Round Lake Bankruptcy Attorney Answers Question About Keeping Proper...

I am often asked as a Round Lake bankruptcy attorney, will I lose any of my property if I file Chapter 13?  You will typically not lose any property when you file a Chapter 13, because Chapter 13 debtors are allowed to keep all of their property while they’re in their reorganization plan, provided they continue to make proper post-petition mortgage payments or post-petition debt payments.  The typical scenario is, the debtor is repaying mortgage arrears, the auto financing balance, and any other debt over a three to five-year period.  Because the debtor is repaying all or a portion of his debts, he is able to keep all of his property, exempt and non-exempt, free and clear from creditors.  The one exception is that the debtor must pay back, through the Chapter 13 plan, at least what the creditors would get if the debtor had filed a Chapter 7 liquidation case.  Thus, as long as you’re paying back the proper amount through your Chapter 13 Bankruptcy case, you have no risk of losing any property.  

The exception to this would be if you do not make your post-petition mortgage payment or post-petition payment on any property that’s being paid outside of the bankruptcy as well.  For example, if you are trying to save your home and you are paying your mortgage arrears through the Chapter 13 trustee, then you have to make your regular mortgage payment going forward outside of the Chapter 13.  If you fall behind on your post-petition mortgage payment or if you fail to make your trustee payment, then that creditor can bring a motion to dismiss.  If the creditor is successful in its motion to dismiss, then they have the ability to proceed against you or the collateral, such as a foreclosure or a repossession.  

The typical Chapter 13 case, if it goes successfully, will mean that you will keep all of your property and you will repay either all or a portion of your debt over time.  By the time your Chapter 13 case is completed and gone through to a discharge, you will have effectively reinstated your mortgage, paid off your vehicle, and paid either all, or a portion, or whatever is required under your Chapter 13 plan, to your unsecured creditors.  Once you receive your discharge in Chapter 13, you have eliminated the debt and successfully reorganized whatever debt you did have.