How property is handled after a bankruptcy filing

| Aug 17, 2016 | Chapter 13 Bankruptcy |

Texas residents may be interested in a Louisiana ruling that may impact their ability to collect an auto accident settlement after declaring bankruptcy. The judge in Louisiana ruled that a settlement stemming from an auto accident claim three years after a Chapter 13 plan had been confirmed was part of the bankruptcy estate. As such, the man was not entitled to collect the money until his creditors had been paid.

An attorney for the debtor negotiated a settlement of $196,845 of which the man was to receive $74,067 after fees and expenses were deducted. There were total allowed claims of $11,359, which were ordered to be paid from settlement proceeds. The order was given based on the estate-replenishment approach, which is one of five used to determine if property acquired after the confirmation of a Chapter 13 plan is part of the bankruptcy estate.

A plan modification was sought by the bankruptcy trustee. The judge agreed that the best interest of the creditors test must be redetermined at the time of a proposed modification. According to the court, the debtor would have been allowed to present evidence that he needed the entire amount of the settlement to pay living and medical expenses. However, no evidence was ever submitted to the court.

Those who are looking for an effective form of debt relief may wish to pursue bankruptcy. Chapter 13 may allow individuals to restructure their debts while also allowing for a stay of creditor actions. An attorney can explain the eligibility requirements of this chapter while pointing out that it is designed only for those debtors who have a regular source of income.