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Teacher Editor
Teacher Editor, Teacher
Category: Bankruptcy Law
Satisfied Customers: 1339
Experience:  College Instructor
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Chapter 13 debtor with less than a year left in plan is

Customer Question

Chapter 13 debtor with less than a year left in plan is awaiting discharge of personal guarantee for SBA loan. Prior to chapter 13 filing, government sent collection letters regarding secured business manufacturing equipment. After filing, collection efforts
ceased and have never been renewed. Debtor can still make use of equipment and is actively using the equipment and considering deploying equipment in new joint business venture. What are the dangers of still using the equipment (other than renewed collection
efforts prior to expiration of the statute limitations)? If an entirely new entity generates revenue from the Houston of the equipment, could this revenue be attached in a repossession of the equipment action?
Submitted: 2 years ago.
Category: Bankruptcy Law
Expert:  Teacher Editor replied 2 years ago.
Hello, if you in a hypothetical situation, a debtor is in a chapter 13 plan, then any secured items that the debtor is keeping can be paid in the plan. If the debtor is surrendering the item, the creditor can still repossess the item after discharge. Most likely in a hypothetical like that, the automatic stay is the reason the creditor will not repossess during the bankruptcy. Once the discharge is issued, as the items is still secured, unless it has been paid in the plan, there can still be an action to repossess the item. Also, keep in mind that as this is an SBA loan, it may be considered a government debt and may not be dischargeable. The other issue here is that a debtor in this situation may be paying the secured loan in the plan and this debtor should ask their chapter 13 attorney for information in regards ***** *****
Expert:  Teacher Editor replied 2 years ago.
Please let me know if you have any other questions and please leave positive feedback.
Customer: replied 2 years ago.
"The secured lien would still exist on the property" but what about revenue derived from using the property?
Expert:  Teacher Editor replied 2 years ago.
In this hypothetical, it depends on the agreement between the business and the SBA. As the business is not covered by bankruptcy protection, if the agreement of the loan was to attach revenue of the business, that would still exist after a personal bankruptcy discharge as the discharge does not attach the business, only the personal guarantee.