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BK's
BVD,
Prior to and during a Chptr 13 filing, negotiations are many times made with secured creditors on the amount they will accept to satisfy their claim. This is all part of the reorganization. Many times loan modifications are done inside and out of BK's to lower the borrower's payment so that the house does not become a foreclosure.
In a Chptr 7 filing, essentially the only way a debtor can keep its house and/or car is if they are current with the lender at the time of the BK filing and the equity of the asset is within the state's exemption limits (no more than $5,000 equity each in up to two cars for a married couple and no more than $150,000 equity in one home [for Arizona]. If the equity position is more than these limits, the debtor is required to file a Chptr13 and pay the secured creditor the excess). However, all other debts in a Chptr 7 are discharged. In a Chptr 7 filing, ATC's, boats, airplanes, and things similar can not be retained as they are considered luxury items.
In a Chptr 13 filing, the debtor may retain those luxury items if its income is above the median income as defined by the court, however, the debtor will have to pay to the court the equity value of that asset which the court will disburse to the unsecured creditors.
For all intents and purposes, very few creditors show up at hearings. Many times, however, agreements have already been made with secured creditors regarding satisfaction of their claims. Almost never does an unsecured creditor show up at a hearing. These days they know they are SOL.
R50/2 - Essentially the change in the BK laws was very limited and really did very little to make it more difficult (notwithstanding the filings of the rich). The main changes were primarily threefold. Now a monthly income vs monthly expenses analysis is made; a consideration for where the debtor's income falls within the average income of the state in which it residesl and some changes relative to the exemption limits of assets. That's really about it relative to the debtor. Most other changes really just dealt with what papers and protocols the attorney was required to follow.
To many of us who sometimes sacrifice to pay our bills, I understand the feeling of disbelief and contempt. I often have these feelings when I see certain cases which I consider abusive.
JYL - I think I addressed part of your question, above, but I see you posted while I am typing this, so I will address you here. The Chptr 7 filer can keep their house and up to two cars, if married, as long as they are current with those loans and the equity values of those assets are within the state's exemption limits. At the same time, all other debts can be discharged (forgiven) through the BK. So, you can keep your house and a couple of cars and get rid of all your unsecured debts (things like credit cards, etc). Again, in a Chptr 7 there are no limits to the value of the unsecured debts discharged (again, in Arizona...Other states might be different). Loan modifications generally don't happen in a Chptr7 filing, however, that is something the borrower can work out with the lender. Only in a Chptr 13 can you scrape a second and/or a third mortgage off your residence (meaning, remove or eliminate it) because of its reduction in value. To scrape off a mortgage, the full amount of the loan must be unsecured, meaning the value of your residence is at least a little less than the amount you owe your first mortgage holder. The first mortgage is never discharged or forgiven.
I hope this helped guys.
Geoff
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