Attorney explains the NJ. Bankruptcy law benefits of a mobile home loan.
Believe it or not the bankruptcy code allows additional benefits for a mobile home loan, in New Jersey, that is not permitted for a house residence mortgage. A mortgage on a mobile home may be “crammed down” in a chapter 13, even though a home mortgage cannot. As I explained, in other blogs, a cram down is changing the secured status of a loan to a partially secured portion and a partially unsecured portion. The secured portion is reduced to the fair market value of the mobile home, with the balance due on the loan to be changed to general unsecured. For example, if the value of a mobile home is $25,000 and the total balance due on the loan is $70,000.00, the secured portion may be reduced to $25,000.0. with the balance of $45,000.00, to be classified as general unsecured. The bankruptcy code does not permit such a change in a mortgage on a house, that is the debtor’s residence.
How does this benefit the owner of the mobile home? In general, a New Jersey chapter 13 bankruptcy debtor is only required to pay the secured portion of the mortgage, plus a reasonable interest rate, through the bankruptcy plan, over five years. In most situations, the debtor may either eliminate all of the unsecured portion or most of the unsecured portion. This means that the debtor in the above reference example will only be required to pay the $25,000.00 (secured portion), plus a fair interest rate. However, the $25,000.00, plus the fair interest rate must be paid within the five year bankruptcy plan. The amount that must be paid towards the $45,000.00 (unsecured portion) balance and any other unsecured debt is based on the debtor’s income, expenses, type of debt owed and asset values.
The determination as to the property that the debtor is permitted to keep in a chapter 7 is based on exemptions. The amount of money that must be paid to unsecured debt in a chapter 13 is based on the value of assets, exemptions and disposable income. This blog is limited to exemptions on a residence. A residence under the bankruptcy code includes real property, which is a house, or personal property that is used as a residence, such as a mobile home.
Please note that the bankruptcy code considers all of the debtor’s finances and assets. Therefore, even though a debtor has filed for bankruptcy protection to deal with his mobile home debt, he may be required to pay other debts and creditors.
Robert Manchel will answer your bankruptcy questions at 866 503 5644.