TheFloridaBankruptcyLawBlog

Chapter 13 permits debtors to “cram down”, or reduce, the amount of a mortgage on investment property to the property’s current market value. A client recently asked me if the Chapter 13 cram down eliminates past-due mortgage payments and if the “cram down” can include a reduction of the mortgage interest rate in addition to the mortgage balance.

My experience is that a Chapter 13 plan will not eliminate past-due payments but can add the arrearage to the loan balance after cram-down.

Student loans are almost impossible to discharge in Chapter 7 bankruptcy. The debtor must show actual hardship to discharge a student loans. Courts interpret hardship very strictly. If you are able to work you probably don’t have hardship sufficient to discharge a student loan in Chapter 7.

In Chapter 13 cases student loans are not dischargeable if the creditor objects the discharge.

I’ve written recently about some Chapter 7 trustees trying to take or administer  “upside down” homestead properties when the bankruptcy debtor chooses not to claim a homestead exemption because their home has no equity. The debtors purposefully avoid claiming the homestead exemption in order to then qualify for the $4,000 wildcard exemption that they can employ to protect cars and other personal property.

People are afraid of filing bankruptcy. Most of my bankruptcy clients are worried about the effect of bankruptcy on their future, and they think they may never recover financially. Consider this true story.

Five years ago I filed bankruptcy for a married couple. The husband had been fired by a a national corporation where he had earned a six figure income for many years. The wife worked for a local home decorating firm.

I saw another example of how sloppy financial and estate planning causes problems in bankruptcy. In this instance, a man took out a $100,000 life insurance policy on his own life. The man died at a time when he and his wife had substantial amounts of  credit card debt. The wife wanted to file bankruptcy. I explained to the  that the life insurance proceeds would be part of her bankruptcy estate if she were the insurance beneficiary.  I suggested that she collect the life insurance, but that she avoid filing bankruptcy.