Lately, I have been getting calls from financially distressed folks who are seeking to stop foreclosure through a Chapter 13 filing. These individuals have recently received discharges in Chapter 7. Presumably, many of these people were among the many that filed before the Bankruptcy Abuse and Consumer Protection Act (BAPCPA) became effective in October 2005. The number one question I am asked by these former Chapter 7 debtors is "can I file Chapter 13 to save my home?”
Under the old law, a debtor could file a Chapter 13 petition following the receipt of a Chapter 7 discharge without any restrictions. The law is different now.
BAPCPA added Section 1328(f)(1) to the Bankruptcy Code. In that section, a Chapter 13 discharge cannot be awarded if the debtor received a Chapter 7 discharge within 4 years before the Chapter 13 was filed. Based on the current law, there is no restriction on filing a Chapter 13, obtaining the order for relief, and getting a Chapter 13 plan confirmed.
What does this mean? It means that homeowners can stop a foreclosure, get caught up, but ultimately, will not have the benefit of getting a discharge. While that might seem like a drastic result, most people who have just received a Chapter 7 discharge do not have any unsecured debts. This option might be workable for some debtors, but the best opinion on that can only come from an attorney who has heard all fact relating to income, expenses, assets and debt.
