Attorney Explains How Financed Jewelry Is Treated In A New Jersey Chapter 13 Bankruptcy Case.
Typically, a person will file a chapter 13 bankruptcy case for issues other than jewelry financing. However, when a New Jersey chapter 13 is filed, the debtor must include on the petition any and all debt and assets. Additionally, the debtor must handle this issue per the bankruptcy code, in addition to all of the other issues.
A chapter 13 bankruptcy case requires a monthly trustee payment for 36 to 60 months. The debtor must pay all of his household disposable income to the trustee, each month, after payment of all reasonable and necessary expenses. If a debtor has sufficient monthly disposable income to pay a portion toward their unsecured debt, such as credit card debt, the debtor must make such payments. The application of the necessary and reasonable expenses that a debtor uses to determine his disposable income, must, in fact, be necessary and reasonable. In other words, a debtor cannot use a $3,000 monthly food budget for a household of 2. Also, a debtor cannot use an $800 finance payment on their third car, for a household of 2.
Each trustee may handle the reasonable and necessary expense issue differently. The trustee’s dilemma is whether they will permit the monthly finance expense of keeping a ring, which reduces the debtor’s disposable income. In other words, will the trustee allow the debtor to make jewelry finance payments thereby reducing the funds that would have been available to other creditors. A New Jersey chapter 13 trustee may either disallow the payment, or permit the payment, if the debtor reduces the amount of another expense. If the trustee disallows the payment, the debtor may not make the jewelry finance payments and/or keep the jewelry. If the trustee disallows the payment, the debtor will likely not be permitted to keep the jewelry.
If the New Jersey chapter 13 bankruptcy trustee permits the debtor to keep the jewelry and make the finance payments, there are various options as to how the payments may be made. The first option is to make the monthly payments directly to the finance company with no portion to be paid through the chapter 13 bankruptcy plan. The second option permits the debtor to pay the entire balance due, plus a reasonable interest rate, entirely through the bankruptcy plan. If the debtor is behind with his finance payments, he may be permitted to pay the arrears through the bankruptcy plan, with the future monthly payments to be paid directly to the finance company. Also, under certain situations, the debtor may be permitted to keep the jewelry by paying back only the value of the jewelry, plus a fair interest rate, through the bankruptcy plan.
Please note that there are numerous exceptions to the above issues.
You may contact Robert Manchel at 866 503 5644 to discuss your NJ. bankruptcy law questions.