As a Willowbrook bankruptcy attorney, I know that the Bankruptcy Code does not mandate that a reaffirmation agreement be entered into with regard to real estate. Thus, if I have a client who owns a home and they’re doing a Chapter 7 and they want to continue to make their mortgage payment, I recommend that they continue to make voluntary payments and they can request that the mortgage company continue to send monthly billing statements. Some mortgage companies and their attorneys will send a reaffirmation agreement attempting to get the debtor to go back on the hook for the mortgage. Since it is not mandated by the Bankruptcy Code, I prefer that my clients do a simple keep and pay as part of the bankruptcy process. As long as they keep up to date, they’ll be able to keep the property. Should they fall behind after the bankruptcy case, then the mortgage company can foreclose just like they could prior to the bankruptcy case being filed.
In the overwhelming majority of my cases the debtors continue to keep their home they continue to make their payments on time, and they continue to keep their vehicles as well. Chapter 7 gets rid of the medical bills and the credit card bills that are hurting people in the United States today. Chapter 13 on the other hand will allow someone to repay mortgage arrears, reorganize a car payment, and reorganize any other type of debt over a three to five year period. All of the debtor’s property is protected when they’re in a Chapter 13 repayment plan, and they don’t have to worry about losing any assets to the trustee. The one minor catch is that the debtor must repay in a Chapter 13 bankruptcy case at least as much as what creditors would get if the debtor did a Chapter 7 liquidation case. If they cannot do it, then they should not be claiming bankruptcy under that chapter.
Basically the trustee is going to look at the assets minus the amount owed and then subtract the exemption amount to determine what would be available to creditors if the debtor did a Chapter 7 bankruptcy liquidation. That number has to be paid at least back in a Chapter 13 for the Chapter 13 trustee to recommend your case for confirmation. On many occasions, there is a dispute between the amount that the trustee feels would be available in a Chapter 7 liquidation test versus what the debtor and the debtor’s attorney believe. If that’s the case, there’s going to be an issue at confirmation and the judge will ultimately have to make the decision on whether or not the debtor is complying with the Bankruptcy Code and providing all of their Chapter 13 disposable income to the Chapter 13 plan each month. If you are having a problem with the trustee, contact your Chapter 13 bankruptcy lawyer for help.