NJ. Bankruptcy Lawyer Explains When A Person Can keep A Second House In A New Jersey Chapter 13
In a New Jersey chapter 13, the debtor must pay all of his monthly household disposable income, each month, to the trustee for 36 to 60 months. The disposable income represents the amount left over after all necessary and reasonable expenses are subtracted from the monthly household net income. Necessary expenses are expenses that are needed to live, which include, but are not limited to the following: mortgage; residential rent; utilities; auto finance payments; food; clothing; auto insurance; auto payment, etc. Also, the amount of the expense must be reasonable. For example, $3,000.00 monthly for food, for a household of two, is unacceptable.
The monthly disposable income, as explained above, must be paid to the trustee each month. At the request of the debtor, the monthly disposable income that represents the trustee payment, may be paid to creditors that are needed for a reorganization. This means that the disposable income used to pay the trustee, may include funds to be paid for mortgage arrears on the debtor’s house, or auto finance arrears on an auto that is needed for work. Also, certain creditors must be paid with the trustee payment funds, such as certain taxes and child support arrears. However, any additional remaining disposable income, each month, that is paid to the trustee, must be paid to the general unsecured creditors, such as credit card companies.
In general, the bankruptcy judge will not permit a debtor to use his disposable income to make a mortgage payment on a second beach house, that is used for vacations. Additionally, typically, the trustee will not permit trustee payment funds to cure the mortgage on a second beach house, as the second house is an unnecessary luxury item. However, if the second beach house brings in a monthly positive income cash flow, which brings in more money to the debtor, the judge may permit the debtor to use his income to pay the mortgage and keep the second house. Under this scenario, the additional monthly income benefits the debtor, his creditors and the bankruptcy estate.
Also, if the debtor is paying any and all his creditors, in full, through his chapter 13 bankruptcy plan, the debtor will be permitted to keep the second beach house and any other house or property, as the additional costs does not have an adverse effect on any creditor. Under this scenario, there would be no reason not to allow the debtor to keep the second house, as every creditor will be paid 100% of the total amount due.
Contact Robert Manchel at 866 503 5644 to discuss your NJ. bankruptcy law questions.