $600.00 per month and your salary cannot yet support that kind of payment. One option would be to file chapter 7 personal bankruptcy which would eliminate the credit cards but not help with the student loan payment. Another option is to file Chapter 13. Lets say you live in Northeast Philadelphia, your budget, when you don't count the student loans or the credit cards, would allow you to pay $200 per month for 5 years. In the Chapter 13, you stop paying all of the creditors and you pay $200.00 per month to the trustee which would total $12,000.00. After certain trustee deductions, your creditors, totaling $100,000.00 ($20,000.00 credit cards and $80,000.00 student loans) would share about $10,000 or roughly 10% of their claim. At the end of 5 years, the other 90% owed to the credit cards would be eliminated. As for the student loan, once the bankruptcy is over, you would then be obligated to continue making payments on the student loan. However, you will have made a manageable payment for 5 years with the hope that you are now in a better position to pay the student loan.


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