Legal Question in Bankruptcy in California

Losing property in Chapter 13 Bankruptcy?

We got in over our heads with credit card debt. We worked out a plan and were paying them back, but two large creditors filed a wage garnishment which was about to really sink us. An attorney advised us to file Chapter 7. It looked as though we might lose our cars due to too much value. We converted to Chapter 13 after being told that we would lose no property. Now the trustee is saying we need to find more money to pay back and says we may not be able to keep a timeshare which we are still making payments on (secured debt) and we may have to incur tax penalties by not paying back a loan from our 401 K plan at work (secured by our wages and retirement plan). Is this legal? Can they make us take a loss on the timeshare property and our 401K loans? It doesn't seem right...Thanks for your help! M.W.


Asked on 12/17/01, 11:51 am

1 Answer from Attorneys
Mark Markus Law Office of Mark J. Markus

Re: Losing property in Chapter 13 Bankruptcy?

It is absolutely legal. 401k contributions and loan repayments are completely voluntary and thus not considered a "reasonable expense" in most jurisdictions. THe balance here is between what your creditors should have to suffer because of your retirement issues versus the benefit to you of having the retirement, etc. This is further complicated by the fact that your future tax liability as a result of the 401k distribution may cause your Ch. 13 plan to become infeasible. Your attorney should have explained all this to you before converting to Ch. 13.

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Answered on 12/17/01, 12:22 pm


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