Keeping Property In A Chapter 13 Bankruptcy Case

This video talks about keeping all of your property in a Chapter 13 bankruptcy case.  However, the debtor could elect to surrender property as well.  It really depends upon the desires of the debtor.

David Siegel: Does someone get to keep all of their property when they are in a Chapter 13 or do they have to give up some property in exchange for this reorganization?

Jesse Barrientes: Typically they get to keep all of their property. I suppose there have been some instances and I think I was referring to that before where you have people that are all over. People – low-wage earners and really high wage earners. And when you get to the top nonchalant or if somebody’s got 12 cars, yeah, you can keep it but if there’s an issue and we are talking about, that might raise an eyebrow from the trustee. But yeah, that’s the whole point of a Chapter 13 that you get to keep everything because in essence, you are paying your creditors back.

David Siegel: Of this is also the opportunity where you can say I can’t afford this house, I’m going to surrender it in the plan or I can’t afford this vehicle, I’m way upside down. I’m going to give it up in the plan and just continue to reorganize my other debts. You have that election.

Jesse Barrientes: You can certainly do that and if you’re going to get out of the house, there’s a foreclosure pending, there’s no way you’re going to be able to pay kind of that off, that would put you into Chapter 13 for some other things which maybe you wouldn’t have been required before because again, remember, you have to pay back your secured creditors 100%. And so if your election is to give up the home that you owe an extra hundred thousand dollars on, then you wouldn’t have been able to do that if it was included in the plan and so you can give that up. Or I suppose that during the plan period you could also be converted or amended to a Chapter 7 if things change for you. If all of a sudden now you’ve lost your job or something happens and it put you in a position where you can make those plan payments. But they can be adjusted, can they not, Dave?

David Siegel: They can. If your income changes, if your expenses change, if there’s a substantial change in your financial circumstances, you can bring a motion to amend the plan. This has to be set out on notice; all the creditors will receive notice. You have to propose a new plan to the court and you have to prove that that’s a valid plan based on your income.

Jesse Barrientes: But generally, Dave, very few people are going to come into your office and say hey, Mr. Siegel, I’m making a whole bunch more money a month and I want to pay more. Usually it’s the other way around, isn’t it?

David Siegel: It’s usually the other way around but every once in a while, the trustee will see your ongoing tax return and if there is an incredible increase in income, the trustee might actually bring a Motion to Dismiss if you don’t kick up the percentage to the unsecured creditors.

Jesse Barrientes: So you have to keep your eye on that – or an inheritance or something like that of that nature.

David Siegel: Right. Well, I think an inheritance you can leave separate but if your income goes up to the point where your disposable goes up significantly, the trustee could bring an action. But typically they don’t.