16 Sep Another reason to file Chapter 13
Sometimes, the duration of a Chapter 13 case is why I recommend Chapter 13 to clients who qualify for Chapter 7. A Chapter 13 generally lasts 3-5 years.
What? you say. Why would you want a bankruptcy case that lasts more rather than less time? Because, during the case, a bankruptcy judge has jurisdiction over disputes between the debtor and his creditors. If there are disputed issues in mortgage servicing or cross collateralization issues that cloud the debtor’s right to the title on his car, you may want a judge at hand to hear and decide disputes.
By contrast, a Chapter 7 is usually over and done with in less than six months and the court has little reason to adjudicate disputes between the debtor and his creditors if the dispute doesn’t impact the assets in the bankruptcy estate that might be available to pay creditors.
Having a bankruptcy judge hear cases between debtors and creditors has a number of advantages.
- Bankruptcy judges are expert in the realm of consumer finances, where as state court judges may not ever have heard such a case before.
- Bankruptcy court trial calendars are usually far less crowded than other courts, so you can get to trial sooner, if necessary.
- The filing fee for initiating an adversary proceeding is waived for debtors in bankruptcy.
One of my rules of thumb concerns cars loans from credit unions: standard credit union documents cross collateralize loans made by the credit union. It is almost guaranteed that if you have a credit union car loan and a credit card or personal loan, your car is pledged as security for both loans. Yet cross collateralization in consumer loans is unenforceable under California law, except under unique circumstances.
I want my client to have a relatively low cost way to compel the credit union to surrender the title when the car loan is paid off. A bankruptcy judge is the enforcer in the background. That works in my client’s favor.
Hurray for Chapter 13.
Cathy Moran, Esq.
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