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Bankruptcy but no unsecured creditors

Ossining, NY |

I want to file bankruptcy because the bank is foreclosing on an investment property and I don't want to be stuck with a judgement as I am a guarantor on the loan. But I have no credit card debt or any other kind of debt. I want to surrender the property in the bankruptcy. I make way too much for a chapter 7. So I have to file a chapter 13. But as there are no credit cards etc to pay, is there any reason I should have to pay a 60 month plan of money to the trustee? The only thing I want to do is surrender the property and discharge my obligation as guarantor. I went to one lawyer who said I need to file a 60 month plan and pay something but she couldn't explain it so I could understand it. Why should I have to pay if I don't have any debts or creditors?

Attorney Answers 5

  1. The answer is simple. When the bankruptcy code was changed by Congress in 2005 a new concept was introduced called commitment periods. If you are an above median income earner you must commit your disposable income to your creditors for 60 months (36 if you are under median income). Courts have also interpreted that to mean that you can not have a zero payment plan. (I tried)

    Answers are provided for direction only; it is not a substitute for an office consultation.

  2. Obviously you do have a creditor and that creditor might have a claim. Otherwise, why exactly do you think you would need to file in the first place. That would make no sense at all. I think you misunderstand Ch. 13 and/or the nature of the debt you owe.

  3. There is case law here in New Jersey that discusses the ramifications of a debtor filing a bankruptcy where there is only one creditor. In essence, the Court can rule that the filing was done in bad faith, because bankruptcy cannot be used in a two party dispute. There are various factors that determine whether the filing was made in bad faith. I do not know the elements in your jurisdiction. Go to another bankruptcy lawyer and bring this issue up.

    Legal disclaimer: Jonathan Stone is a New Jersey-licensed attorney only. The information is not intended to be legal advice. You should consult an attorney regarding your particular circumstances. Answering this question on Avvo does not constitute legal advice, constitute legal representation or constitute an attorney-client privilege.

  4. As part of the 2005 "reform" law, the bankruptcy code now includes "applicable commitment periods" for Chapter 13 cases. They are either 36 or 60 months depending on your gross income. Court are increasingly interpreting this clause to mean that you must make either 36 or 60 payments.

    It remains to be seen if the lender on the investment property files a claim. if you have to propose a 60-month plan and nobody files a claim, you won't have to make 60 payments.

    First, the firm is a debt relief agency according to the U.S. Bankruptcy Code. We help people file for bankruptcy. We also do other stuff and we do it well, but Congress wants me to post this notice. Second, nothing on this site is legal advice. You are not my client unless you enter into a written agreement signed by you and me.

  5. While you presently have no debt, you can assume that there will be a deficiency after the foreclosure. At this point, you have no idea of the amount of the deficiency. Once the amount is determined, then it would be possible to determine both your plan payment and the length of the plan. Unless your payments allow you to pay the debt in less than 60 months, you are looking at a 60 month plan.

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