What Happens to Assets You Receive While Going Through Chapter 13?

A Chapter 13 bankruptcy allows you to reorganize your debts and partially pay them off according to a court-approved plan, which can last three to five years. That plan is based on your assets and projected monthly income and how much of those resources you can devote to debt repayment. But what if you receive other property during the period of your Chapter 13 plan?

In a Chapter 13 bankruptcy, all assets and earnings you acquire following the commencement of the case — and before the case is closed, dismissed, or converted — are considered “property of the estate.” That means you are generally permitted to remain in possession of them. They will not be sold to pay off creditors.

However, your Chapter 13 plan will require you to repay unsecured creditors based on the value of your property that is not considered exempt under the law. This includes not only property you own at the time of filing but also assets acquired afterwards.

Determining to what extent an asset is exempt in a Chapter 13 bankruptcy can be complex. Exempt property can include equity in the following types of assets:

• Residential property
• A vehicle
• Artwork
• Valuable collections
• Investments that aren’t in retirement accounts
• Jewelry

The non-exempt portion of the value of each asset must be applied toward paying the unsecured debts. If the amount of the exemption is greater than the value of the asset — after deducting any secured interest or lien on the property — a debtor is not required to devote any of its value toward payment of the unsecured debts.

Holding onto your property requires staying current on loan payments, that will last longer than the length of the plan, such as those on your home or sometimes vehicle. Failure to do so can result in the lender requesting the court to lift the automatic stay in order to proceed with foreclosure or repossession.

Chapter 13 is a useful but complicated form of debt relief. It is critical to understand your legal rights and obligations. Jeff Field & Associates helps clients with filing Chapter 13 bankruptcies throughout the Atlanta metropolitan area. We have offices in Bogart, Douglasville, Gainesville, Lawrenceville, Marietta and Decatur. To schedule an appointment, call 404-381-1278 or contact us online.