Скачать или смотреть How Homeowners Filing For Chapter 13 Bankruptcy Will Be Impacted By 2024 Homestead Exemption Changes

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Law Offices of Nicholas Gebelt
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There is a connection between Chapter 13 and Chapter 7. Chapter 13 debtors must propound a plan of reorganization that satisfies, at the very least, three key requirements. There are others, but these three are the make-or-break ones.

One of those requirements is the "Chapter 7 liquidation requirement for Chapter 13." Practitioners call it the "best interest of creditors requirement." In a Chapter 7 bankruptcy, debts are wiped out without you paying anything. This requirement is a hit from the creditor's perspective.

There are some limitations on homeowners. One limitation is what you can keep. You get to keep some possessions, but there's at least the potential to lose some in a Chapter 7 bankruptcy case.

A set of Chapter 7 bankruptcy papers includes a complete listing of everything you own or in which you have an interest. Everything, down to the shoes on your feet, gets divided into two categories: exempt or non-exempt. Exempt possessions are yours to keep.

Non-exempt possessions are fair game for the Chapter 7 trustee to seize, liquidate, and have money to pay the creditors. Determining whether something is exempt or non-exempt is done by consulting the appropriate exemption table.

In Chapter 13, you keep all of your possessions. No trustee is going to seize any non-exempt assets. However, you still go through the exercise of listing all your possessions and dividing them into exempt and non-exempt categories. You do this because the minimum that you can get away with repaying over the life of the Chapter 13 plan is what the creditors would have received in Chapter 7.

Creditors in Chapter 7 would receive the liquidation value the trustee would receive from liquidating the non-exempt assets and having money to pay creditors. What is being exempted here? You are not trying to exempt the value of the property. You are exempting the value of the portion of the property you own. That is what's referred to here as equity.

How is that equity calculated? It's the property's market value, from which you subtract amounts still owed on a mortgage. That amount is the value of the portion of the property you own. That's the equity, what you have to protect in Chapter 7.

The non-exempt portion of that equity is the starting point for Chapter 13. How does that equity affect Chapter 13 debtors? Well, if you've got a lot of non-exempt equity in your home, that will affect the amount you have to repay over the life of the Chapter 13 plan.

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