Chapter 13 Bankruptcy

New Jersey Lawyer Explains Bankruptcy Modifications After Filing

The chapter 7 process in New Jersey lasts about 4 months. After approximately 4 months, the debtor is completely out of the bankruptcy case with an order eliminating certain debt. No payments are required like a chapter 13 case. Typically, there is no need to make any changes in a chapter 7, other than correcting information or the bankruptcy schedules.
A chapter 13 is very flexible and may be modified for numerous reasons. A chapter 13 requires monthly payments to the trustee for 36 to 60 months. The number of months of the plan depends on numerous factors. The amount of the monthly payment depends on: the type of debt; the plan’s goal; the debtor’s disposable income; and the debtor’s assets. A plan may be modified by filing a modified plan with the court. The debtor is required to pay no less than the debtor’s disposable income. In limited circumstances, the monthly payment may be modified, if the debtor’s household income is reduced. At the filing of a modified plan, the trustee requires updated proof of income.
A list of possible chapter 13 plan modifications are listed below. A debtor may wish to modify their plan to surrender a house, or auto, and eliminate the mortgage or auto finance debt. A debtor may wish to purchase a car or house, during the plan. Someone could modify their plan to remove the mortgage payments arrears, after a loan modification is consummated. The plan could be modified to reject any type of lease, including a rental or auto lease. There are numerous reasons for modifying a bankruptcy plan in New Jersey.
Robert Manchel, may be contacted at (866) 503-5655, to discuss your New Jersey bankruptcy options.

Auto Financing in a Chapter 13 Bankruptcy
Sometimes in a chapter 13, the debtor’s lease expires or the individual needs to purchase an automobile. In general, it is possible to obtain a lease or financing if the debtors meet the criteria. However, the criteria may be different depending on the trustee for the bankruptcy case.
A debtor that wishes to purchase an auto or enter into an auto lease must first obtain a copy of the unsigned sales or lease contract and/or financing agreement from the dealership. All of the important terms and figures must be reflected on the unsigned contracts. Thereafter, the debtor must complete an “Application for Vehicle Financing During Chapter 13 Pan”. All of the unsigned contracts and the completed application must be submitted to the trustee for his/her evaluation and determination. If the trustee approves the application, the trustee’s office provides a letter or notice of “No Opposition” and consent to the dealership.
In general, obtaining a lease or purchasing an auto during a chapter 13 plan may be difficult, but it is possible based on the debtor’s financial situation and the seller involved. The consent of the trustee depends on the debtors’ financial position and the monthly trustee payments. Typically, a trustee will not consent to a lease or financing that requires a payment in excess of $350.00 monthly. Also, the debtor must show an ability to pay the monthly finance payments, in addition to his necessary expenses and trustee payment.
Robert Manchel, a NJ Bankruptcy Attorney,  will explain the process of obtaining a lease or auto financing in a chapter 13 case, by contacting him at 1 (866) 503-5655.

Your monthly payments in a chapter 13 are based on numerous criteria. A debtor must pay all of their monthly household disposable income through a chapter 13 plan or trustee payment, under virtually all circumstances.  Certain debt, such as priority (certain taxes) and secured debt (mortgage arrears) must be paid through the monthly plan, in virtually all circumstances. If the debtor does not have sufficient monthly disposable income to make the required payment to creditors that must be paid, the case will be dismissed or thrown out. In other words, in a particular case, if the debtor does not have the sufficient disposable income to pay to the trustee each month, for such creditors, the case will be dismissed.
At the commencement of the case, the trustee confirms that the debtor has sufficient disposable income to make the required monthly payments. At the Confirmation Hearing, the amount of the monthly payment will be confirmed, and possibly modified, at an amount that pays all disposable income to pay all creditors who are required payment under the bankruptcy code. If the debtor earns more than the amount needed to pay certain creditors who are required payment under the code, the debtor must pay all of their disposable income, with the balance of the monthly disposable income to be paid towards the unsecured debt (ie. credit card debt), pro rata.
After the Confirmation Hearing, the debtor must continue to make the monthly trustee payments until the case is completed. However, if the debtor has an increase in disposable income, the debtor is required to pay the additional disposable income to the trustee. If the debtor’s  income is reduced, the debtor may not be able to reduce their monthly payment, in the event that the disposable income is insufficient to pay the creditors who are required payment under the plan. However, the monthly trustee payment may be reduced by the amount that was being paid to the unsecured creditors, solely due to having excessive disposable income.
Chapter 13 bankruptcy attorney Robert Manchel may be contacted at 1 (866) 503-5655 for a free consultation.

In a chapter 13, a debtor may be able to cramdown the financing on personal property other than an automobile if the property was purchased by financing more than one year prior to the bankruptcy filing. This issue typically relates to financing on furniture. However, this code section generally deals with any personal property other than an auto.
If a person purchases furniture by way of financing, he may keep the furniture by paying through the bankruptcy plan. They will have to pay the retail fair market value of the used furniture as of the time of the of the bankruptcy filing, plus an interest rate that is based on the present prime rate.
Example:
Fair Market Value of Furniture                                             $1,500
Total financing balance as of the filing date                     $2,800
A debtor will be permitted to keep the furniture, by paying $1,500, plus the fair rate of interest, through chapter 13 bankruptcy plan. The present permitted interest rate is about 5.25%.
However, if the debtor purchased the furniture, through financing, within one year of the bankruptcy filing, the debtor will be required to pay the following, if they wish and are able to keep the furniture:

1. The arrears through the bankruptcy plan, in addition to making direct monthly payments to the finance company; or,
2. pay the entire balance due, plus the contract rate of interest, through the bankruptcy plain.

Please note that a chapter 13 trustee may not permit a person to make a substantial payment towards a luxury item, such as expensive furniture and reduce the monthly disposable income that would otherwise be paid to their unsecured creditors.
Robert Manchel, a bankruptcy attorney serving NJ, can be reached at 1 (866) 503-5655 if you would like to discuss how a chapter 13 bankruptcy might be able to benefit you.

What is an automobile cramdown?
A cramdown is applied in a chapter 13 case. In general, a secured creditor must be paid in full if a debtor is keeping the collateral (property). In other words, typically, someone who wishes to keep an auto, whom is behind with their finance payments, must pay the arrears through the bankruptcy trustee payments while still making their regular monthly payments on a timely basis.
However, under certain circumstances, a person may be able to keep his auto without paying the full amount of the secured auto loan.  A cramdown permits a person to keep their auto by paying through the bankruptcy plan only the retail fair market value of the auto, plus a fair rate of interest. The value is determined as of the time of the bankruptcy filing. The interest rate is based on a formula that is relative to the prime rate, as of the filing date.
Example:
Retail Auto Value                    $10,000.00
Auto Financing Payoff           $20,0000
Contract Interest Rate           8%,
If the debtor is able to cramdown the secured interest in the auto, the debtor would be permitted to pay only $10,000.00, plus a fair interest rate, amortized over a three to five year chapter 13 plan. The allowable interest rate at this time is about 5.25%. In the above  example, a debtor is permitted to keep the auto by paying $11,391.59, through the bankruptcy plan, over the life of the plan.
The criteria for a chapter 13 cramdown is as follows:

1. Can cramdown any commercial or non-personal vehicle;
2. Can cramdown a personal vehicle if the financing was obtained at any time, other than at the time of purchase;
3. If the auto was purchased with the financing for personal use, the auto must have been purchased at least 910 days or more, prior to the bankruptcy filing date.

You may contact NJ bankruptcy lawyer Robert Manchel at 1 (866) 503-5655 to discuss your bankruptcy questions.

Can I Keep luxury personal property in a chapter 13.
A chapter 13 requires a debtor to pay monthly payments to a trustee for 36 to 60 months.
A chapter 13 bankruptcy trustee will never sell a debtor’s luxury property. However, if the value of the property cannot be totally exempt, the debtor will be required to pay additional funds to their unsecured creditors (ie. credit card debt) through their monthly bankruptcy payments. The debtor must pay to the unsecured creditors, through their bankruptcy plan, at least, the amount that a chapter 7 trustee could have received, if the same debtor filed a chapter 7 bankruptcy case.
In other words, the debtor or his attorney must perform an analysis to determine how much a chapter 7 trustee could have received, if anything, from the sale of the luxury item(s), if that same debtor filed under a chapter 7 case. In most chapter 7 cases a trustee would not be able to sell a luxury item, which means that no additional funds must be paid to the unsecured creditors in a chapter 13.
The analysis, in this situation, is the same analysis that is applied to determine whether a chapter 7 trustee can sell a debtor’s luxury item in a chapter 7 case. This is explained, under the blog heading “Chapter 7”, blog named, “Can I keep luxury personal property in a chapter 7”.  The bankruptcy code lists the exemptions that may be applied to certain types of property. Part of the list of exemptions, is an $11,950.00 wildcard exemption that may be applied towards any property. Please note that the amounts of the bankruptcy code exemptions are periodically modified.
For example if one debtor owns a boat valued at $10,000, the debtor, if he wishes, may apply $10,000.00 of the wildcard exemption so that the boat is totally exempted. Under this scenario, the debtor would not be required to pay any additional funds to the unsecured creditors, as the boat is fully exempt. However, if the boat has a value of $20,000 and the debtor can only apply exemptions of $11,950, the debtor would be required to pay at least $8,050.0 towards his unsecured debt, through the plan. If the debtor could not afford this monthly trustee payment, he must sell the boat or be unable to file a chapter 13 case.
The second issue deals with a luxury item that is financed. The debtor must pay through the bankruptcy plan, the total amount of his monthly disposable income. However, the disposable income is the amount left over after payment of the debtor’s necessary and reasonable expenses, which should not include a payment on a luxury item, such as a boat. Under this scenario, the debtor must either surrender the boat to the finance company, sell the boat, if possible, or settle the issue with the trustee, if possible, by increasing his trustee payment.
You may contact the bankruptcy attorney in the state of New Jersey, Robert Manchel, at 1 (866) 503-5655, to discuss your situation.