You are allowed to keep all of your property if you file for bankruptcy under Chapter 13. However, this does not mean that you will not be responsible for paying for some of it. You are permitted to safeguard, or “exempt,” a specific amount of equity in the property you’ll need to keep a home and a job. This protection comes in the form of an exemption. If you wish to keep nonexempt property, such as a boat, a collection of baseball cards, or another luxury item, you will be required to make payments on it via your Chapter 13 plan.

Also, if you want to keep a home, car, or some other property that you are still making payments on, and you put the property up as collateral (agreed that the creditor could take it back if you failed to make your payment), you must continue to make the payments and be able to pay back any arrearages over time. This applies whether you put the property up as collateral because you agreed that the creditor could take it back if you failed to make your payment.

The privilege of Redemption and Filing for Bankruptcy Under Chapter 13

As an alternative to filing an action for redemption in a court in Philadelphia, the United States Bankruptcy Court for the Eastern District of Pennsylvania (which governs Philadelphia) has decided that a homeowner may redeem the property by paying the redemption amount over sixty months in a Chapter 13 bankruptcy proceeding instead of filing an action for redemption in a court in Philadelphia. This decision was made in light of the fact that Philadelphia is under the jurisdiction of the Eastern District of Pennsylvania.

As a result of this ruling, a property owner is exempt from the requirement that they must file the redemption action within nine months of the date of the tax sale. Instead, they are permitted to file a Chapter 13 bankruptcy petition within that time frame and are given five years to pay the redemption amount.

As a result, this ruling is consistent with the goal of the Philadelphia redemption law, which is to provide a residential property owner with the opportunity to reclaim his or her property that was sold at a tax sale for a portion of the property’s value. As a result, this ruling is in line with the objective of the Philadelphia redemption law. It is essential to keep in mind that redemption may only be utilised for tax sales; redemption may not be utilised in sales resulting from mortgage foreclosures.

In addition to the amount that is owed for the redemption, any arrears that have accrued on other secured debts, such as a mortgage or an auto loan, as well as arrears on other types of debt, such as back taxes, may be included in the Chapter 13 bankruptcy. Reorganizing one’s debt through the use of Chapter 13 bankruptcy is highly recommended.

Why Keeping Your Property in Chapter 13 May Turn Out to Be Expensive for You

When you file for bankruptcy under Chapter 13, none of your assets will be sold. However, this does not imply that you receive anything in exchange for nothing. The guidelines are listed below.

If all of your property qualifies for an exemption, you won’t have to pay any taxes or fees to keep it. On the other hand, if it is not free from taxation, you will be required to pay for it. So how do you determine if you have property that is exempt or property that is not exempt?

When you file for bankruptcy, the requirements for the types of property you must sell in order to get a fresh start are set by your state (some states allow you to choose between state exemptions and federal exemptions). Regardless of the form of bankruptcy you file, you will be able to keep any exempt property without having to pay any fees.

However, the chapter in which you file for bankruptcy will determine what will happen to your nonexempt property, which is property that is not protected by an exemption.

Your Chapter 13 plan payment may need to be increased if you own nonexempt property.

You are obligated to make full payments toward specific debts as part of your Chapter 13 plan. These include delinquent mortgage payments as well as other priority items like certain taxes. On the other hand, the sum that you are required to pay to your general unsecured creditors (such as credit card companies) is determined by your income, your expenses, and the property that is not exempt from taxation.

To be more specific, you are expected to pay the entirety of your disposable income, which is the sum that is left after allowingable living expenditures have been deducted.

Having said that, there’s more. If you have nonexempt assets, you are obligated to pay either the amount of your disposable income or an amount equivalent to the value of your nonexempt assets, whichever number is higher. If you do not have any nonexempt assets, you are not required to pay any tax. You get to keep your nonexempt assets, but as part of your repayment plan, you might wind up having to pay a greater dividend to your unsecured creditors. This is despite the fact that you get to keep those assets.

In point of fact, if your monthly income is insufficient to meet the Chapter 13 payment requirements and you have a significant amount of nonexempt assets, you may not be able to file for Chapter 13 bankruptcy. (For additional information, have a look at The Chapter 13 Repayment Plan.)

You Must Stay Current on Loan Payments to Keep a Home, Car, or Other Collateral

If you want to keep property that you’ve put up as collateral for a loan, such as your house or car, you’ll need to keep making payments on it while you’re in Chapter 13 bankruptcy. If this is not the case, the lender who holds your mortgage or your vehicle repossession rights may petition the court to lift the automatic stay. This is the order that prevents your creditors from collecting against you, and if the petition is granted, the lender may begin or resume the process of foreclosure or repossession.

The judge in charge of your case will decide whether or not you are able to pay your monthly mortgage or auto payment outside of the parameters of your plan. For instance, some of them demand that you pay through the plan if you’re behind on payments at the time that you file. Why is this an important question? Because you are required to pay the trustee overseeing your bankruptcy a percentage of all funds paid through the plan, which could result in a considerable increase in the costs incurred by your company.

You Have the Ability to Get Behind on Your Loan Payments Through Your Repayment Plan

You will not be able to catch up on payments for secured debts if you file for bankruptcy under Chapter 7, but if you file under Chapter 13, you will have the opportunity to do so. By allowing you to spread out any missed payments over the duration of your three- to five-year repayment plan, Chapter 13 bankruptcy makes it possible for you to prevent foreclosure or the repossession of your property.

During the time that you are working to correct your default, the automatic stay prevents your creditors from repossessing or foreclosing on any of your property. When you have completed your plan, you will be up to date on all of your payments.