<h2>New Jersey Lawyer Explains How The Financing On A Washer And Dryer Is Treated In A Chapter 13.</h2>
In a New Jersey chapter 13, the debtor must make monthly payments to a chapter 13 trustee. The number of months of the entire bankruptcy plan and the amount of the monthly payments depends on numerous issues. Unsecured debt and secured debt are treated and paid differently. An unsecured creditor does not hold a lien on property. The most common type of unsecured debt is credit card debt and a personal loan. Typically, the amount to be paid to the unsecured creditors, is based on the debtor’s disposable income and the debtors’ equity in their personal property and real estate. Theoretically, depending on the debtor’s circumstances, he may be permitted to eliminate all unsecured debt. I explain how unsecured debt is treated in a chapter 13 in numerous blogs within this website.
A secured creditor is granted a lien in property. If the debtor wishes to keep such property, he must pay the secured creditor and the property must be essential to the household, such as a house, car, etc. The property cannot be their brother in law’s camper. In my opinion a washer and dryer is essential.
The bankruptcy code permits various options as to how a debtor may pay for a washer and dryer. If the debtor is current with their washer and dryer finance payments, at the time of the bankruptcy filing, the debtor may continue to make his monthly payments, as they did prior to the filing. In other words, the debtor may pay the monthly payments directly to the finance company. If the debtor was behind with his payments prior to the filing, he may continue to make monthly finance payments directly to the finance company and pay his finance arrears, within his monthly bankruptcy plan payments. In this scenario, the court will divide the amount of his arrears by the number of the months of his bankruptcy plan.
The third option permits the debtor to pay the entire amount of the debt through the bankruptcy plan’s monthly payments, without having to make the regular monthly payments directly to the finance company. The bankruptcy code allows the debtor to stretch out the payments, after the due date on the financing contract.
Additionally, the debtor may be able to “cramdown” the debt. This means that the debtor may keep the items, by only paying the finance company, the fair market value of the items, plus a fair rate of interest. The total amount of the value will be paid through the monthly bankruptcy plan, without having to make direct payments to the finance company. The debtor may only “cramdown” the debt and pay the value, if the washer and dryer was purchased a certain period of time prior to the bankruptcy filing. For example, if the value of the washer and dryer is $500.00 and the financing payoff is $1,000.000, the debtor must pay the $500.00, plus a fair rate of interest only. Please note thate there are numerous exceptions to this law.
Contact Robert Manchel at 866 503 5644 to discuss your NJ. bankruptcy law questions.