Bankruptcy lawyer explains how a New Jersey chapter 7 and chapter 13 bankruptcy works, with a debtor that owns a mobile home.
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.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, such as a mobile home, the applicable exemptions and disposable income.
The bankruptcy code has numerous sections relating to real property. Real property is land and all improvements that are fixed to the land, such as a house. A mobile home, that is used as a residence, is not real property under the bankruptcy code. However, the exemption 11 U.S.C., section 522 (d) (1), specifically covers real property and personal property in which the debtor uses as a residence. Therefore, a mobile home applies to this exemption. This provides substantial protection to a person that resides in a mobile home, as a mobile home typically has less value than a typical house.
If a mobile home is completely exempt, the debtor may keep their New Jersey mobile home. The 11 U.S.C., section 522 (d) (1) exemption is $23,675.00. This means that a person may keep their mobile home, in a chapter 7, if the mobile home’s value, minus the mortgage is $23,675.00, after subtracting the mortgage payoff and 10% of the projected cost of sale. For example, a mobile home valued at $40,000.00, minus a mortgage payoff of $10,000.00, has equity of $30,000.00. The court permits a projected 10% cost of sale, which is 10% of $40,000.00, or $4,000.00. $30,000.00, minus $4,000.00 is $26,000.00. $26,000.00, minus the $23,675.00 exemption is $2,325.00. Therefore, technically, the chapter 7 trustee may sell the house and receive $2,325.00 for the creditors.
If I modify the example above by changing the house’s value to $37,675.00, the debtor would be permitted to keep the mobile home in a chapter 7 and avoid the chapter 7 trustee’s sale of the property. $37,675.00 (house value), minus $4,000.00 (cost of sale), minus $10,000 (mortgage payoff), minus $23,675.00 (exemption) is $0.00. If the mobile home has a value of $35,000.00, in the above referenced example, the property will be fully exempt and the debtor will be permitted to keep the mobile home.
In the above referenced example, where the mobile home has a $40,000.00 value, the debtor will be able to file a New Jersey chapter 13 and save his mobile home. However, the debtor will be required to pay at least $2,325.00 toward his unsecured debt, as a result of the $2,325.00 “unexempt” equity in the mobile home. In the above referenced example, where the mobile home has a value of $35,000.00, the debtor would be able to file a chapter 13, keep his property, and pay nothing to toward his unsecured debt, as it pertains to his mobile home equity.
Although a person may file a bankruptcy case for the sole purpose of resolving mobile home issues and associated debt, the debtor must deal with all of his debt, according to the bankruptcy code. A chapter 13 debtor, who owns a mobile home, may be required to pay other debt based on the value of all of his assets, disposable income and type of other debt.
Please contact Robert Manchel, Esq., your NJ. bankruptcy attorney, at 866 503 5644.