Can a creditor RE-claim an asset in a Chapter 13 after they withdrew the claim or had is disallowed by the bankruptcy judge?

Asked 10 months ago - Santa Rosa, CA

The creditor withdrew one claim and was disallowed another by the bankruptcy judge. Can they come back and RE-assert their claim if the debtors fail to follow through with the bankruptcy repayment plan?

FYI: This pertains to an asset (a home) in which the creditor withdrew objection on one claim, and was disallowed on another claim because the judge deemed that the debtors had quit claimed interest in a property four years prior to filing for Chapter 13. Also, the debtors had no financial interest in the asset, which belonged to their daughter (who made all the mortgage payments and the original down payment). The debtors only co borrowed on the asset to help daughter qualify for home loan. Is the daughter safe from these creditors if the debtors cannot complete the repayment plan?

Attorney answers (3)

  1. Eric Charles Lewis

    Contributor Level 18

    7

    Lawyers agree

    Answered . If the Chapter 13 plan is not completed, the claim being disallowed has little implication outside of bankruptcy other than perhaps being useful to lock parties into statements and positions in other litigation.

    Advice on this forum is for informational purposes only and should never be mistaken as a substitute for legal... more
  2. Stuart Gregory Steingraber

    Contributor Level 18

    5

    Lawyers agree

    Answered . When you fail to complete your 13 and the case is dismissed, all BK protection is lost. The effect of rulings issued in the BK case cannot be determined by anyone except your attorney who has possession of all the relevant facts. As pointed out by others, there may be some "res judicata" or "estoppel" arguments to be made in post-BK litigation.

    You are not my client and I am not your attorney. This advice is given in the spirit of the AVVO platform and is... more
  3. Stephanie Anne Perez

    Contributor Level 7

    3

    Lawyers agree

    Answered . Claims can be denied for many reasons and I cannot guess or predict what a judge will do with this claim. To clarify some confusion, liability and ownership are two different things. Quit-claiming an interest in the home changes ownership of the home but does not change the parents' obligations to pay on the loan if they were co-borrowers. A loan must be refinanced or assumed by another party in order for liability to change. (Assumption requires permission of the bank).

    If the parents filed the bankruptcy, their bankruptcy will not change their daughter's obligation to pay on her debts. The bankruptcy only affects the parent's obligations. If the parents were co-borrowers on their daughter's loan and they do not complete their bankruptcy to receive a discharge, they will still be personally liable (along with their daughter) on the loan. If the loan is secured by a home and is not paid, the lender has the right to foreclose on the property or potentially sue all borrowers (parents and daughter) for payment.

    The parents should speak with their bankruptcy attorney to clarify their and their daughter's potential liability if the bankruptcy is dismissed before discharge. The attorney will know more about whose names are on these loans and who liable for payment.

    This information is not, nor is it intended to be, legal advice. You should consult an attorney in your area for... more

Related Topics

Bankruptcy

Bankruptcy is a legal way for people or businesses who are no longer capable of paying back their bills to clear these debts and start over.

Chapter 13 bankruptcy

Chapter 13 bankruptcy is called a wage earner's plan because it lets people who earn an income repay their debt (all or some) over time and keep their property.

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