<h2>Attorney, Robert Manchel, explains the consequences of owning valuable property and the whether a chapter 13 trustee would sell property. </h2>
A chapter 13 case is different than a chapter 7, in that a New Jersey chapter 7 trustee would sell a debtor’s personal property or real estate that is not fully exempt. A chapter 13 trustee will not sell a debtor’s property no matter the value. However, the value of the property may effect the amount that the debtor must pay through the bankruptcy plan. As a result, an individual may consider filing for a chapter 13, if he owns property with a substantial value.
If any value of property is not fully exempt, the amount that is “unexempt“, must be paid to towards the unsecured debt, pro-rata. I explained how NJ. bankruptcy exemptions are applied in both chapter 7 and chapter 13 cases. For example, if a house, owned by one person, has a value of $400,000.00, with a mortgage payoff of $330,000.00. $400,000.00 minus $330,000.00 is $70,000.00. $70,000.00 minus $40,000.00 (10% cost of sale of $400,000.0) is $30,000.00. $30,000.00 minus the bankruptcy homestead exemption of $23,675.00, is $6,325.00.
The debtor in connection with the above referenced example would be required to pay at least $6,325.00 toward his unsecured (ie. credit card debt, personal loans, medical bills, etc.). The debtor would be required to pay the $6,325.00 and the New Jersey chapter 13 trustee would not sell the debtor’s property. Please note that based on various other financial issues, the debtor may be required to pay additional funds towards the unsecured debt.
Suppose the debtor’s house is worth $10,000.000.00, with no mortgage or liens? Would the NJ. chapter 13 trustee sell the debtor’s house under such circumstances? The answer is still no. However, the debtor would be required to pay all of his debt, in full, after deduction of his $1,000,000.00 cost of sale expenses and his $23,675.00 exemption. If the debtor is unable to pay the total amount of his debt by any means, including monthly trustee payments, his case would be dismissed, due to the lack of feasibility. Dismissed means the case would be thrown out. If the case is thrown out of court, the chapter 13 trustee would still not be able to sell his house.
Contact Robert Manchel at 866 503 5644 to discuss your NJ. bankruptcy law questions.