Surrending Home and Vehicle in Chapter 13

[lawforever]

I am fixing to file a Chapter 13 bankruptcy in the State of Tennessee pretty soon. The reason why I am going to file Chapter 13 is to protect my family real property that was deeded to me at the time my parents were alive. They deeded the property to me 15 years ago, and I recently deeded the property to my sister last year in November 2009. My attorney told me that I could not file Chapter 7 due to the above mentioned transfer. So, I decided to file Chapter 13 and pay 100% of my unsecured debts. What effect could this have on my Chapter 13 case?

Additionally, I currently have a house with mortgage and vehicle that has is past due for five months. I want to surrender both, the house and the vehicle. If I file Chapter 13 bankruptcy, would I still have to pay the deficiency balance on both the house and the vehicle? My attorney told me that surrendering the house and vehicle would not incur any deficiency balance. Is that true?

Your help is truly appreciated. Anybody is welcome to post advice including attorneys.

[MSbklawyer]

I am fixing to file a Chapter 13 bankruptcy . . .

For all you damnyankees reading the forum, "fixing to" is Southernspeak and roughly translated means "getting ready to" or "preparing to" or "in the process of". Anybody who says "fixing to" can't be all bad.

Now that we've cleared that up, welcome to the forum, lawforever.

As a general rule, your deeding of property to your sister within 2 years of your petition date would be considered a fraudulent conveyance. But, as with any rule, there are exceptions, loopholes and dirty tricks. Did your sister pay you fair market value for the property? Was the property part of your exemptible homestead that would not have been available to your creditors even if you had not transferred it to your sister? Has your sister since sold the property to someone else for fair market value? How much is the property worth? Putting aside the sentimental value of the property, does it make economic sense to pay 100% through your plan just to keep it? Since you say you are surrendering your own house anyway, have you thought about moving onto this property and having your sister then deed it back to you and claiming it as your homestead? These are a few of the things you and your attorney need to consider.

As for the house and vehicle you are surrendering, any deficiency left over from the sale is normally discharged.

[lawforever]

Surrending Home and Vehicle in Chapter 13

Thanks for clearing the term "fixing to". LOL!

My sister really wants to keep the property. She will not sell the property because its been in our family for generation.

I am afraid that the hanging paragraph of section 1325(a) will make me pay deficiencey of my vehicle in my Chapter 13 Plan.

[MSbklawyer]

Thanks for clearing the term "fixing to". LOL!

My sister really wants to keep the property. She will not sell the property because its been in our family for generation.

I am afraid that the hanging paragraph of section 1325(a) will make me pay deficiencey of my vehicle in my Chapter 13 Plan.

Yes, if you're paying 100% of unsecureds, it would. Assuming your finance contract is less than 910 days old, you're right. The deficiency would be treated as an unsecured debt.

[lawforever]

Lol!

MSbklawyer, your hilarious! What is the statute concerning deficiency judgments in bankruptcy? What is the effect of a house that is being surrendered? In today's market, the value of homes are not going for at the time when I purchased the house. Therefore, I'm afraid of the deficiency judgment coming from the lender of my house.

[justbroke]

There's no direct statute on deficiency judgments. Deficiencies are covered under the claims process. The creditor just needs to submit a claim that includes the deficiency as an unsecured debt.

If the creditor first submits a secured claim, they need to make sure that claim includes language regarding any possible deficiency on surrender. This is because once the claims bar date passes (the last date to file a claim), a claim can only be modified but not "changed" from secured to unsecured.

You may live in a non-recourse State where the lender can't file a deficiency claim. (California is one of those States, so long as the mortgage was used to purchase the home... known as a purchase-money loan.)

[tigergem]

I understood the "fixing to". Didn't get a lick of the rest of it though. Welcome to the board lawforever. You're in good hands with MSbklawyer and justbroke. They rawk!