Defining the bankruptcy estate in Chapter 13

When Florida residents find themselves overwhelmed with debt, they may decide to seek relief and a fresh financial start in bankruptcy. Depending on their finances and circumstances, these debtors may agree to set up a manageable payment plan through Chapter 13 bankruptcy.

In a Chapter 13 bankruptcy, a debtor who has a steady income develops a court-approved repayment plan that last three or five years. This plan allows borrowers to keep their property, but they must agree to turn over their disposable income to a bankruptcy trustee who then distributes it to creditors. In some cases, there can be confusion over which debts should be included in the bankruptcy estate.

In a Georgia case, a title loan company asked that a vehicle that was used as collateral be excluded from the bankruptcy estate and that the loan company not be prohibited by the automatic stay from repossessing the vehicle. The court disagreed with the title loan company and stated that the lender was subject to the automatic stay against collection efforts.

Situations like this sometimes come up in bankruptcy cases. Since filing for bankruptcy is often stressful for many people, the last thing debtors want is to engage in a adversarial proceeding with a creditor. Unfortunately, the nature of some debts may create ambiguity that requires a court’s intervention.Individuals considering bankruptcy may benefit from speaking with an experienced lawyer before filing. Legal counsel may be able to examine the client’s case and make recommendations regarding preparations and taking note of which creditors may present challenges to the proposed Chapter 13 plan.