Cashman, No. 11-00178 (Bankr. D. Hawaii., April 25, 2011)
In Chapter 13 bankruptcy cases, there is a general requirement that you pay what you owe to as many creditors as you can for 3 to 5 years. At the end of the plan, you have the opportunity to wipe clean all remaining debts that are “unsecured”, such as credit card debt. Because this only applies to unsecured debt, many people try to pay as much secured debt as they can during the course of their plan, because it will need to be paid anyway.
Often, whether this is allowed or not will depend on specific circumstances and the extent unsecured creditors are paid. The more you pay them, the more likely the court will permit the plan.
Here, a married couple filed for Chapter 13 and proposed a plan to pay almost nothing on their $160,000 in credit card debt. Instead, they sought to make large monthly payments to their car loans. The credit card company objected to this, because the couple were paying a car loan that was not even in their name. Although they were co-owners of the cars, their parents’ names were on the loan documents.
Even though the couple were not legally obligated to pay the car loan, the court allowed them to do it, at the expense of paying their credit card debts. They needed cars in order to work and live, the court reasoned, and if the loans were not paid, they would lose them.
Read more about In re: Cashman, No. 11-00178 here.
If you are considering filing a Chapter 13 bankruptcy or have any questions in regards to filing bankruptcy it is important to consult with a Tucson bankruptcy attorney first.
Stephen M. Trezza