The court will not take any property as long as one files Chapter 13
and pays the creditors (through the Chapter 13 Plan) as much money as the creditors would have received had the unexempt assets been sold in Chapter 7
. This is called the Best Interest of Creditors Test (BIT for short), pursuant to 11 U.S.C. 1325(a)(4), HERE
So, if you have $150,000 in real estate (for example), and $75,000.00 is covered by a mortgage, and $10,000 is protected by your State's exemption law (again these are fictitious examples), then there would be $65,000 left over if the property were sold in Chapter 7 (after paying the mortgage and your exemption). So, if you filed Chapter 13 and paid the court $65,000 in the Chapter 13 Plan over 5 years (plus attorney fees, court fees, taxes
, and/or any other secured items you wanted to pay) then the court would not sell the property because it would be getting its money instead from your payments. It's kind of like buying back your un-exempt equity
(if that makes sense).
I would see the OTHER bankruptcy in town =)
Also, some states have an exemption called the Tenancy by the Entireties exemption, which protects real estate owned jointly by a married couple in an unlimited amount as long as only one spouse files bankruptcy. I don't know if that is the case in Kentucky, but I would ask your lawyer about it.
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