Re: chap 13 bail out foreclosure - Posted by JT-IN
Posted by JT-IN on September 18, 2003 at 20:43:54:
A Ch 13 is a Bankruptcy, whereby the Debtor has an opportunity to re-organize their debt, with certain protection from Creditors, to stay off (stop) collection actions. This period of time is limited, and the Debtor must present a re0organization plan, showing how they plan to repay the Creditors, with the plan being acceptable to the BK Court; (and Creditors in turn).
This means that the Debtor must show where they can continue to make existing payments in full, while paying part payments, of past due amounts, so that in a period certain, not more than 60 months, the past due accounts are fully paid while remaining current on the present payments. The percentage of Ch 13 cases where the Debtor completes the plan as presented, thereby paying back all past due debts, is rather low. All too many Debtors use (abuse) the court protection of a Ch 13 as more of a time-management tool, than a repayment technique.
What occurs in real life when a property is scheduled for Sheriff (Trustee) Sale is that near (or on) the date of sale the Debtor will file Ch 13, and the sale will not take place as advertised. Within 6 weeks of a filing, a 341 meeting is scheduled, whereby the Creditors (or their legal representative) attends, as well as the Debtors representative, to present the repayment plan. All too often the Debtor does not even show up to present the plan, or they present a plan that is obviously unacceptable, (usually due to not having enough cash flow) and the case is dismissed. Hence the party being foreclosed of their property rights has bought several months of time. Then the process of advertising begins again; maybe months until the rescheduling of a Sale… then boom, another Ch 13 filing… and so on.
The Debtor Atty’s who specialize in Bk work, defend this practice much in the same way as a Criminal Atty would defend their client… “Better to have 100 people abuse the Bk system and fail to do so, than to have One person who coould reorganize be unable to use their rights to do so… and be foreclosed from their equity…” I guess it depends upon what part of the proecess that you are in, as to how you rationalize this… I think you know where I would fit in on this line of thinking; (not that it is relavent, because the law is the law).
Hope this explanation helps you grasp the concept…