Bankruptcy

Did Congress Pop the Balloon?

By Bill McLeod, Esq.

A chapter 13 debtor proposes a plan to pay creditors over a period of time. Their creditors may include credit cards and utilities, and as in most cases I deal with, prepetition mortgage arrears. In some cases, debtors simply make a monthly payment to the chapter 13 trustee over the life of the plan. In others, debtors propose plans that provide for gradual increases in monthly payments (what might be referred to as a ?step plan?). Other proposals might include monthly payments, with the last payment being a large balloon. That final balloon payment might be paid by the sale of an asset or a refinancing of property. However, a recent Massachusetts Bankruptcy Court decision says that this practice is no longer permissible since BAPCPA. The decision is on its way to the Bankruptcy Appellate Panel and debtors and practitioners should follow it closely.

Full post as published by McLeod Law Offices on May 15, 2008 (boomark / email).