Secured Debts in Chapter 13 Bankruptcy

In Chapter 13, a debtor is generally entitled to keep his assets while repaying debts through a plan of reorganization. Amongst a debtor’s creditors there are different rights and priorities that affect the ownership of a debtor’s assets and the priority in which creditors get paid. Read further to learn more on how secured debt is handled in Chapter 13 bankruptcy.

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If I declare bankruptcy, what will happen to tuition prepayments for my children?

Tuition prepayments are structured in varying ways. In some situations, money is actually paid to a school or group of schools. In other instances, you may have money in a 529 account, a trust fund or have it set aside in some other way for your children. In the case of a bankruptcy, what happens to that money is going to depend on the tuition prepayment plan’s structure and on the bankruptcy chapter filed.

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Cosigner’s Responsibility on an Unpaid Student Loan

As a co-signer on a student loan, you promise to pay the debt yourself if the borrower defaults. If the creditor has attempted to collect from the student and failed, late fees and collection costs are also passed on to you, in addition to the original debt amount.

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Are my retirement assets, college savings plans, and asset protection trusts protected under the bankruptcy law?

Money rolled over from a pension into an IRA is also protected. However the law limits protection for funds in regular and Roth IRAs to $1,283,025, although this cap can be increased by the bankruptcy court. Contributions placed in a section 529 college education savings plan or in a section 530 education IRA at least 2 years prior filing for bankruptcy are off limits to creditors. An asset protection trust can be established under the laws of Alaska, Delaware, Nevada, Rhode Island and Utah.

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What is redemption in a bankruptcy case?

Bankruptcy redemption is an option in a Chapter 7 bankruptcy case that may allow you to keep a vehicle or other asset that is acting as collateral for secured debt. However, redemption may not be an option for all Chapter 7 debtors because it requires them come up with cash up front. Consult a Chapter 7 bankruptcy attorney prior to making a decision about bankruptcy redemption.

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