Category Archives: Chapter 13 Bankruptcy

Using Bankruptcy to Get Rid of Judgment Liens on Your Property

Closed houseASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon, 

My mother filed bankruptcy a few years ago. After that, she transferred a house to me because she couldn’t afford the payments and I was willing to take it over. The property had no equity and was upside down. Since then, the home has increased in value and I could sell it for a profit. However, I just found out that there are five judgment liens against my mother that had attached to the property. Those liens add up to more than $50,000. My real estate agent says I will have to pay off those liens if I sell the property. I didn’t know about the liens when she transferred title to me. 

I’ve heard that I can file for bankruptcy to clear the liens. But this seems pretty extreme. I made all of the delinquent house payments and have paid the mortgage and the taxes for several years. But with those liens on the property I can’t sell the place and get my money out. 

What do you think? 



Dear Ted,

The law allows an individual in bankruptcy to remove judicial liens from property to the extent that each lien impairs an exemption the person is entitled to have in that property. Your mother may have been able to avoid the judgment liens in her bankruptcy case. What a shame that she didn’t do that. But if she couldn’t afford the house, she probably didn’t want to spend the time and money getting rid of the liens. You might be able to remove them if you file for bankruptcy. But the better news is this: Your mother can reopen her bankruptcy and remove the liens at this later date.

Why Didn’t Your Mother Avoid the Liens in Her Bankruptcy?

Often people in bankruptcy have the option of exercising legal rights like lien avoidance, but they don’t bother to. Especially when it looks like they can’t afford to keep the asset anyway. In order to avoid the liens your mother and her attorney would have had to file a motion and attend one or more court hearings. She would have had to pay attorney’s fees and maybe pay for a professional real estate appraisal. There was no point in doing all that if your mother believed she was going to lose the property anyway.

You Might Be Able to Get Rid of the Liens in Your Own Bankruptcy

You may be able to avoid those liens if you file bankruptcy. You acquired title subject to her judicial liens, but courts have ruled that a transferee like yourself can avoid a lien if you meet the same requirements that your mother would have had to meet in her bankruptcy. That’s fine – but only if you need to file for bankruptcy anyway.

Your Mother Can Reopen Her Bankruptcy Case

It sounds like you don’t need, or want, to file for bankruptcy. So here’s another solution:

Your mother can reopen her bankruptcy case. A debtor is allowed to reopen a closed bankruptcy case in order to seek relief that she could have sought during her case. She’ll have to file two motions: a motion to reopen the case, and then after the case is open, another motion seeking the lien avoidance. She may also need to amend her claims for exemptions, if she has not already claimed the correct exemption to accomplish lien avoidance.


Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

Find Leon on Google+


Filing Bankruptcy on the Eve of a Foreclosure Sale

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Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon, 

I filed a Chapter 13 bankruptcy petition yesterday, late in the afternoon. I filed in California on my own, without an attorney. A foreclosure sale is set for tomorrow. After I got my bankruptcy case number I tried to contact the parties involved in the foreclosure to give them notice of my bankruptcy filing. I couldn’t reach anyone in the lender’s foreclosure office, nor can I find an email address or a fax number to notify anyone to stop the foreclosure. What should I do? 


Dear Trista,

If you act quickly, you might be able to prevent the sale from going through. Even if the sale occurs, it’s possible you can void it (but it won’t be easy). Here’s what to do.

(Learn how Chapter 13 bankruptcy can help you save your home from foreclosure.)

Go to the Foreclosure Sale

You should attend the actual foreclosure sale, or send a reliable person to the sale. Get there early and provide proof of the bankruptcy filing to the auctioneer before the sale starts.

If You Can’t Attend, Record a Bankruptcy Notice

If you can’t attend the foreclosure sale, immediately record a Notice of Bankruptcy in the county recorder’s office. Do this in the county where the real estate is located.

Will the Bankruptcy Stop the Foreclosure?

The filing of a bankruptcy (assuming there are no prior bankruptcy filings), creates an automatic stay which prohibits most collection efforts, including a foreclosure. Courts have held that a foreclosure sale is void or voidable, when done in violation of the automatic stay. (Learn more about how the automatic stay stops foreclosure.)

Even so, it can get awfully tricky. Doubly so if the sale is conducted and the property gets purchased by an innocent buyer – what we lawyers call a BFP (“bona fide purchaser for value”).

There is at least one key court decision stating that the foreclosure sale is still voidable even if the property is bought by a BFP. However, it can be a litigation mess for a debtor who is trying to get a foreclosure sale rescinded. (In fact, I was the lawyer for the successful homeowner in that case. See Walker v. California Mortgage Service, 861 F.2d 597.)

If the Sale Has Occurred: Record the Bankruptcy Notice Before the Recordation of the Trustee’s Deed

Even if the sale has already been held, it is very helpful to record a bankruptcy notice before a trustee’s deed is recorded. The trustee’s deed upon sale is typically not issued to the successful bidder until a few days after the sale.

The recorded notice imposes what we lawyers call “constructive notice” upon all the parties involved. Constructive notice of the sale should remove any defenses that a BFP would raise if you have to bring a legal action seeking to void the sale.

Of course, you should continue efforts to notify the lenders and the foreclosure agents.

— Leon

Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

Find Leon on Google+

How to Buy a New Car While in Chapter 13 Bankruptcy

car loan photoASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon, 

We have been in a Chapter 13 bankruptcy case for three years – we are on a five year repayment plan. Our car caught on fire and the insurance company declared it to be a total loss. The company offered us $13,000. 

What do we need to do in order to buy a new car while in bankruptcy? 


Tony and Lisa

Dear Tony and Lisa,

I’m sorry to hear about your car. Life on a Chapter 13 bankruptcy budget is hard even when things go according to plan. When the unexpected happens, it can be very difficult to stay on track. I hope you are able to do so, and finish out your case.

I will assume you didn’t owe anything on your car. If that’s the case, it’ll be easier for you. If you did owe money, you will have to pay your lender the balance due before you get any of the insurance money.

The next step depends on whether you will buy a car with cash, or you need financing.

Buying a Car With Cash in Chapter 13 Bankruptcy

If you are going to buy a car without financing, go right ahead and do it. You don’t need anyone’s permission. I assume you would buy a used car that will cost about the same as you received for the old one. But, if you have the resources to buy a brand new car, or a newer and more reliable car, I see nothing to prevent you from doing that.

Getting a Loan to Buy a Car in Chapter 13 Bankruptcy

If you need financing to buy another car, it’s more complicated. You will need bankruptcy court approval before getting a loan, and of course, you need a willing lender.

Getting Court Approval

I suggest you begin by seeking court approval before you try to buy anything.  It will take about one month in order for the court to process the paperwork giving you permission to get financing. A car dealer won’t hold a car for you for that long. Avoid that problem by getting permission first.

To get permission, you must file a written motion with the court. Your motion should tell the court:

  • what happened to your old car
  • how much you plan to spend on the new car
  • how much you will finance
  • the approximate amount of the monthly payments, and
  • whether your proposal will affect your Chapter 13 plan.

In the motion, you will ask the court to make an order allowing you to proceed with the purchase and financing of a replacement vehicle based on those terms.

A word of warning — be reasonable. Don’t ask the court for permission to buy a luxury car. Your chances of approval are better if you are seeking a newer model in the same class of vehicle as what your old car was.

Shopping for a Car

After you get the court order, you can go car shopping.

Be up front with car dealers. Let them know the challenges you face regarding financing. Of course, by getting the court order first, you make things easier for everyone.

Negotiating With the Dealer

Even with an ongoing bankruptcy case and bad credit, you still have leverage when negotiating with the dealer – the dealer knows that you can walk away and buy a car elsewhere.

Keep in mind that you can negotiate not only the price of the car, but also the interest rate of the car loan. There is almost always room left in the dealer’s first offer to give you better terms. The first offer a dealer gives you is probably not its best offer.  (Learn more about negotiating with car dealers.)

 Do You Need to Modify Your Chapter 13 Plan?

Next, how will the car payments affect your Chapter 13 plan? Is there money in your budget for the car payment? If not, it may be necessary to seek a court order modifying your plan. Perhaps you will seek to reduce the amount paid to unsecured creditors so that you can free up money that you will need for a car payment. Be mindful that sometimes the amounts paid to creditors cannot be reduced. The same factors that were considered when your plan was originally confirmed will still apply. (Your creditors then, as now, are entitled to receive at least as much money from you as they would have received from your non exempt assets had this been a case under Chapter 7. To learn more see Nolo’s article Unsecured Debt in Chapter 13: How Much Must You Pay?)

 Do You Have to Amend Your Bankruptcy Schedules?

The last consideration is whether or not you need to amend your bankruptcy schedules to disclose what happened to your old car, the receipt of the insurance proceeds, and the purchase of a new car. I reviewed the Bankruptcy and the official Bankruptcy Rules. It makes sense that you should be required to update your schedules to disclose any material change to your financial affairs.

Although it would make sense that you should have to update your schedules to disclose changes in your financial affairs, I see nothing in the Bankruptcy Code and Rules that requires you to amend the bankruptcy schedules in this situation. However, old timers like me (I have been handling bankruptcy cases for 34 years) believe that when in doubt, disclosure is the best rule. You can file a simple amendment to your original schedules to disclose everything. If you like you can add a statement that you believe none of the new information is material to the legal rights of any other party, but you want to make such disclosure solely from an abundance of caution.


– Leon

Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

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Ninth Circuit Sticks It to Higher Income Chapter 13 Debtors

Serious male judgeThis summer, the Ninth Circuit Court of Appeals dealt a blow to Chapter 13 bankruptcy filers who earn more than the average person. In In re Flores, the court ruled that above-median income Chapter 13 bankruptcy filers who have no disposable income, and therefore are paying nothing to unsecured creditors, cannot use a three-year repayment plan, but instead must be in bankruptcy for a full five years.  In re Flores, _ F.3d_ (9th Cir. Aug. 29, 2013). In so ruling, the Ninth Circuit reversed its previous decision on this issue in In re Kagenveama, which had been good law since 2008. In re Kagenveama, 541 F.3d 868, 875 (9th Cir.2008)

What does all of this mean?

How Long Does a Chapter 13 Plan Last?

The simple answer to this is – it depends on whether your household income is greater or less than that of a similar sized household in your state.

  • For those with incomes below the state median, their plans can be as short as three years.
  • For those with incomes above the state median, their plans must usually be five years.

(To learn more, see Nolo’s article How Long Will My Chapter 13 Plan Last?)

There are a few exceptions to this rule. For example, if you are below median income, you can opt for a longer plan. And if you are above median income, you can opt for a shorter plan if you can pay off all of your unsecured debt before the full five years.

In some circuits, there is one more exception:  Above median debtors can propose a three-year plan if their disposable income is zero or negative.

How Does Disposable Income Factor Into the Equation?

In Chapter 13 bankruptcy, you must put all of your disposable income towards your repayment plan. Disposable income is your income from most sources, reduced by certain allowed expenses. Even if you are a high-income wage earner, your allowed expenses might bring your disposable income to zero, or a negative number. (See Nolo’s article The Best Effort Requirement in Chapter 13.)

Some courts, including the Ninth Circuit during the past five years, have allowed above median Chapter 13 debtors with no disposable income to propose a three year plan. The idea being this – if you aren’t paying anything to unsecured creditors, then why make the debtor stay in bankruptcy for five years.

The Ninth Circuit, Joining Other Circuits, Sticks it to Higher Income Debtors

In In re Flores, the Ninth Circuit ruled that above income Chapter 13 debtors must propose a five year repayment plan, even if their disposable income is zero or a negative number. This ruling puts the Ninth Circuit in company with the Sixth, Eighth, and Eleventh Circuits on this issue.

What does this mean for you?  If you live in Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, or Washington, and your income is above the state median, be prepared to be in bankruptcy for five solid years.

If you want to read a good recap of the Ninth Circuit’s past decisions on this issue, and its reasoning in the In re Flores case, check out the recent Bankruptcy Law Network blog by Karen Oakes.

For more on the Chapter 13 repayment plan, including what it is, what debts must be paid through the plan, and more, visit Nolo’s Chapter 13 Repayment Plan topic area.

Fourth Circuit: Social Security May Be Excluded From Disposable Income in Chapter 13 Bankruptcy

People filing for Chapter 13 bankruptcy in Maryland, Virginia, West Virginia, North Carolina, and South Carolina, won a significant victory this month. On July 1, 2013, the Fourth Circuit ruled that bankruptcy filers do not have to include social security as part of their disposable income when calculating plan payments.  In re Ranta,  2013 WL 3286252 (4th Cir. 2013).

This means that people receiving Social Security income in the Fourth Circuit may keep social security income, even if it means having a surplus of income after paying expenses and the plan payment.

Social Security and Disposable Income

The law on whether social security must be included as part of a Chapter 13 debtor’s disposable income is unsettled throughout the country.  (To learn about the role your disposable income plays in your Chapter 13 case, see The Best Effort Requirement in Chapter 13 Bankruptcy.)

Even though the bankruptcy code specifically states that social security should not be included as part of the disposable income calculation, many bankruptcy courts have ruled that if a debtor’s plan does not devote social security income to the payments, then the plan is proposed in “bad faith.”  For all practical purposes, these courts require a debtor to include social security income in disposable income.

(To learn more about this issue, see Can I Keep My Social Security Income in Chapter 13 Bankruptcy?)

The Fourth Circuit’s Decision

The Fourth Circuit, in In re Ranta, has settled this issue for those filing for bankruptcy in Maryland, Virginia, West Virginia, North Carolina, and South Carolina.  In the Ranta case, the court ruled that the bankruptcy code’s exclusion of social security in the disposable income calculation means what it says – that disposable income does not have to be included in plan payments. If a debtor chooses to exclude social security income from plan payments, he or she may do so, even if this means having surplus income each month.  The Fourth Circuit joins several other Circuits in ruling this way, including the Fifth, Sixth, Eighth, and Tenth Circuits.

You Have the Option to Devote Social Security to Your Plan

Of course, a debtor in the Fourth Circuit may choose to include social security income as part of plan payments. This would make sense if the debtor could not otherwise propose a confirmable plan (for example, because payments would not cover the minimum amount that the debtor must pay to unsecured creditors).

Fourth Circuit Allows Lien Stripping in Chapter 20 Bankrutpcy

On May 10, 2013 the U.S. Court of Appeals for the Fourth Circuit ruled that a debtor can strip off (eliminate) second mortgages and other junior liens in a Chapter 20 bankruptcy under certain circumstances. (In re Davis, No. 12-1184 (May 10, 2013).)

This means that if you file a Chapter 13 bankruptcy soon after a Chapter 7 bankruptcy, you may be able to get rid of second mortgages, liens, and HELOCs in the bankruptcy (if you live in the Fourth Circuit — Maryland, North Carolina, South Carolina, Virginia, and West Virginia).

Here’s how this works.

What Is Lien Stripping?

In Chapter 13 bankruptcy, if you have a second mortgage, junior lien, or any mortgage or lien other than your first mortgage that is “wholly unsecured,” you can get rid of it. The amount of the mortgage or lien becomes part of your unsecured debt — which most people pay off through their Chapter 13 plan at a rate of pennies on the dollar.

“Wholly unsecured” means that your equity in your home, after subtracting the balance on your first mortgage, won’t cover any of the balance on the junior mortgage. Here’s an example: Your home is worth $400,000 and the unpaid balance on your first mortgage is $450,000. You have a second mortgage for $50,000. Because your home equity is not enough to cover your first mortgage, your second mortgage is wholly unsecured, and eligible for lien stripping.

Lien stripping is allowed in Chapter 13 bankruptcy, but not in Chapter 7 (although you might be able to strip liens in Chapter 7 in the Eleventh Circuit.)

(Learn more about lien stripping in Chapter 13 bankruptcy.)

What Is a Chapter 20 Bankruptcy?

Chapter 20 bankruptcy is an informal way of referring to the practice of filing for Chapter 7 bankruptcy, and then following with a Chapter 13 bankruptcy.  Some debtors do this because the Chapter 7 does not get rid of all their debts (for example, child support arrears, tax debts, and other priority debts). The Chapter 13 allows the debtor to pay off these debts in a three to five-year payment plan.

The debtor cannot get a discharge in Chapter 13 if it falls too close upon the heels of the Chapter 7 — but often that doesn’t matter.  (Learn the rules about multiple bankruptcy filings.) The debtor can still get the protection of the bankruptcy court during the plan payment period, and in this way can make more reasonable payments towards the remaining debts.

Lien Stripping in Chapter 20 Bankruptcy

What remains an unresolved question in many circuits is this:  Can a debtor strip off junior liens in a Chapter 13 bankruptcy even though there is no discharge available (because of the previous Chapter 7)?

The Court of Appeals in the Fourth Circuit, in In re Davis, No. 12-1184 (May 10, 2013) said yes. This is good news for bankruptcy debtors living in Maryland, North Carolina, South Carolina, Virginia, and West Virginia.

When Chapter 13 Bankruptcy Is a Bad Deal

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Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon, 

Should I file bankruptcy? I started debt consolidation almost five years ago. I pay $400 per month. My remaining balance is $3,500. My condo is under water. My home is worth $300,000. I owe $325,000 on my first mortgage. I owe $58,000 on my second mortgage line of credit. I am seriously thinking about some sort of a bankruptcy to get rid of my second mortgage, which has a monthly payment of $600 (I am current).

I am single, and try to live frugally because I learned my lesson about living in credit card hell. I make about $100,000 a year. What do you think I should do? I went to two different lawyers – both recommended Chapter 13 as the best option for me.

— Jay

Dear Jay,

First off, you are a winner! You win my Question of the Year award. I have never received any other question with such complete, clear, succinct information. You have given me everything I need to give you back a complete answer.

Now for the answer (drum roll, please)…I see absolutely no point in you pursuing a bankruptcy case.

(Yes, a bankruptcy lawyer is really telling you that.)

Here’s why.

If you file for Chapter 13 bankruptcy, you will be able to strip off (get rid of) your second mortgage and make it an unsecured claim. But you will also have to pay what you can afford into a Chapter 13 repayment plan for 60 months. Based on what you are paying now ($600 for your second mortgage and $400 for your consolidation loan), you will be able to afford a monthly Chapter 13 payment of at least $1000 per month. You may be able to pay more into your plan since you live frugally.

Over the life of your Chapter 13 case, you will probably pay enough into your plan to pay off your debts in full, including that stripped off second mortgage (which will be treated like an unsecured debt in your plan).

The only advantage in filing for Chapter 13: You can repay the remaining debt, including your second mortgage, without paying more interest.

But here are the disadvantages that await you. A typical Chapter 13 filer in the San Fernando Valley of California on average pays the following:

  • $4,000 in attorney fees for the basic 13 case
  • $1,500 in attorney fees to strip the lien off
  • a court filing fee of $281
  • a real estate appraisal cost of around $200
  • Chapter 13 trustee fees of around $6,000, and
  • mandatory credit counseling cost of around $25.

This means your total cost of filing for Chapter 13 will be approximately $12,000. That should pretty much outweigh any possible savings you would see by eliminating interest on the debts under Chapter 13.

Delay in rebuilding good credit. There is another thing to consider. You are just now coming out of a five- year debt plan. Entering another five-year plan means five more years of delay in reestablishing your good credit.

Pay Off Your Debt on Your Own

My advice? Get the remainder of your consolidation program paid off as fast as you can. If you have some savings available, use it right now to get the old plan finished. As soon as the old plan is finished, devote that monthly consolidation payment to paying extra loan principal each month on your second mortgage.

The lawyers who recommend Chapter 13 are putting their own financial gain ahead of your best interests, which is unethical, to say the least.

For the benefit of other readers, please don’t get me wrong. Chapter 13 is not a good option for Jay in this situation because he can afford to pay his debts. If his disposable income for debt payments was $200 monthly instead of $1000, a Chapter 13 would be a very good deal for Jay.

— Leon

Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer. 

Find Leon on Google+


Filing Chapter 13 to Stop an Eviction

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Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon,

I filed a face sheet Chapter 13 bankruptcy a few days ago in Los Angeles. Now I need a lawyer to take over my case and file the rest of my paperwork.

I filed for bankruptcy to stop my landlord from going ahead with an eviction trial. When the landlord served me with an eviction notice, I offered to pay up (I had just gotten money that my employer owed me). The landlord refused to take my rent money unless I paid an extra $800 to cover lawyer fees. I offered to pay late fees, but not the lawyer fees because I don’t think the lawyer did any work.

Also my car payment is two months behind and I want to keep it. I did a Chapter 7 bankruptcy three years ago. Now I need a to file a plan and make them take my money and save my car. Am I out of luck here?



Dear Katrina,

I really wish I could have heard from you earlier, and you will too when you read this.

Most bankruptcy attorneys in Los Angeles  charge around $4,000 for a Chapter 13 bankruptcy.  Whether the landlord’s lawyer did any work or not, it would have been far cheaper for you to pay the landlord the extra $800 than to pay $4,000 to a lawyer for your own Chapter 13.

If You Continue With the Chapter 13 Case

If you proceed in Chapter 13, you can  force reinstatement of a defaulted lease. The drawback is that you will have to pay what you owe, in full. You will also have to pay the landlord’s court costs and whatever attorney fees are called for in your lease. You can also use  Chapter 13 to catch up on your car payments. But remember, you’ll have to fork over $4,000 in attorney fees to get legal help.

If you are considering representing yourself in the Chapter 13, think again. If you file Chapter 13 bankruptcy without a lawyer in the Los Angeles Bankruptcy Court, your chances of having a Chapter 13 case approved are less than 1% (even if you use self-help services from a bankruptcy petition preparer). These findings are contained in a recent study issued by Angeles Bankruptcy Court, Access to Justice in Crisis: Self-Represented Parties and the Court.

Solving Your Troubles Outside of Bankruptcy

Here is my suggestion. Try to make peace with the landlord. If you have been a good tenant up to now, most landlords would rather let you pay up and stay. The landlord knows there is very little chance of collecting from you after an eviction. A landlord also knows he or she is likely to lose  additional rent money while searching for a new tenant. Those are powerful reasons to convince any landlord that you should be allowed to stay.

You can also use the money you now have to catch up on your car payments.

You Cannot Discharge Debt in Your Chapter 13

If you do have debt you want to discharge (and maybe you don’t), be aware that you won’t be able to do so in your Chapter 13 bankruptcy. Because you got a discharge in a Chapter 7 bankruptcy case three years ago, you are not entitled to discharge any debt in your Chapter 13. To be able to discharge debt in Chapter 13, your Chapter 13 had to be filed more than four years after the date you filed your previous Chapter 7 case. However, you are not prohibited from filing for Chapter 13 and making payments under a repayment plan.  (To learn more, see Multiple Bankruptcy Filings: When Can You File Again?)

What you are now going through is a good example of why people need legal advice. Almost all Chapter 13 lawyers in Los Angeles will provide a free consultation. I am confidant that any veteran bankruptcy lawyer would have given you the same advice that I have. I hope things will work for you.


Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

Find Leon on Google+



Can I Reduce Chapter 13 Bankruptcy Payments if I Increase My Mortgage Payment?

Leon Bayer PhotoASK LEON 

Bankruptcy expert Leon Bayer answers real-life questions.

Dear Leon,

I like this blog. I find it interesting and helpful.  I could use some help. I filed Chapter 13 bankruptcy in December 2009. I have a five-year repayment plan. 

Here’s my problem. I have not been able to live very well on my Chapter 13 budget. I always come up short by around $500 per month. To make up for the shortage I have not been paying my property taxes, and I now am about $20,000 behind.

I spoke to my mortgage company. They will probably be willing to modify my loan to advance enough money to bring my taxes current. But that will make my house payment go up. My Chapter 13 will be done in December, 2014.  If I get a loan modification that increases my house payment, do you anticipate that the trustee will reduce the amount I pay into my plan by the amount that my mortgage payment increased?

I really do like my house and would like to keep it. I have a way to make and extra $400 to $500 per month but it will take about one year for it to get it to the point where I have money coming in.

Any suggestions or thoughts?  Thanks again,


Dear Marjorie,

Thank you for the kind words about the blog. Your question is about seeking to reduce your Chapter 13 monthly payments.

Your property taxes were probably included in your original Chapter 13 budget for normal living expenses. If so, that money was already deducted from your monthly income and included in the money that you are supposed to spend on normal anticipated living expenses, such as your property taxes.

It may be possible to reduce Chapter 13 monthly payments if an extraordinary expense comes along that was never budgeted for. However, in your case the property taxes standing alone are not anything new or unexpected. Do you have some other unusual expense that was not budgeted for (for example, supporting another family member)? If so, maybe you can get your payments reduced for some other reason.

Unless you can prove some new unexpected and necessary expense, a trustee will probably oppose your effort to reduce your Chapter 13 plan payments. I expect the trustee will tell the court that you wound up spending your tax money on something that the money was not intended for; and thus the creditors should not be penalized. (You can learn more in Nolo’s article Modifying Your Chapter 13 Plan Payments.)

I do think you should find a way to generate some extra income immediately. It sounds like you are approaching a “fiscal cliff.” You may be running out of time to get your income and expenses under control.


Leon Bayer is a Los Angeles bankruptcy attorney.  He is a partner at Bayer, Wishman & Leotta, a California law firm specializing in bankruptcy.  The opinions and advice in this blog post are from Mr. Bayer alone, and should not be attributed to Nolo.  By answering a question on this blog, Mr. Bayer does not become your lawyer.

Find Leon on Google+