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cfortunato, Attorney
Category: Bankruptcy Law
Satisfied Customers: 8023
Experience:  Bankruptcy professor.
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We are contemplating using Chapter 13 bk as a way to keep our

Resolved Question:

We are contemplating using Chapter 13 bk as a way to keep our house and car and restructure and repay debt. We have enough income to do that if the mortgager is willing to renegotiate the loan at a lower interest/principal. Here is the question:

We are on S.S and pensions and my husband works part time. At the moment we earn about $70,000/year and have about that much in remaining stocks. We have debt of approx $35,000.

If we go into Chapter 13, can we protect our investments? Also, we need a new car, and can buy one now. Can we protect a new car if we are willing affirm payment obligations?

Submitted: 5 years ago.
Category: Bankruptcy Law
Expert:  cfortunato replied 5 years ago.

Hi Customer,

Are you behind with your mortage payments?

Are the stocks set up as an IRA (tax deferred)?

Customer: replied 5 years ago.
We are not behind in our mortgage payments. Our two year mod expires on 5/1, and at that time the bank proposed to return to a mortgage payment of $2800 at 6% on property bought at $480,00 in 2007, valued at $315,000 now. We put $100,000 down. But--given how much have lost in stocks and not being able to sell our previous home--which we gave in Deed in Lieu to CitiMortgage.

It is my understanding that after we pass 65 and 70, which we have, we cannot set up IRA funds.

Expert:  cfortunato replied 5 years ago.

Given the information your provided, I don't think a Chapter 13 Bankruptcy will help you. Filing a Bankruptcy cannot affect the mortgage payment. A Chapter 13 Bankruptcy can allow the debtor to pay mortgage arrears over a period of up to 5 years, in addition to paying the regular monthly amount. This is the main advantage of a Chapter 13.

Additionally, your non-IRA investments would be taken to pay your unsecured creditors.

Customer: replied 5 years ago.
Wouldn't a ch 7 be the same? Also, can we do a 13 to force the bank to adjust mortgage. I thought this was the "payback plan" for people who can pay their debt in 3-5 years. If we have a $2800 month mortgage, we would have to walk away if the bank did not restructure. If the bank did restructure, we may not need bankruptcy at all.
Expert:  cfortunato replied 5 years ago.

Chapter 7 is for debtors who have little or no assets. In a Chapter 7, debts are discharged with the debtor paying little or nothing. With a Chapter 13, the debtor pays all disposable income to the Bankrutpcy court for 5 years, and after the 5 years most unsecured debt is discharged.

The exemptions are the same for both.

A Chapter 13 cannot force the lender of a first mortgage to adjust the payments. (Actually, Congress recently had the chance to change this, but voted against the change.) However, if the house is underwater and there is a second mortgage, the balance of the second mortgage can be discharged - along with the other unsecured debts - at the end of the 5-year period.

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