Rochester – Page 4 – Rochester Bankruptcy and Debt Relief

Can You Be Fired For Filing Bankruptcy?

Many people who file for bankruptcy in New York have fears about their relatives, friends, neighbors and employers discovering that they have filed for bankruptcy. They try to hide this fact from everyone. Many people who would greatly benefit from filing for bankruptcy under either Chapter 7 or Chapter 13 are reluctant to do so is because the perception among some people is that it is shameful to file for bankruptcy. I spend a considerable amount of time explaining to my clients that there is nothing shameful about filing for bankruptcy.

A lot of people are scared that their employers would find out that they filed for bankruptcy. They are afraid that their employers might fire them from their jobs if employers find out about their bankruptcy filing. They try as much as possible to hide their filing for bankruptcy because of this sense of insecurity.

The debtors should not be concerned since federal law prohibits employers from discriminating against them or from terminating their employment solely because of the debtor’s bankruptcy filing. Specifically, the bankruptcy code’s non-discrimination provision, 11 U.S.C. section 525(b), states as follows:

No private employer may terminate the employment of, or discriminate with respect to employment against, an individual who is or has been a debtor under this title … solely because such debtor … is or has been a debtor under this title…. 11 U.S.C. sec. 525(b).

One caveat to the above provision is that the Bankruptcy Code prohibits discrimination solely on the basis of the bankruptcy filing. It will not protect an employee who is having other employment-related problems.

The reality now is that a great number of people in Rochester, New York, or elsewhere in Western New York, have filed or are filing for bankruptcy. For a business having employees who file for bankruptcy is simply a fact of life. In many respects, it is better for the employer to have an employee file for bankruptcy, so that the employee is not spending time answering phone calls from the debt collectors, or that employer does not have to waste time garnishing employer’s wages. In today’s economy, bankruptcy is a reality that everyone is facing, and so companies would rather not do anything that would appear to be a form of discrimination against their employees.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, New York, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Should You Hire a Bankruptcy Lawyer?

Some of the major reasons why people who know they need to file for bankruptcy, but postpone doing so, is fears about filing either Chapter 7 or Chapter 13 Bankruptcy, and concern about paying the legal fees.

Some debtors consider filing bankruptcy on their own. However, this can be a major mistake and can create additional problems. As I have written about previously, bankruptcy involves a number of procedural and substantive steps and tests that have to be satisfied before the bankruptcy court can grant a discharge.

In both Chapter 7 and Chapter 13 bankruptcy cases, the debtor must appear before a court-appointed trustee for a 341 hearing. The bankruptcy trustee who conducts the hearing is not someone who is there to help the debtor. His role is just the opposite. The trustee is charged with investigating the debtor and his financial circumstances to determine if there are any assets available for thee benefit of creditors. Meeting with an experienced bankruptcy attorney will enable the debtor to have his or her financial situation reviewed and assets protected in advance to the extent possible.

What debtors may not realize is that certain types of financial transactions that may have taken place years before filing can have a major impact on the debtor’s bankruptcy. For example, if any significant assets were given away or if real estate was transferred, this may amount to what is known as a fraudulent conveyance or a preference, and may result in significant litigation in the bankruptcy case. Usually, a bankruptcy lawyer will review these issues before a bankruptcy petition is filed in order to mitigate the risk.

While the bankruptcy petition is written in plain English, it is a difficult document to prepare for someone who is not familiar with the Bankruptcy Code. A complete petition in a Chapter 7 Bankruptcy in New York, including all of the various forms and schedules runs in excess of 40 pages. The petition requires preparing numerous schedules and budgets. The debtor must list appropriate information about his debts, assets, income and expenses.

The Statement of Financial Affairs includes numerous questions that must be answered. All of the debtor’s creditors must be listed not only in a schedule of debts (segregated in three separate categories) but also in a special format called a Matrix. Such listing must include creditors’ names, addresses, account numbers, dates when any debts were incurred and their purpose.

When Congress passed BAPCPA in 2005, it imposed many new requirements. The most significant of those requirements is a complex and complicated means test, as well as the requirement for mandatory credit counseling. The Chapter 7 trustee as well as the Office of the U.S. Trustee reviews each and every petition to make sure all of the requirements under the new law are properly met. The means test is complicated, and the debtor’s failure to properly prepare the bankruptcy means test can create significant problems as the United States Trustee can seek to have the bankruptcy case dismissed.

The debtor must also choose which Chapter of bankruptcy to file. If a debtor is seeking to stop foreclosure and cure mortgage arrears, a Chapter 7 Bankruptcy filing won’t be helpful. At the same time, a Chapter 13 Bankruptcy filing is likely to result in a 3-5 years payment plan.

There are self-help books that explain how a debtor can prepare and file his petition and complete the process. However, there are many traps for the unwary that even attorneys who do not regularly practice bankruptcy often create problems for their clients.

Every bankruptcy trustee I know in Rochester, New York, has expressed concern about those debtors who file bankruptcy without an attorney because these debtors often make serious procedural and substantive mistakes. Self-representation by pro-se debtors in bankruptcy matters can end up being a mistake, and result in further financial problems for the debtor.

Another Remedy For A Failing Chapter 13 Bankruptcy- Amending Bankruptcy Plan

I have recently written about a situation where the debtor’s Chapter 13 Bankruptcy plan is failing for the reasons beyond the debtor’s control. One potential way to resolve this problem was to seek a hardship discharge. Today, I will describe another way of addressing this problem.

In a typical Chapter 13 Bankruptcy case, the debtor has to propose a monthly payment to repay his/her creditors over either 36 or 60 months. The length of the plan in either situation is substantial and carries with it some risks for the debtor. The primary risk is a substantial change in the debtor’s income, leaving him/her unable to make monthly payments approved by the bankruptcy court.

When a confirmed Chapter 13 bankruptcy plan is failing, the debtor should start thinking about having the plan modified in order to remain in Chapter 13 Bankruptcy. Under the applicable provisions of the Bankruptcy Code, the plan can be modified and the debtor can seek a change in the amount of the monthly payment or the length of the plan to fit the current circumstances.

Section 1329 of the Bankruptcy Code provides that the plan can be modified to:

(1) increase or reduce the amount of payments on claims of a particular class provided for by the plan;

(2) extend or reduce the time for such payments;

(3) alter the amount of the distribution to a creditor whose claim is provided for by the plan to the extent necessary to take account of any payment of such claim other than under the plan; or

(4) reduce amounts to be paid under the plan by the actual amount expended by the debtor to purchase health insurance for the debtor.

If you are unable to make a payment on the plan on time, you should immediately contact your bankruptcy lawyer to determine if the plan can be modified. In order to modify the plan, the debtor must make a motion for modification. Such motion must show to the bankruptcy court new payments using documentation of the new income figures.

The advantages in keeping your Chapter 13 Bankruptcy include keeping the automatic stay in place; getting a discharge, and not incurring additional attorneys fees for converting to a Chapter 7 Bankruptcy. If the bankruptcy remains in place, your creditors will not be able to sue you or begin collections activities.

If you contemplating filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, or are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a Rochester, NY, bankruptcy lawyer.

Debtor Who Can’t Make His Chapter 13 Bankruptcy Payments and Hardship Discharge

Once debtor’s Chapter 13 Bankruptcy plan is confirmed, the debtor has an obligation to make monthly payments. Unfortunately, sometimes circumstances change and the debtor cannot continue to make payments. When the debtor can’t make the payments on a confirmed Chapter 13 plan, the choices available to the debtor are limited. While there are a number of options, the best option for the debtor is usually a hardship discharge under §1328(b).

A bankruptcy discharge under §1328(b) eliminates all the debt that would have been dischargeable had the case been filed initially as a Chapter 7 Bankruptcy. While certain types of claims would still survive a hardship discharge, but the remainder of the debt is discharged, as if the plan has been completed over its term.

In order to obtain a hardship discharge, the debtor has to satisfy the best interests of creditors test, i.e., creditors must have received at least as much as they would have received had the case been filed as a Chapter 7 Bankruptcy. Additionally, the debtor’s reasons for his inability to complete the plan must be events outside of the debtor’s control. Usual events include death, illness, job loss, and, occasionally, divorce.

I prefer hardship discharge for my clients, as opposed to converting a Chapter 13 Bankruptcy to Chapter 7 Bankruptcy? When the discharge is entered under Chapter 13, the debtor is eligible to file another Chapter 13 immediately. If the case is converted to a Chapter 7 Bankruptcy, the debtor cannot file under either chapter of the Bankruptcy code for a period of time. An additional advantage of a hardshipt discharge is that there is no need for a new 341 meeting or amended schedules, as there would be if the case were converted to Chapter 7.

Since Chapter 13 Bankruptcy often includes debt that is not dischargeable in Chapter 7 Bankruptcy, while the hardship discharge won’t discharge priority taxes, by obtaining a hardship discharge, the debtor is eligible to file another Chapter 13 when he is again healthy or employed. Further, the debtor can receive the automatic stay in a subsequent case to finish paying the debts that often caused the Chapter 13 Bankruptcy.

In subsequent posts, I intend to discuss additional options available to the debtor.

Bankruptcy Basics – All About Automatic Stay

Often, it is not the debt itself that drives someone to file for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, but it is the actions of the creditors. Creditors have many different ways to try to collect a debt, such as repeated telephone calls to debtor’s house or work, letters from collection agencies and attorneys, lawsuits, wage garnishment, and other collection activities.

The debtor has only one tool available to stop the creditors. That tool arises as a result of filing Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. It is called “automatic stay” and arises under 11 U.S.C. §362. The automatic stay will stop all collection activities by a creditor to recover a debt. The creditor will not be able to call debtor’s home or place of work, send letters, commence or continue a law suit, or enforce a judgment. It will prevent any garnishment and will stop any garnishment already in place. It will also stop any pending foreclosure. It will stop all collection activities and will require all creditors to resolve their claims in the bankruptcy court. If you file Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, the automatic stay will prevent the utility company from shutting off your service. The automatic stay will even stop contempt proceedings in the divorce case that relate to nonpayment of financial obligations.

Once the automatic stay is in place, in order to take any further action, the creditor will have to file a motion in the bankruptcy court seeking to lift stay. Most of the motions to lift the automatic stay involve cars and houses. Typical creditor in a Chapter 7 may just be seeking to enforce it state court rights against the assets, especially if the debtor is surrendering the asset.

In Chapter 13 Bankruptcy, motions to lift automatic stay are usually filed by secured creditors when they believe that they aren’t getting paid sufficient money before the plan is confirmed. The most common motions to lift stay in a Chapter13 are filed after confirmation of the plan, usually, when the debtor fails to make the required payments.

Once imposed, automatic stay requiring a stop to almost all debt collection activity against the debtor and his property remains in effect until the earliest of the following events:

1. The case is closed;
2. The case is dismissed;
3. Or the debtor is granted or denied a discharge.

After the automatic stay is terminated, either by operation of law or special order, it is important to remember that property exempted in a bankruptcy generally remains protected from pre-petition debts, even if these debts were held to nondischargeable in the case.

The Bankruptcy Abuse Prevention Consumer Protection Act (BAPCPA) which went into effect on October 17, 2005, included provisions that made it more dangerous for the creditors to violate automatic stay. Previous to BAPCPA, there appeared to be an exception for creditors who violated the automatic stay if the acts were done in good faith due to a bona fide question of law regarding the applicability of the automatic stay. In other words, if a creditor technically violated the automatic stay but believed it was not violating the stay due to the facts or its interpretation of the law, such an act would not have been considered “willful” so as to allow damages, attorney fees, and costs. Pretty much any act by a creditor in technical violation of the automatic stay is now actionable, despite the fact that the creditor truly believes its actions are completly justified. Even if the debtor may not sustain any actual damages, the creditor will be liable for statutory damages.

There are some exceptions to the automatic stay. However, one of the exceptions included in §362(b) allows for actions in Family Court matters and also in Supreme Court involving domestic support obligations.

In short, the automatic stay is the most powerful tool in the bankruptcy lawyer’s arsenal. It will provide the debtor with an opportunity to resolve all claims in a single proceeding before the bankruptcy court. Without automatic stay, it would be very difficult for a bankruptcy attorney, if not impossible, to guide the debtor toward the fresh start contemplated by the bankruptcy law.

Student Loans and Chapter 13 Bankruptcy

On March 23, 2010, the U.S. Supreme Court issued its decision in United Student Aid Funds v. Espinosa, No. 08-1134 (2010), which affirmed the 9th Circuit’s holding that a Chapter 13 Bankruptcy debtor can obtain a discharge of a student loan by including it in a Chapter 13 plan. The loan can be discharged if the creditor fails to object after notice and opportunity to do so, and the bankruptcy court enters an order confirming the Chapter 13 plan.

In a typical bankruptcy, whether Chapter 7 Bankruptcy or Chapter 13 Bankruptcy, a student loan is not discharged unless the bankruptcy court makes a determination that the student loan would be an undue hardship on the debtor. Under Bankruptcy Rules, the court is required to make such a determination in an adversary proceeding, which is a lawsuit within the bankruptcy case. In United Student Aid Funds, the debtor did not bring an adversary proceeding. Rather, the debtor put in his plan that only the principal amount of the student loan would be paid through the plan, but that accrued interest would be discharged. The student loan lender did receive a copy of the plan, and even filed a Proof of Claim. However, the lender did not object to confirmation of the Chapter 13 plan.

Subsequently, the bankruptcy court entered an order confirming the plan as proposed. After confirmation, the Chapter 13 trustee sent a notice to the lender, saying that the Proof of Claim amount differed from the amount stated in the Chapter 13 plan, and that if the lender disputes the amount in the plan, it should notify the trustee within 30 days. After the debtor completed his plan payment, several years later, the student loan lender tried to collect the remaining amount due.

The debtor filed a motion seeking enforcement of his bankruptcy discharge. The lender filed a motion seeking to declare the order confirming the Chapter 13 plan void. Ultimately, this was the issue that the Supreme Court resolved. That is, the student loan lender argued that the bankruptcy court order confirming the Chapter 13 plan void because the lender was denied due process regarding the required statutory finding of undue hardship, which did not happen in this case.

The Supreme Court, in looking only at Bankruptcy Rule 60(b)(4), which permits a court to relieve a party for a final order or judgment, found that the lender was not denied due process, since the lender did receive the plan, filed a claim, and received the notice from the chapter 13 trustee. The Court agreed that the confirmation of the plan without an undue hardship determination was legal error, however, the legal error does not void the order. The Court noted that Rule 60(b)(4) strikes a balance between the need for finality of judgments, and the right of parties to have a full and fair opportunity to raise issues and the lender had ample notice and opportunity to contest the debtor’s actions.

What is to be learned from United Student Aid Funds? Bankruptcy lawyers are well aware of the fact that lenders can make errors in dealing with both Chapter 7 Bankruptcies and Chapter 13 Bankruptcies. However, in most chapter 13 bankruptcies, here in Rochester, New York, and elsewhere, the student loans are paid pro rata through the plan. Thus, the bankruptcy lawyers are unlikely to follow the debtor’s approach to the student loans in United Student Aid Funds, since it is likely to be rejected by the bankruptcy court. It appears that the bankruptcy court in that case ignored its obligation to make sure that the debtor followed the Bankruptcy Code in his Chapter 13 Bankruptcy. At the same time , there is little harm in trying to discharge some or all of the student loan debt, since if the above approach is followed, and the bankruptcy court or the bankruptcy trustee object, the plan can be amended to comply with the law, but if the bankruptcy court rubberstamps the plan and the lender fails to object in a timely manner, the debtor may get a discharge.

Past Judgments, Real Estate and New York’s Exemptions

Whenever there are judgments against real property, owned by the debtor who files Chapter 7 Bankruptcy, those judgments, under appropriate circumstances, can be removed by filing 522(f) motion. The judgment can be removed provided that the debtor’s equity in the property does not exceed $50,000.00 per single filer, or $100,000 per married couple. The $50,000.00, otherwise known as a homestead exemption, comes from the present version of New York’s Debtor and Creditor Law. Prior to August 30, 2005, New York’s homestead exemption was $10,000.00 per single filer, or $20,000.00 per married couple.

One issue that was not conclusively resolved in Western New York bankruptcy court was what happened in a situation where the creditor’s judgment was perfected prior to August 30, 2005. If the judgment was perfected prior to the effective date of the increase in the homestead exemption, would the new homestead exemption or old homestead exemption would apply if the debtor filed Chapter 7 Bankruptcy?

According to the United States Bankruptcy Court Judge Bucki in Buffalo, the applicable homestead exemption amount is the new $50,000.00. In Re Calloway, Judge Bucki held that once the New York statute was amended, the homestead exemption amount became $50,000.00, and it would apply regardless of the date it was perfected. Judge Bucki wrote that to hold otherwise, would disregard the meaning of the statute and its interpretation under New York law. Specifically, he wrote that “C.P.L.R. § 5206 was immediately changed to provide that a homestead “not exceeding fifty thousand dollars in value above liens and encumbrances, owned and occupied as a principal residence, is exempt from application to the satisfaction of a money judgment, unless the judgment was recovered wholly for the purchase price thereof.””

Pursuant to the Debtor and Creditor Law § 282, the debtor has exercised her right to exempt her property from the bankruptcy estate. Therefore, pursuant to 11 U.S.C. §522(f), the debtor may now avoid judgment liens that impair a homestead not exceeding $50,000 in value.

Therefore, debtor’s bankruptcy attorney does not need to be concerned with the date when the judgment was perfected. As with most §522(f) motions, the biggest concern that a lawyer would have is the value of the property and whether debtor’s equity in it does not exceed the homestead exemption.

Chapter 7 Bankruptcy, Chapter 13 Bankruptcy and Debtor’s Credit Report

I am frequently asked by the debtors how long their bankruptcy filing will remain on their credit report and whether they would be able to obtain credit after the filing. There is a substantial amount of confusion with respect to when a bankruptcy can no longer be reported on the debtor’s credit report and whether credit becomes available to those who file for bankruptcy relief.

The length of time a bankruptcy can be reported on the debtor’s credit report is governed by the Fair Credit Reporting Act (“FCRA”). The FCRA orders credit reporting agencies to remove bankruptcy case information from all consumer reports ten years after “the date of entry of the order for relief.” It does not differentiate between Chapter 7 Bankruptcy and Chapter 13 Bankruptcy. The order for relief according to §301 of the Bankruptcy Code is entered on the filing date, so the ten year period is measured from the bankruptcy filing date, not the discharge date.

It is usually a good idea to order your credit report after the bankruptcy to make sure that the bankruptcy discharge also shows on the credit report so that potential new creditors understand that the creditors whose claims were discharged in bankruptcy have no remaining legal claims.

In my opinion, bankruptcy is no more harmful to the debtor’s credit score than the financial circumstances that lead to the bankruptcy filing. In today’s lending environment, credit is available to the recently bankrupt. It may be more expensive than prior to the bankruptcy filing, and available with lower limits, but it is likely to be offered. Similarly, according to the credit industry’s studies, 18-24 months after a bankruptcy discharge, bankruptcy debtors can qualify for a mortgage loan on the same terms as if they had not filed bankruptcy. The anecdotal experience of my clients has been that they were able to obtain mortgages within two years of filing Chapter 7 Bankruptcy. While it takes some effort to rebuild credit after bankruptcy, it is possible to do so.

Disqualification of Debtor From Filing Chapter 7 Bankruptcy

I have previously written about the requirements that a debtor must meet in order to file for Chapter 7 Bankruptcy. As long as the debtor is able to meet the means test and disposable income test, the debtor can file for Chapter 7 Bankruptcy. However, there are a number of conditions that would disqualify a debtor from filing Chapter 7 Bankruptcy. The following post will address those conditions.

Generally, any debtor who is qualified to file and complete a Chapter 7 Bankruptcy case is eligible for a Chapter 7 Bankruptcy Discharge, unless the debtor falls into one or more of the following categories:

A person who has been granted a discharge in a Chapter 7 Bankruptcy case that was filed within the last 8 years. This limitation prevents debtor from filing another Chapter 7 Bankruptcy case despite meeting all other qualifications. The bankruptcy petition specifically asks debtors regarding any prior bankruptcy filings.

A person who has been granted a discharge in a Chapter 13 Bankruptcy case that was filed within the last 6 years, unless 70% or more of the debtor’s unsecured claims were paid off in the Chapter 13 Bankruptcy case. Therefore, if the debtor’s Chapter 13 Bankruptcy case paid less than 70% of the unsecured claims, the debtor is limited to filing Chapter 13 Bankruptcy within the 6 year period.

A person who files and obtains court approval of a written waiver of discharge in the Chapter 7 Bankruptcy case.

A person who conceals, transfers, or destroys his or her property with the intent to defraud his or her creditors or the trustee in the Chapter 7 Bankruptcy case. This relates to the provisions denying discharge to the debtor who committed that type of conduct.

A person who conceals, destroys, or falsifies records of his or her financial condition or business transactions.

A person who makes false statements or claims in the Chapter 7 case, or who withholds recorded information from the trustee.

A person who files to satisfactorily explain any loss or deficiency of his or her assets.

A person who refuses to answer questions or obey orders of the bankruptcy court, either in his or her bankruptcy case or in the bankruptcy case of a relative, business associate, or corporation with which he or she is associated.

A person who, after filing the case, fails to complete an instructional course on personal financial management. This is the reason that it is critical for the debtor to complete the course within 45 days of the meeting of the creditors.

A person who has been convicted of bankruptcy fraud or who owes a debt arising from a securities law violation.

If the debtor meets on or more of the above conditions, he is not eligible for a Chapter 7 Bankruptcy discharge and should not file a Chapter 7 Bankruptcy.

Second Vehicles, Motorcycles and Bankruptcy

Periodically, I meet with debtors who own either second vehicles or motorcycles, and would like to keep them, after either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy filing. Filing for either Chapter 7 Bankruptcy or Chapter 13 Bankruptcy doesn’t always mean that you have to give up your second vehicle or motorcycle, as long as the payments are considered a reasonable vehicle expense. The second vehicle, referred to above, is the vehicle that is an extra one for the single debtor, or the third one for joint filers.

How does the debtor know if the second car or motorcycle will be considered a reasonable expense? The answer to this question initially depends on the type of bankruptcy being considered: Chapter 7 or Chapter 13.

Since with Chapter 7 Bankruptcy there is no repayment plan for creditors, the secured debts, like vehicle loans, are either continue to be paid by the debtor or the vehicles are surrendered. The debtor is obligated to list his/her income and expenses in the bankruptcy petition. The purpose of listing income and expenses is to show that after deducting reasonable expenses, the debtor has no money with which to repay his creditors. If there is any significant money left over in the budget (more than about $100), the debtor will not qualify for Chapter 7. Instead, he will be required to file a Chapter 13 Bankruptcy where creditors are repaid some or all of what they are owed.

If the Chapter 7 debtor’s monthly income equals to his/her monthly expenses, the debtor has no money with which to repay his creditors in a Chapter 13. However, those expenses must be reasonable or the trustee will object to the bankruptcy. This is the critical issue in whether the debtor will be able to keep the second vehicle or motorcycle. Usually if teh budget shows that even befor the payment on the second vehicle or motorcycle, the debtor is either at break-even, or is in the negative territory, the bankruptcy court will not require him to give it up. If the debtor wants to spend less on other expenses, the debtor can do that. If the debtor wants to make the payments, he can keep the second vehicle or motorcycle. An additional caveat has to do with any equity in such second vehicle. If there is any equity, the trustee is likely to demand that such equity be paid to the bankruptcy estate since it would not be protected by teh bankruptcy exemptions.

The above also applies for Chapter 13 Bankruptcy. In Chapter 13, any vehicle payments allowed in the repayment plan take money away from what the unsecured creditors receive. So a payment for the second vehicle or motorcycle will reduce the money the trustee has available to repay other claims and is likely to be objected to. Here in Rochester, the bankruptcy trustee will permit the debtor to keep the second vehicle or motorcycle if the plan repays all unsecured debtors at 100%. So, if the joint debtors, for example, are a couple with three vehicle payments, three vehicle payments are not necessary for “the effective reorganization of the debtor” required by the bankruptcy statute. The second vehicle or motorcycle is likely to be toy, and allowing the toy to be paid off in the plan reduces the amount the unsecured creditors receive.

The easiest way to determine whether the second vehicle or a motorcycle will be viewed as an allowable expense in Chapter 7 bankruptcy or Chapter 13 Bankruptcy is to discuss these issues with a bankruptcy lawyer prior to making a decision to file.