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Keeping Real Property and Personal Property in Chapter 13 Bankruptcy

Click here for information about keeping property in a chapter 7 bankruptcy

In a chapter 13, the New Jersey Bankruptcy Trustee will never sell a debtor’s property. However, if an asset or property has substantial unexempt equity, the debtor will be required to pay additional funds to the trustee towards the general unsecured debt. In other words, the general unsecured creditors are required to be paid the same amount that would be required if the debtor filed a chapter 7.

The analysis regarding each and every piece of property is the same as if the debtor filed a chapter 7. In a chapter 13, the debtor may subtract from the residence’s fair market value, the appropriate exemption, plus 10% for the cost of sale, as in the following example:

  • Fair market value of the residence;
  • Mortgage payoff:
  • Balance after subtracting the payoff
  • Residence exemptions
  • Approx. costs of sale
  • Balance after subtracting exemptions and costs of sale
  • $270,000.00
  • $190,000.00
  • $80,000.00
  • $22,500.00
  • $30,000.00
  • $27,500.00

Based on the above example, a single debtor will be required to pay at least $27,500.00 of their general unsecured debt in a chapter 13. Please note that there are others factors that determine the total amount that must be paid to general unsecured creditors.

The debtor must have the financial ability to make their monthly trustee payments, which must include the amount of $27,000.00 to be disbursed to their general unsecured creditors over the life of the bankruptcy plan. If the debtor is unable to make the trustee payments, he will be unable to continue with the chapter 13 bankruptcy case.