Troubleshooting Chapter 13 Plan Problems

Our office often receives calls about Chapter 13 bankruptcy petitions from people that are struggling with one thing or another in the Chapter 13 Plan, and can’t seem to resolve it.

What we usually find, is that because it is a Chapter 13 petition, that people tend to panic, and overlook the basics.

This week we received a call about a Chapter 13 petition where the Chapter 13 Plan was giving an error about unsecured debts being over 109(e) limit $360,475.

After getting a copy of the petition and looking at it, it didn’t take long to see where the problem was, as there were only two secured debts, and they were both mortgages.

What we found, is that all of the lien information had been entered for the house that the debtor owned, but the market value for the house had been left out.

With the property information configured like this, it told the bankruptcy software that there was $374,395 owed on the house ($192,640 first mortgage, and $181,755 second mortgage), but that the house had no value.  This means that all $374,395 of the house is unsecured, which exceeds the limit of $360,475 of unsecured debt allowed in a Chapter 13 bankruptcy.

After entering a market value for the house (e.g., $300,000), the the amount of unsecured debt on the house was reduced by the same amount, and eliminated the error in the Chapter 13 Plan.

What can we learn from this?

As you know, drafting bankruptcy petitions is not just data entry, and requires critical thinking and analytics capabilities, but just because the bankruptcy petition you are working on is a Chapter 13, don’t let this intimidate you, and remember the basics.  Look through each of the items entered into the petition to make certain that nothing was left out or overlooked, or mistakenly entered incorrectly.

Have a terrific week!

Sincerely,

-The 713 Training Team
www.713Training.com

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Disclaimer: We at 713Training.com not attorneys; any information provided by 713 Training should not be considered legal advice.  The information in this article, and any other materials provided by 713 Training, whether delivered verbally, written or via any other means, including electronic/digital delivery and storage, is for training purposes only, and is intended for individuals who work under the direction of a licensed attorney.