Can I Keep luxury personal property in a chapter 13.
A chapter 13 requires a debtor to pay monthly payments to a trustee for 36 to 60 months.
A chapter 13 bankruptcy trustee will never sell a debtor’s luxury property. However, if the value of the property cannot be totally exempt, the debtor will be required to pay additional funds to their unsecured creditors (ie. credit card debt) through their monthly bankruptcy payments. The debtor must pay to the unsecured creditors, through their bankruptcy plan, at least, the amount that a chapter 7 trustee could have received, if the same debtor filed a chapter 7 bankruptcy case.
In other words, the debtor or his attorney must perform an analysis to determine how much a chapter 7 trustee could have received, if anything, from the sale of the luxury item(s), if that same debtor filed under a chapter 7 case. In most chapter 7 cases a trustee would not be able to sell a luxury item, which means that no additional funds must be paid to the unsecured creditors in a chapter 13.
The analysis, in this situation, is the same analysis that is applied to determine whether a chapter 7 trustee can sell a debtor’s luxury item in a chapter 7 case. This is explained, under the blog heading “Chapter 7”, blog named, “Can I keep luxury personal property in a chapter 7”. The bankruptcy code lists the exemptions that may be applied to certain types of property. Part of the list of exemptions, is an $11,950.00 wildcard exemption that may be applied towards any property. Please note that the amounts of the bankruptcy code exemptions are periodically modified.
For example if one debtor owns a boat valued at $10,000, the debtor, if he wishes, may apply $10,000.00 of the wildcard exemption so that the boat is totally exempted. Under this scenario, the debtor would not be required to pay any additional funds to the unsecured creditors, as the boat is fully exempt. However, if the boat has a value of $20,000 and the debtor can only apply exemptions of $11,950, the debtor would be required to pay at least $8,050.0 towards his unsecured debt, through the plan. If the debtor could not afford this monthly trustee payment, he must sell the boat or be unable to file a chapter 13 case.
The second issue deals with a luxury item that is financed. The debtor must pay through the bankruptcy plan, the total amount of his monthly disposable income. However, the disposable income is the amount left over after payment of the debtor’s necessary and reasonable expenses, which should not include a payment on a luxury item, such as a boat. Under this scenario, the debtor must either surrender the boat to the finance company, sell the boat, if possible, or settle the issue with the trustee, if possible, by increasing his trustee payment.
You may contact the bankruptcy attorney in the state of New Jersey, Robert Manchel, at 1 (866) 503-5655, to discuss your situation.